<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1998.
REGISTRATION NOS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
[X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO.
AND/OR [_]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
[X]
AMENDMENT NO. [_]
NUVEEN INVESTMENT TRUST IV
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
333 West Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 917-7700
With copies to:
Gifford R. Zimmerman, Janet D. Olsen Eric F. Fess
Esq. Bell, Boyd & Lloyd Chapman and Cutler
Vice President and 70 W. Madison St. 111 W. Monroe St.
Secretary Chicago, IL 60602 Chicago, IL 60603
333 West Wacker Drive
Chicago, Illinois 60606
(Name and Address of
Agentfor Service)
[_]Immediately upon filing pursuant to [_]on (date) pursuant to para-
paragraph (b) graph (a)(1)
[_]75 days after filing pursuant
to paragraph (a)(2)
[_] on ________ pursuant to paragraph (b)
[_] 60 days after filing pursuant to
paragraph (a)(1) [_]on (date) pursuant to para-
graph (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NUVEEN
Growth and Income Funds
November , 1998
Prospectus
A balanced portfolio of quality bonds and stocks for investors seeking
attractive income with some opportunity for capital growth
Dividend and Growth Fund
[PHOTO APPEARS HERE]
- -------------------------------
NOT FDIC- May lose value
INSURED No bank guarantee
- -------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
<PAGE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges and Expenses
Shareholder Instructions
Performance and Current Portfolio Information
Table of Contents
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
<TABLE>
<S> <C>
Introduction 1
...............................................................................
Nuveen Dividend and Growth Fund 2
...............................................................................
Summary of Fund Expenses 3
...............................................................................
</TABLE>
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
<TABLE>
<S> <C>
Who Manages the Fund 4
...............................................................................
Management Fees 4
...............................................................................
What Securities We Invest In 5
...............................................................................
How We Select Investments 6
...............................................................................
What the Risks Are 7
...............................................................................
How We Manage Risk 8
...............................................................................
</TABLE>
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of your
account.
<TABLE>
<S> <C>
How to Choose a Share Class 10
...............................................................................
How to Reduce Your Sales Charge 12
...............................................................................
How to Buy Shares 12
...............................................................................
Systematic Investing 13
...............................................................................
Systematic Withdrawal 14
...............................................................................
Special Services 14
...............................................................................
How to Sell Shares 15
...............................................................................
</TABLE>
Section 4 General Information
This section summarizes the fund's distribution policies and other general fund
information.
<TABLE>
<S> <C>
Distributions and Taxes 17
...............................................................................
Distribution and Service Plans 18
...............................................................................
Net Asset Value 18
...............................................................................
Fund Service Providers 19
...............................................................................
</TABLE>
Section 5 Financial Highlights
This section provides the fund's financial performance for the past 5 years
<TABLE>
<S> <C>
Nuveen Dividend and Growth Fund 20
...............................................................................
</TABLE>
<PAGE>
November , 1998
Section 1 The Fund
Nuveen Dividend and Growth Fund
- --------------------------------------------------------------------------------
Introduction
- --------------------------------------------------------------------------------
This prospectus is intended to provide important information to help you
evaluate whether the fund may be right for you. Please read it carefully before
investing and keep it for future reference.
Current Income with Capital Appreciation Potential
Even for investors whose primary need is current income, a measure of growth
potential is important for achieving long-term financial security. Growth
potential helps over time to protect against inflation and preserve capital,
which is the source of future earnings power.
Investors seeking attractive current income and capital appreciation potential
in a single investment should consider the Nuveen Dividend and Growth Fund. The
fund utilizes a value-oriented strategy in selecting bonds with attractive yield
and appreciation potential and stocks of well-known companies that offer high
current income and good relative value.
A 100-Year Tradition of Quality Investments
Since our founding in 1898, John Nuveen & Co. Incorporated has been synonymous
with investments that withstand the test of time. Today we offer a broad range
of quality investments designed for individuals seeking to build and maintain
wealth.
To learn more about how Nuveen Mutual Funds can help you achieve your financial
goals, talk with your financial adviser. Or call us at (800) 257-8787 for more
information.
Section 1 The Fund 1
<PAGE>
Nuveen Dividend and Growth Fund
Fund Overview
Investment Objective
The investment objective of the fund is to seek current income and long-term
growth of income and capital, with capital appreciation as a secondary
objective.
How the Fund Pursues Its Objective
We invest the majority of fund assets primarily in investment grade quality
bonds with varying maturities. We look for bonds that appear especially
attractive on a relative value basis, and concentrate on those with
intermediate-term characteristics that we believe offer the best balance of
current income and capital preservation potential. The fund's bond investments
may include up to 35% in BB- or B-rated bonds, or bonds of comparable quality if
unrated. The fund's average effective maturity generally will vary between 5 and
10 years.
We invest the balance of fund assets primarily in stocks of established, well-
known companies. We concentrate on stocks we believe represent excellent
relative value and offer high current income or attractive appreciation
potential.
What are the Risks of Investing in the Fund?
An investment in the fund is subject to market risk, interest rate risk and
credit risk. Interest rate risk is the risk that interest rates will rise,
causing bond prices to fall. Credit risk is the risk that a bond issuer will
default or be unable to pay principal and interest; lower rated bonds generally
carry greater credit risk. Market risk is the risk that a particular stock, or
stocks in general, may fall in value. As with any investment, loss of money is a
risk of investing.
Is This Fund Right For You?
The fund may be appropriate for you if you are seeking:
. attractive current income with some long-term growth potential;
. a substantial measure of protection against inflation;
. the convenience of a balanced portfolio in a single investment;
You should not invest in this fund if you are:
. unwilling to accept share price fluctuation;
. investing to meet short-term financial goals.
How the Fund Has Performed*
The fund's investment adviser is Nuveen Institutional Advisory Corp. ("NIAC").
The chart and table below illustrate annual fund returns for each of the past
ten years as well as fund, fund index and market benchmark annualized returns
for the one-, five- and ten-year periods ending December 31, 1997.
Total Returns/1/
Class A Annual Returns
[BAR GRAPH APPEARS HERE]
1988 -15.4%
1989 5.3%
1990 -1.4%
1991 10.8%
1992 8.5%
1993 11.1%
1994 -7.2%
1995 26.8%
1996 6.5%
1997 23.6%
For the ten years ending December 31, 1997, the fund's highest and lowest
quarterly returns were 13.24% and (7.45)%, respectively for the quarters ending
12/31/97 and 6/30/88. The bar chart and highest/lowest quarterly returns do not
reflect sales charges, which would reduce returns, while the average annual
return table does. The fund's past performance is not an indication of how the
fund will perform in the future.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
....................................
Class 1 Year 5 Years 10 Years
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 17.08% 10.28% 6.14
.....................................................................
Class A (NAV) 23.60% 11.47% 5.69
.....................................................................
Class B -- -- --
.....................................................................
Class C 23.02% 10.87% --
.....................................................................
Class R -- -- --
- ---------------------------------------------------------------------
Lipper Income Equity Index/2/ 18.45% 12.26% --
.....................................................................
LB Aggregate Bond/2/ 9.65% 7.48% 9.18%
.....................................................................
S&P 500/2/ 33.36% 20.27% 18.05%
.....................................................................
Market Benchmark/2/ 16.55% 11.27% 11.89%
.....................................................................
</TABLE>
* The fund's current investment strategy was adopted in November 1998. The fund
was a corporate cash management fund through June 1991, and was a utility
income fund from July 1991 through November 1998.
2 Section 1 The Fund
<PAGE>
What are the Costs of Investing?
<TABLE>
<CAPTION>
Shareholder Transaction Expenses/3/
<S> <C> <C> <C> <C>
Paid Directly From Your Investment
Share Class A B C R/4/
- ---------------------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchase 5.25%/5/ None None None
.........................................................................................................
Maximum Sales Charge Imposed on Reinvested Dividends None None None None
.........................................................................................................
Exchange Fees None None None None
.........................................................................................................
Deferred Sales Charge/6/ None/5/ 5%/7/ 1%/8/ None
.........................................................................................................
Annual Fund Operating Expenses/9/
Paid From Fund Assets
Share Class A B C R
- ---------------------------------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75% 0.75%
.........................................................................................................
12b-1 Distribution and Service Fees 0.25% 1.00% 1.00% --%
.........................................................................................................
Other Expenses 0.65% 0.65% 0.65% 0.65%
- ---------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses-Gross+ 1.65% 2.40% 2.40% 1.40%
+After Expense Reimbursements
.........................................................................................................
Reimbursements (0.45%) (0.45%) (0.45%) (0.45%)
- ---------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses-Net 1.20% 1.95% 1.95% 0.95%
.........................................................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the costs of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
1 Year $ 684 $ 636 $ 243 $ 143 $ 684 $ 243 $ 243 $ 143
..................................................................................................
3 Years $1,018 $1,060 $ 748 $ 443 $1,018 $ 748 $ 748 $ 443
..................................................................................................
5 Years $1,375 $1,391 $1,280 $ 766 $1,375 $1,280 $1,280 $ 766
..................................................................................................
10 Years $2,377 $2,550 $2,736 $1,680 $2,377 $2,550 $2,736 $1,680
..................................................................................................
</TABLE>
How the Fund Is Invested (as of 11/30/98)
<TABLE>
<CAPTION>
Portfolio Allocation Target Actual
<S> <C> <C>
Bonds 65% 8%
....................................................
Stocks 30% 92%
....................................................
Cash Equivalents 5% --%
....................................................
Portfolio Statistics
Weighted Average Maturity (Bonds) 19.7 years
.................................................
Weighted Average Duration (Bonds) 10.0 years
.................................................
Average Market Capitalization (Stocks) $ ___
.................................................
Average P/E (Stocks) ___
.................................................
Credit Quality (Bonds)/10/
A 49%
.................................................
BBB 51%
.................................................
Top 5 Stock Holdings/11/
Carolina Power & Light 3.5%
.................................................
D Q E Inc. 2.9%
.................................................
Sprint Corp. 2.8%
.................................................
Ameritech Corporation 2.7%
.................................................
Piedmont Natural Gas 2.7%
.................................................
</TABLE>
1. The year to date return as of September 30, 1998 was 2.78%.
2. The table reflects returns of the Lipper Income Equity Index, Lehman
Brothers Aggregate Bond Index, Standard & Poor's 500 Index and a market
benchmark comprised of a 70% weighting in the LB Aggregate Bond Index and
30% weighting in the S&P 500 Index. Returns assume reinvestment of
dividends, but do not include any brokerage commissions or sales charges.
3. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
4. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
5. Reduced Class A sales charges apply to purchases of $50,000 or more.
Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
6. As a percentage of lesser of purchase price or redemption proceeds.
7. Class B shares redeemed within six years of purchase bear to a CDSC of 5%
during the first year, 4% during the second and third years, 3% during the
fourth, 2% during the fifth, and 1% during the sixth year.
8. Class C shares redeemed within one year of purchase bear to a 1% CDSC.
9. Management and 12b-1 fee rates reflect increases effective in November
1998. "Other Expenses" are based on actual fund expenses for the fiscal
year ended 6/30/98. Long-term Class B and C investors may pay more in 12b-1
distribution fees and CDSCs than the economic equivalent of the maximum
permitted front-end sales charge. The adviser will reimburse expenses
through July 31, 1999 to prevent "Total Annual Fund Operating Expenses"
(excluding distribution or service fees and extraordinary expenses) from
exceeding 0.95% of average net assets.
10. As a percentage of the fund's bond holdings. Holdings may vary.
11. As a percentage of the fund's stock holdings. Holdings may vary.
Section 1 The Fund 3
<PAGE>
Section 2 How We Manage Your Money
To help you understand the fund better, this section includes a detailed
discussion of our investment and risk management strategies. For a more complete
discussion of these matters, please consult the Statement of Additional
Information.
Who Manages the Fund
Nuveen Institutional Advisory Corp. ("NIAC"), 333 West Wacker Drive, Chicago, IL
60606, serves as the investment adviser to the fund. In this capacity, NIAC is
responsible for the selection and on-going monitoring of the securities in the
fund's investment portfolio, managing the fund's business affairs and providing
certain clerical, bookkeeping and other administrative services. NIAC is a
wholly owned subsidiary of John Nuveen & Co. Incorporated ("Nuveen"), which is
the sponsor and principal underwriter of the fund's shares and has sponsored or
underwritten more than $60 billion of investment company securities. Nuveen and
its affiliates have more than $38 billion in assets under management.
Overall investment management strategy and operating policies for the fund are
set by Nuveen's Investment Policy Committee. This committee is comprised of the
principal executive officers and portfolio managers of NIAC and meets regularly
to review economic conditions, the outlook for the financial markets in general
and the status of the bond markets in particular. Day-to-day operation of the
fund and the execution of its specific investment strategies is the
responsibility of Richard A. Huber. Mr. Huber is a Vice President of NIAC and
has been a Vice President of the fund since its inception. Mr. Huber previously
was a Vice President and portfolio manager of Flagship Financial, and he
currently manages investments for six Nuveen-sponsored investment companies.
Management Fees
For providing these services, NIAC is paid an annual fund management fee
according to the following schedule:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
<S> <C>
For the first $125 million 0.7500%
...........................................................
For the next $125 million 0.7375%
...........................................................
For the next $250 million 0.7250%
...........................................................
For the next $500 million 0.7125%
...........................................................
For the next $1 billion 0.7000%
...........................................................
For assets over $2 billion 0.6750%
...........................................................
</TABLE>
For the most recent fiscal year, the Fund paid 49%, as a percentage of average
net assets, to Nuveen Advisory Corp. Nuveen Advisory Corp., another subsidiary
of Nuveen that operates with the same personnel and
4 Section 2 How We Manage Your Money
<PAGE>
practices, was investment adviser to the fund from January 1, 1997 to
November , 1998. For providing services to the fund, Nuveen Advisory Corp.
received an annual management fee pursuant to the following schedule: for the
first $125 million-0.5000%; for the next $125 million-0.4875%; for the next $250
million-0.4750%; for the next $500 million-0.4625%; for the next $1 billion-
0.4500%; and for assets over $2 billion-0.4250%
What Securities We Invest In
Taxable Bonds
The fund invests a majority of its assets in a diversified portfolio of bonds of
varying maturities. At least 65% of these bonds are investment grade quality.
Investment grade quality bonds are fixed income securities that at the time of
purchase either are rated in the four highest (investment grade) categories by
Moody's Investors Service, Standard & Poor's, Duff & Phelps, or Fitch Investors
Service, or are unrated but judged investment grade by NIAC. Fixed-income
securities include U.S. and foreign government bonds (including obligations of
their agencies and instrumentalities), corporate bonds (other than convertible
bonds), mortgage- and asset-backed securities, loan participations, and
comparable instruments. Fixed-income securities may have a fixed, variable, or
floating rate of interest.
The fund may also invest up to 35% of its net assets in a combination of (a)
fixed-income securities that are either rated B or higher by at least one of the
national rating agencies or unrated but judged to be comparable in quality by
NIAC; or (b) other securities that have predominantly fixed-income
characteristics, such as preferred stock or convertible bonds. Convertible bonds
must be rated at least BBB by Standard & Poor's, Duff & Phelps, or Fitch
Investor Service, or Baa by Moody's Investors Service. Securities rated below
investment grade are commonly known as "high-yield," "high-risk" or "junk" bonds
which typically offer higher yields but involve greater risks, including the
possibility of default or bankruptcy, and increased market price volatility.
The fund will limit its foreign bond investments to 20% of its bonds, and will
invest only in U.S. dollar-denominated securities of foreign issuers whose
headquarters are located in a country that is a member of the Organization for
Economic Cooperation and Development (OECD).
Stocks
The fund invests at least 25% of its total assets in equity securities of mid-
and large-cap companies with market capitalizations of at least $1 billion.
Eligible equity securities include common stocks; warrants to purchase common
stocks or preferred stocks; securities convertible into common or preferred
stocks, such as convertible bonds and debentures; and other securities with
equity characteristics.
The fund may invest up to 20% of its equity allocation in foreign securities
traded in the U.S., including American Depository Receipts ("ADRs"). ADRs are
receipts for the shares of a foreign company that entitle the ADR holder to a
proportionate beneficial ownership interest in the underlying shares, including
all dividends and capital gains distributions on such shares.
Section 2 How We Manage Your Money 5
<PAGE>
Short-term Investments
Under normal market conditions, the fund may invest up to 20% of its total
assets in short-term, high quality fixed-income securities and cash equivalents.
These securities include U.S. government securities, certificates of deposit,
bankers' acceptances, commercial paper rated A-1 or higher by S&P, Prime-1 or
higher by Moody's, Duff 2 or higher by Duff & Phelps or Fitch 2 or higher by
Fitch, and repurchase agreements with respect to U.S. government obligations,
and similar fixed-income securities with remaining maturities of one year or
less. (See "How We Manage Risk -- Hedging and Other Defensive Investment
Strategies.") For more information on eligible short-term investments, see the
Statement of Additional Information.
How We Select Investments
NIAC follows a value-driven investment process to select bonds for the fund
based upon its assessment of a bond's relative value in terms of current yield,
price, credit quality and future prospects. NIAC is supported by Nuveen's team
of research analysts who review the bonds available for purchase, monitor the
continued creditworthiness of the fund's investments, and analyze economic,
political and demographic trends affecting the bond markets. We seek to identify
bonds with favorable characteristics we believe are not yet recognized by the
market. We then select those higher-yielding and undervalued bonds that we
believe represent the most attractive values.
In selecting equity securities, NIAC uses a value-oriented strategy to identify
established, well-known companies whose stocks represent excellent relative
value and offer high current income or attractive appreciation potential.
Portfolio Maturity
The fund buys bonds with different maturities in pursuit of its investment
objective, but maintains under normal market conditions an investment portfolio
with an overall weighted average effective maturity of 5 to 10 years. A bond's
effective maturity may be significantly shorter than its stated maturity due to
certain features (such as puts, adjustable coupons, or a prepayment schedule or
expected prepayment rates, but not call provisions) that cause the bond to
experience the same price volatility as a shorter-maturity but otherwise
comparable bond.
Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or delayed-delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15 to 45 days of the trade. Such transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
Portfolio Turnover
The fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The fund intends to keep portfolio turnover
6 Section 2 How We Manage Your Money
<PAGE>
relatively low in order to reduce trading costs and the realization of taxable
capital gains. The fund, however, may make limited short-term trades to take
advantage of market opportunities or reduce market risk. During the fund's
current fiscal year, the fund's portfolio turnover rate may be higher than usual
as a result of the recent change in the fund's investment policies.
The fund's investment objective may not be changed without shareholder approval.
The fund's investment policies may be changed by the Board of Trustees without
shareholder approval unless otherwise noted in this prospectus or the Statement
of Additional Information.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund -- even the most
conservative -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in the fund. Because of these
and other risks, you should consider an investment in the fund to be a long-term
investment.
Market risk: the risk that a particular stock, an industry, or stocks in general
may fall in value.
Interest rate risk: the risk that the value of the fund's portfolio will decline
because of rising market interest rates (bond prices move in the opposite
direction of interest rates). The longer the average maturity (duration) of a
fund's portfolio, the greater its interest rate risk. See "How We Select
Investments -- Portfolio Maturity."
Income risk: the risk that the income from the fund's portfolio will decline
because of falling market interest rates. This can result when the fund invests
the proceeds from new share sales, or from matured or called bonds, at market
interest rates that are below the portfolio's current earnings rate.
Credit risk: the risk that an issuer of a bond is unable to meet its obligation
to make interest and principal payments due to changing financial or market
conditions. Generally, lower rated bonds (including below investment grade bonds
owned by the fund), provide higher current income but are considered to carry
greater credit risk than higher rated bonds. In addition, Year 2000 issues may
affect the ability of issuers to meet their payment obligations to their bond
holders, and may adversely affect their credit ratings.
Inflation risk: the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the fund's assets can decline as can the value
of the fund's distributions.
Correlation risk: Although the prices of stocks and bonds often rise and fall at
different times so that a fall in the price of one is offset by a rise in
Section 2 How We Manage Your Money 7
<PAGE>
the price of the other, in a down market the prices of these securities can also
fall in tandem.
Foreign investment risk: Securities of foreign issuers present risks beyond
those of domestic securities. Such risks include political or economic
instability, less publicly available information and, in the case of foreign
stocks, currency risk. Foreign securities may also have more volatile prices and
be less liquid than domestic securities.
How We Manage Risk
In pursuit of its investment objective, the fund assumes investment risk,
chiefly in the form interest rate and credit risk. The fund limits this
investment risk generally by restricting the type and maturities of bonds it
purchases, and by diversifying its investment portfolio geographically as well
as across different industry sectors.
Portfolio Allocation Targets and Ranges
The fund follows a disciplined asset allocation methodology that keeps your
portfolio mix within a defined range over time as market conditions change. The
fund has established the following allocation targets and operating ranges for
each asset class.
<TABLE>
<CAPTION>
Target Range
<S> <C> <C>
Bonds 65% 55-75%
........................................
Stocks 30% 25-45%
........................................
Cash Equivalents 5% 0-20%
........................................
</TABLE>
The fund's Board of Trustees may change the target investment mix and operating
ranges for each asset class without shareholder approval.
Investment Limitations
The fund has adopted certain investment limitations (based on total assets) that
cannot be changed without shareholder approval and are designed to limit your
investment risk and maintain portfolio diversification. The fund may not have
more than:
. 5% in securities of any one issuer, or 10% of the voting securities of
that issuer (except for U.S. government securities or for 25% of the
fund's total assets);
. 25% in any one industry (except for U.S. government securities).
Hedging and Other Defensive Investment Strategies
The fund may invest up to 100% in cash and cash equivalents and short-term
investments as a temporary defensive measure in response to adverse market
conditions, or to keep cash on hand fully invested. During those periods, the
weighted average maturity of the fund's investment portfolio may fall below the
defined range described under "How We Select Investments -- Portfolio Maturity."
The fund may also use various investment strategies designed to hedge against
changes in the value of securities the fund owns or expects to purchase or to
hedge against interest rate changes. These hedging strategies include using
financial futures contracts, options on financial futures, or options based on
debt securities whose prices, in the opinion
8 Section 2 How We Manage Your Money
<PAGE>
of NIAC, correlate with the prices of the fund's investments. The ability of the
fund to benefit from options and futures is largely dependent on our ability to
pursue such strategies successfully. The fund could lose money on futures
transactions or an option can expire worthless.
Section 2 How We Manage Your Money 9
<PAGE>
Section 3 How You Can Buy and Sell Shares
You can choose from four classes of fund shares, each with a different
combination of sales charges, fees, eligibility requirements and other features.
Your financial adviser can help you determine which class is best for you. We
offer a number of features for your convenience. Please see the Statement of
Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or Class R shares, you
should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would apply upon
redemption;
. the amount of any distribution or service fees that you may incur while you
own the shares;
. whether you will be reinvesting income or capital gain distributions in
additional shares;
. whether you qualify for a sales charge waiver or reduction.
For a summary of the charges and expenses for each class, please see the Summary
of Fund Expenses.
Class A Shares
You can buy Class A shares at the offering price, which is the net asset value
per share plus an up-front sales charge. You may qualify for a reduced sales
charge, or the sales charge may be waived, as described in "How to Reduce Your
Sales Charge." Class A shares are also subject to an annual service fee of .25%
which compensates your financial adviser for providing ongoing service to you.
The up-front Class A sales charge for the fund is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 5.00%
............................................................................................................
$50,000 but less than $100,000 4.25% 4.44% 4.00%
............................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 3.25%
............................................................................................................
$250,000 but less than $500,000 2.75% 2.83% 2.50%
............................................................................................................
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
............................................................................................................
$1,000,000 and over * -- 1.00%*
............................................................................................................
</TABLE>
(*) You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays Authorized Dealers of record on these
share purchases a sales commission of 1.00% of the first $2.5 million, plus .50%
of the next $2.5 million, plus .25% of the amount over $5.0
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
million. If you redeem your shares within 18 months of purchase, you may have
to pay a CDSC of 1% of either your purchase price or your redemption proceeds,
whichever is lower. You do not have to pay this CDSC if your financial adviser
has made arrangements with Nuveen and agrees to waive the commission.
Class B Shares
You can buy Class B shares at the net asset value per share without any up-front
sales charge so that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of 1.00% of average
daily net assets. The annual .25% service fee compensates your financial
adviser for providing ongoing service to you. The annual .75% distribution fee
compensates Nuveen for paying your financial adviser a 3.75% up-front sales
commission, which includes an advance of the first year's service fee. If you
sell your shares within six years of purchase, you will have to pay a CDSC based
on either your purchase price or what you sell your shares for, whichever amount
is lower, according to the following schedule. You do not pay a CDSC on any
Class B shares you purchase by reinvesting dividends.
<TABLE>
<CAPTION>
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
<S> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1%
.....................................................................
</TABLE>
Class B shares automatically convert to Class A shares eight years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay an annual service fee on any converted Class
B shares.
Class C Shares
You can buy Class C shares at the net asset value per share without any up-front
sales charge so that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of 1%. The annual
.25% service fee compensates your financial adviser for providing ongoing
service to you. The annual .75% distribution fee reimburses Nuveen for paying
your financial adviser an ongoing sales commission. Nuveen advances the first
year's service and distribution fees. If you sell your shares within 12 months
of purchase, you may have to pay a 1% CDSC based on either your purchase price
or what you sell your shares for, whichever amount is lower.
Class R Shares
Under limited circumstances, you may purchase Class R shares at the net asset
value on the day of purchase. In order to qualify, you must be eligible under
one of the programs described in "How to Reduce Your Sales Charge" or meet
certain other purchase size criteria. Class R shares are not subject to sales
charges or ongoing service or distribution fees. Class R shares have lower
ongoing expenses than the other classes.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
Class A Sales Charge Reductions
. Rights of accumulation
. Letter of intent
. Group purchase
Class A Sales Charge Waivers
. Nuveen Defined Portfolio reinvestment
. Purchases using redemptions from unrelated funds
. Retirement plans
. Certain employees and directors of Nuveen or employees of authorized dealers
. Bank trust departments
Class R Eligibility
. Certain employees and directors of Nuveen or employees of authorized dealers
. Bank trust departments
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisers, certified financial planners
and registered broker-dealers who charge asset-based or comprehensive "wrap"
fees for their services. Please refer to the Statement of Additional
Information for detailed program descriptions and eligibility requirements.
Additional information is available from your financial adviser or by calling
(800) 257-8787. Your financial adviser can also help you prepare any necessary
application forms. You or your financial adviser must notify Nuveen at the time
of each purchase if you are eligible for any of these programs. The fund may
modify or discontinue these programs at any time.
How to Buy Shares
You may open an account with $3,000 per fund share class ($1,000 for a
Traditional/Roth IRA account; $500 for an Education IRA account; and $500 for
accounts opened through certain fee-based programs) and make additional
investments at any time with as little as $50. There is no minimum if you are
reinvesting Nuveen Defined Portfolio distributions. The share price you pay
will depend on when Nuveen receives your order. Orders received before the
close of trading on a business day will receive that day's closing share price,
otherwise you will receive the next business day's price. A business day is any
day the New York Stock Exchange is open for business and normally ends at 4 P.M.
New York time.
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop
a customized financial plan, select investments and monitor and review your
portfolio on an ongoing basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisers are paid either from
fund sales charges and fees or by
12 Section 3 How You Can Buy and Sell Shares
<PAGE>
charging you a separate fee in lieu of a sales charge for ongoing investment
advice and services. If you do not have a financial adviser, call (800) 257-
8787 and Nuveen can refer you to one in your area.
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186.
Systematic Investing
Once you have established a fund account, systematic investing allows you to
make regular investments through automatic deductions from your bank account
(simply complete the appropriate section of the account application form) or
directly from your paycheck. To invest directly from your paycheck, contact
your financial adviser or call Nuveen at (800) 257-8787. Systematic investing
may also make you eligible for reduced sales charges.
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 5%, 6% or 7% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Invested Principal Compounded 5% Compounded 6% Compounded 7%
- ------------------ ------------- ------------- -------------
<S> <C> <C> <C>
3,000 3,013 3,015 3,018
4,100 4,281 4,319 4,356
5,300 5,733 5,825 5,918
6,500 7,260 7,424 7,592
7,700 8,864 9,121 9,387
8,900 10,551 10,924 11,312
10,100 12,323 12,837 13,376
11,300 14,187 14,869 15,590
12,500 16,146 17,025 17,963
13,700 18,205 19,315 20,508
14,900 20,369 21,746 23,237
16,100 22,644 24,327 26,164
17,300 25,036 27,067 29,302
18,500 27,550 29,976 32,666
19,700 30,192 33,065 36,274
20,900 32,970 36,344 40,143
22,100 35,890 39,826 44,292
23,300 38,959 43,522 48,740
24,500 42,185 47,446 53,510
25,700 45,577 51,612 58,624
26,900 49,141 56,035 64,109
</TABLE>
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time, and does not assure that you will profit.
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
Systematic Investment Plan
You can make regular investments of $50 or more per month by authorizing us to
draw preauthorized checks on your bank account. You can stop the withdrawals at
any time. There is no charge for this plan.
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct this amount automatically from your paycheck. You can stop the
deductions at any time. There is no charge for this plan.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Special Services--Fund Direct" below), paid to a third party or sent
payable to you at an address other than your address of record. You must
complete the appropriate section of the account application or Account Update
Form to participate in the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for the same class of another Nuveen mutual fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you
are exchanging. Because an exchange is treated for tax purposes as a concurrent
sale and purchase, and any gain may be subject to tax, you should consult your
tax adviser about the tax consequences of any contemplated exchange.
The exchange privilege is not intended to allow you to use the fund for short-
term trading. Because excessive exchanges may interfere with portfolio
management, raise fund operating expenses or otherwise have an adverse effect on
other shareholders, the fund reserves the right to revise or suspend the
exchange privilege, limit the amount or number of exchanges, or reject any
exchange.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed.
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
If you paid a CDSC, we will refund your CDSC and reinstate your holding period.
You may use this reinstatement privilege only once for any redemption.
Fund Direct/SM/
You may link your fund account to your bank account and transfer money
electronically between these accounts and perform a variety of account
transactions, including buying shares by telephone and systematic investing.
You may also have dividends, distributions, redemption payments or systematic
withdrawals sent directly to your bank account.
Your financial adviser can help you complete the forms for these services, or
you can call Nuveen at (800) 257-8787 for copies of the necessary forms.
How to Sell Shares
You may use one of the following ways to sell (redeem) your shares on any day
the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your properly completed redemption request.
Your redemption request must be received before the close of trading for you to
receive that day's price. While the fund does not charge a redemption fee, you
may be assessed a CDSC, if applicable. When you redeem Class A, Class B, or
Class C shares subject to a CDSC, the fund will first redeem any shares that are
not subject to a CDSC or that represent an increase in the value of your fund
account due to capital appreciation, and then redeem the shares you have owned
for the longest period of time, unless you ask the fund to redeem your shares in
a different order. No CDSC is imposed on shares you buy through the
reinvestment of dividends and capital gains. The holding period is calculated
on a monthly basis and begins on the first day of the month in which you buy
shares. When you redeem shares subject to a CDSC, the CDSC is calculated on the
lower of your purchase price or redemption proceeds, deducted from your
redemption proceeds, and paid to Nuveen. The CDSC may be waived under certain
special circumstances as described in the Statement of Additional Information.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your financial adviser may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by telephone. You may not redeem by telephone shares held in certificate
form. Checks will be issued only to the shareholder of record and mailed to the
address of record. If you have established electronic funds transfer privileges,
you may have redemption proceeds transferred electronically to your bank
account. We will normally mail your check the next business day. Nuveen and
Chase Global Funds Services Company, the transfer agent, will be liable for
losses resulting from unauthorized telephone redemptions only if they do not
follow reasonable procedures designed to verify the identity of the caller. You
should immediately verify your trade confirmations when you receive them.
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
An Important Note About Involuntary Redemption
From time to time the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account upon 30 days' written notice
if the value of your account falls below an established minimum. The fund
presently has set a minimum balance of $100 unless you have an active Nuveen
Defined Portfolio reinvestment account. You will not be assessed a CDSC on an
involuntary redemption.
By Mail
You can sell your shares at any time by sending a written request to the fund,
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186. Your request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
Guaranteed signatures are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record or you
want the check sent to another address (or the address of record has been
changed within the last 60 days.) Signature guarantees must be obtained from a
bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that is otherwise approved by the fund.
A notary public cannot provide a signature guarantee.
16 Section 3 How You Can Buy and Sell Shares
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the fund, this
section includes important details about how the fund makes distributions to
shareholders. We discuss some other fund policies, as well.
Distributions and Taxes
The fund pays dividends monthly and any capital gains once a year in December.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial adviser or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
The fund's distributions are taxed as ordinary income or capital gains (which
may be taxable at different rates depending on the length of time the fund holds
its assets). Dividends from the fund's long-term capital gains are taxable as
capital gains, while dividends from short-term capital gains and net investment
income are generally taxable as ordinary income. The tax you pay on a given
capital gains distribution depends generally on how long the fund has held the
portfolio securities it sold. It does not depend on how long you have owned your
fund shares. Taxable dividends do not qualify for a dividends received deduction
if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains that you were paid during the prior year. You
will receive this statement from the firm where you purchased your fund shares
if you hold your investment in street name. Nuveen will send you this statement
if you hold your shares in registered form. The tax status of your dividends
from the fund is not affected by whether you reinvest your dividends or receive
them in cash. The sale of shares in your account may produce a gain or loss, and
is a taxable event. For tax purposes, an exchange is the same as a sale.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires us to withhold
federal income tax from your distributions and redemption proceeds at a rate of
31%.
Section 4 General Information 17
<PAGE>
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is
commonly known as "buying the dividend." The entire dividend may be taxable to
you even though a portion of the dividend effectively represents a return of
your purchase price.
Distribution and Service Plans
John Nuveen & Co. Incorporated serves as the selling agent and distributor of
the fund's shares. In this capacity, Nuveen manages the offering of the fund's
shares and is responsible for all sales and promotional activities. In order to
reimburse Nuveen for its costs in connection with these activities, including
compensation paid to authorized dealers, the fund has adopted a distribution and
service plan under Rule 12b-1 under the Investment Company Act of 1940. (See
"How to Choose a Share Class" for a description of the distribution and service
fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to Authorized Dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the service fee for
Class A, Class B, and Class C shares to compensate Authorized Dealers, including
Nuveen, for providing account services to shareholders. These services may
include establishing and maintaining shareholder accounts, answering shareholder
inquiries, and providing other personal services to shareholders. These fees
also compensate Nuveen for other expenses, including printing and distributing
prospectuses to persons other than shareholders, the expenses of preparing,
printing, and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of shares. Because these fees are
paid out of the fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
Net Asset Value
The price you pay for your shares is based on the fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. eastern
time) on each day the New York Stock Exchange is open for business. Net asset
value is calculated for each class by taking the fair value of the class' total
assets, including interest or dividends accrued but not yet collected, less all
liabilities, and dividing by the total number of shares outstanding. The result,
rounded to the nearest cent, is the net asset value per share. All valuations
are subject to review by the fund's Board of Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. 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. Common stocks and other equity
securities are
18 Section 4 General Information
<PAGE>
valued at the last sales price that day. Securities not listed on a national
securities exchange or Nasdaq are valued at the most recent bid prices.
Fund Service Providers
The custodian of the assets of the fund is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the fund. The fund's transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186, performs bookkeeping, data processing and
administrative services for the maintenance of shareholder accounts.
NIAC and Chase Global Funds Services Company each rely on computer systems to
manage the fund's investments, process shareholder transactions and provide
shareholder account maintenance. Because of the way computers historically have
stored dates, some of these systems currently may not be able to correctly
process activity occurring in the year 2000. NIAC is working with the fund's
service providers to adapt their systems to address this "Year 2000" issue. NIAC
and the fund expect, but there can be no absolute assurance, that the necessary
work will be completed on a timely basis.
Section 4 General Information 19
<PAGE>
Section 5 Financial Highlights
The following table is intended to help you better understand the fund's recent
past performance. The tables are excerpted from the fund's latest financial
statements audited by Arthur Andersen LLP. You may obtain the complete
statements along with the auditor's report by requesting from Nuveen a free copy
of the fund's latest annual shareholder report.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Nuveen Dividend and Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Operations Less Distributions
Class ---------------------------------- ------------------------------
(Inception Net
Date) Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ended Net Asset Investment Investment Investment Capital Asset Total Assets
June 30, Value Income(a) Gain (loss) Total Income Gains Total Value Return(b) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/83)
1998 $11.51 $.61 $ 1.57 $2.18 $(.63) $ -- $(.63) $13.06 19.32% $20,013
1997 11.09 .66 .40 1.06 (.64) -- (.64) 11.51 9.89 20,157
1996 10.24 .64 .85 1.49 (.64) -- (.64) 11.09 14.82 25,010
1995 9.69 .64 .55 1.19 (.64) -- (.64) 10.24 12.73 25,000
1994 11.04 .63 (1.34) (.71) (.64) -- (.64) 9.69 (6.83) 26,921
Class C (7/93)
1998 11.49 .55 1.56 2.11 (.57) -- (.57) 13.03 18.65 5,707
1997 11.08 .61 .38 .99 (.58) -- (.58) 11.49 9.25 5,555
1996 10.24 .58 .84 1.42 (.58) -- (.58) 11.08 14.15 6,302
1995 9.69 .59 .55 1.14 (.59) -- (.59) 10.24 12.14 5,501
1994(c) 11.05 .59 (1.39) (.80) (.56) -- (.56) 9.69 (7.52)* 5,129
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------
Ratio of Ratio of Net
Expenses to Investment Income
Average Net to Average
Assets After Net Assets After Portfolio
Reimbursement(a) Reimbursement(a) Turnover Rate
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (8/83)
1998 1.34% 4.93% 101%
1997 .98 5.97 128
1996 .98 5.82 115
1995 1.00 6.52 159
1994 .94 5.92 193
Class C (7/93)
1998 1.89 4.39 101
1997 1.53 5.47 128
1996 1.52 5.27 115
1995 1.54 6.01 159
1994(c) 1.46* 5.69* 193
- ---------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) After the waiver of certain management fees or reimbursement of expenses by
Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
20 Section 5 Financial Highlights
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
Taxable Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona
California/1/
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky/2/
Louisiana
Maryland
Massachusetts/1/
Michigan
Missouri
New Jersey
New Mexico
New York/1/
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Shareholder
reports contain management's discussion of market conditions, investment
strategies and performance results as of the fund's latest semi-annual or annual
fiscal year end. Call Nuveen at (800) 257-8787 to request a free copy of any of
these materials or other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The fund's
Investment Company file number is 811- .
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
, 1998
NUVEEN INVESTMENT TRUST IV
NUVEEN DIVIDEND AND GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus of
the Nuveen Investment Trust IV dated . The Prospectus may be
obtained without charge from certain securities representatives, banks, and
other financial institutions that have entered into sales agreements with John
Nuveen & Co. Incorporated, or from the Fund, by mailing a written request to
the Fund c/o John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago,
Illinois 60606 or by calling (800) 257-8787.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information........................................................ S-2
Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-24
Investment Adviser and Investment Management Agreement..................... S-29
Portfolio Transactions..................................................... S-30
Net Asset Value............................................................ S-31
Federal Income Tax Matters................................................. S-31
Performance Information.................................................... S-35
Additional Information on the Purchase and Redemption of Fund Shares....... S-38
Distribution and Service Plan.............................................. S-47
Independent Public Accountants and Custodian............................... S-48
Financial Statements....................................................... S-48
Appendix A--Ratings of Investments......................................... A-1
</TABLE>
The audited financial statements of the Fund's most recent fiscal year appear
in the Fund's Annual Report. The Annual Report accompanies this Statement of
Additional Information.
<PAGE>
GENERAL INFORMATION
Nuveen Dividend and Growth Fund, formerly Flagship Utility Income Fund (the
"Fund"), is a series of the Nuveen Investment Trust IV (the "Trust"), an open-
end diversified management series investment company. The Trust (formally
Flagship Admiral Funds Inc.) was originally incorporated in Maryland on
April 18, 1983 and reorganized as a Massachusetts business trust in ,
1998. Currently, the Fund is the only series of the Trust authorized and
outstanding. References to the Trust and the Fund, to the extent they relate to
or are derived from information as of a date before , 1998, are to
Flagship Admiral Funds Inc. and Flagship Utility Income Fund, respectively.
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
INVESTMENT POLICIES
The investment objectives and certain fundamental investment policies of the
Fund are described in the Prospectus. The Fund, as a fundamental policy, may
not, without the approval of the holders of a majority of its shares:
(1) With respect to 75% of its total assets, purchase the securities of
any issuer (except securities issued or guaranteed by the United States
government or any of its agencies or instrumentalities) if, as a result,
(i) more than 5% of the Fund's total assets would be invested in securities
of that issuer or (ii) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
(2) Borrow money, except that the Fund may (i) borrow money from banks
for temporary or emergency purposes (but not for leverage or the purchase
of investments) and (ii) engage in other transactions permissible under the
Investment Company Act of 1940 that may involve a borrowing (such as
obtaining such short-term credits as are necessary for the clearance of
transactions, engaging in delayed-delivery transactions, or purchasing
certain futures and options), provided that the combination of (i) and (ii)
shall not exceed 33 1/3% of the value of the Fund's total assets (including
the amount borrowed), less the Fund's liabilities (other than borrowings).
(3) Act as an underwriter of another issuer's securities, except to the
extent that the Fund may be deemed to be an underwriter within the meaning
of the Securities Act of 1933 in connection with the purchase and sale of
portfolio securities.
(4) Make loans to other persons, except through (i) the purchase of debt
securities permissible under the Fund's investment policies, (ii)
repurchase agreements, or (iii) the lending of portfolio securities,
provided that no such loan of portfolio securities may be made by the Fund
if, as a result, the aggregate of such loans would exceed 33 1/3% of the
value of the Fund's total assets.
(5) Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options, futures contracts, or other
derivative instruments, or from investing in securities or other
instruments backed by physical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prohibit the Fund
from purchasing or selling securities or other instruments backed by real
estate or of issuers engaged in real estate activities).
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(7) Issue senior securities, except as permitted under the Investment
Company Act of 1940.
(8) Purchase the securities of any issuer if, as a result, 25% or more of
the Fund's total assets would be invested in the securities of issuers
whose principal business activities are in the same industry (except that
this restriction shall not be applicable to securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities).
Electric company securities, natural gas company securities, and
telecommunications company securities shall each be considered securities
of issuers in separate industries for the purpose of this restriction.
Except for restriction (2), if a percentage restriction is adhered to at the
time of investment, a later increase in percentage resulting from a change in
market value of the investment or the total assets will not constitute a
violation of that restriction.
The foregoing fundamental policies, together with the investment objective of
the Fund, cannot be changed without approval by holders of a "majority of the
Fund's outstanding voting shares." As defined in the Investment Company Act of
1940, this means the vote of (i) 67% or more of the Fund's shares present at a
meeting, if the holders of more than 50% of the Fund's shares are present or
represented by proxy or (ii) more than 50% of the Fund's shares, whichever is
less.
In addition to the fundamental investment policies listed above, the Fund is
also subject to the following non-fundamental restrictions and policies, which
may be changed by the Board of Trustees without shareholder approval.
The Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to
obtain securities equivalent in kind and amount to the securities sold at
no added cost, and provided that transactions in options, futures
contracts, options on futures contracts, or other derivative instruments
are not deemed to constitute selling securities short.
(2) Purchase securities of open-end or closed-end investment companies
except in compliance with the Investment Company Act of 1940 or any
exemptive relief obtained thereunder.
(3) Enter into futures contracts or related options or forward contracts,
if more than 30% of the Fund's net assets would be represented by futures
contracts or more than 5% of the Fund's net assets would be committed to
initial margin deposits and premiums on futures contracts and related
options.
(4) Purchase securities when borrowings exceed 5% of its total assets. If
due to market fluctuations or other reasons, the value of the Fund's assets
falls below 300% of its borrowings, the Fund will reduce its borrowings
within 3 business days. To do this, the Fund may have to sell a portion of
its investments at a time when it may be disadvantageous to do so.
(5) Invest in illiquid securities it, as a result of such investment,
more than 15% of the Fund's net assets would be invested in illiquid
securities.
(6) Purchase securities of companies for the purpose of exercising
control.
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INVESTMENT POLICIES AND TECHNIQUES
The following information supplements, and should be read in conjunction
with, the discussion of the Fund's investment objectives, policies and
techniques that are described in the Prospectus.
INVESTMENTS IN FIXED-INCOME SECURITIES
As described in the Prospectus, the Fund invests the majority of its assets
primarily in investment grade quality bonds with varying maturities. Investment
grade quality securities are securities which are rated at the time of purchase
within the four highest grades (Baa or BBB or better) by Moody's Investors
Service, Inc. ("Moody's"), by Standard and Poor's Corporation ("S&P"), by Fitch
Investors Service, Inc. ("Fitch"), or by Duff & Phelps Inc. ("D&P") or are
unrated fixed-income securities which, in the opinion of Nuveen Institutional
Advisory Crop. ("NIAC"), are of comparable quality to bonds rated within the
four highest grades by Moody's, S&P, Fitch, or D&P. The Fund may also invest up
to 35% of its bonds in securities that are rated B or BB (below investment
grade) or in unrated securities, judged by NIAC to be of comparable quality.
The Fund may also invest up to 20% of its bonds in dollar-denominated
securities of foreign issuers whose headquarters are located in a country that
is a member of the Organization for Economic Cooperation and Development.
Lastly, the Fund may invest in temporary investments as described below. See
Appendix A for more information about ratings by Moody's, S&P, Fitch and D&P.
NIAC looks for bonds that appear especially attractive on a relative value
basis, and concentrate on those with intermediate-term characteristics that we
believe offer the best balance of current income and capital preservation
potential. Securities that are undervalued or that represent undervalued market
sectors are securities that, in NIAC's opinion, are worth more than the value
assigned to them in the marketplace. Securities of particular types or purposes
may be undervalued because there is a temporary excess of supply in that market
sector, or because of a general decline in the market price of securities in
the market sector for reasons that do not apply to the particular securities
that are considered undervalued. The Fund's investment in undervalued
securities will be based on NIAC's belief that their prices should ultimately
reflect their true value. In seeking undervalued securities, the Fund may
purchase underrated securities. Underrated securities are those whose ratings
do not, in NIAC's opinion, reflect their true value. Such securities may be
underrated because of the time that has elapsed since their rating was assigned
or reviewed, or because of positive factors that may not have been fully taken
into account by rating agencies, or for other similar reasons.
In general, fixed-income securities include securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities ("U.S. Government
securities"); corporate debt securities, including convertible securities
(rated BBB or better by S&P, D&P, or Fitch, or Baa or better by Moody's) and
corporate commercial paper; mortgage-backed and other asset-backed securities;
inflation-indexed bonds issued by both governments and corporations; structured
notes, including hybrid or "indexed" securities, and loan participations;
delayed funding loans and revolving credit facilities; bank certificates of
deposit, fixed time deposits and bankers' acceptances; repurchase agreements
and reverse repurchase agreements; debt securities issued by states or local
governments and their agencies, authorities and other instrumentalities;
obligations of foreign governments or their subdivisions, agencies and
instrumentalities; obligations of international agencies or supranational
entities; and similar instruments. Fixed income securities may have fixed,
variable, or floating rates of interest including rates of interest that vary
inversely at a multiple of a designated or floating rate, or that vary
according to changes in relative values of currencies. The Fund may invest all
of its assets in derivative instruments or in mortgage-or asset-backed
securities. The Fund may adhere to its investment policy by entering into a
series of purchase and sale contracts or utilizing other investment techniques
by which it may obtain market exposure to
the securities in which it primarily invests. Some of the fixed income
securities in which the Fund may invest are described in further detail below.
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Loans Participations. The Fund may invest in loan participations, which may
have speculative characteristics, when the investment adviser believes such
investments offer the possibility of long-term appreciation in value. Loan
participations are interests in floating or variable rate senior loans to U.S.
corporations, partnerships, and other entities that operate in a variety of
industries and geographic regions. An investment in loan participations carries
a high degree of risk and may have the consequence that interest payments with
respect to such securities may be reduced, deferred, suspended, or eliminated
and may have the further consequence that principal payments may likewise to
reduced, deferred, suspended or canceled, causing the loss of the entire amount
of the investment. In addition, most loan participations are illiquid. To the
extent that loan participations are deemed to be illiquid, they will be subject
to the Fund's 15% restriction on investments in illiquid securities.
Loans in which the Fund will purchase participation interests may pay
interest at rates which are periodically redetermined on the basis of a base
lending rate plus a premium. These base lending rates are generally the Prime
Rate offered by a major U.S. bank, the London Inter-Bank Offered Rate, the
Certificate of Deposit rate or other base lending rates used by commercial
lenders. The loans typically have the most senior position in a borrower's
capital structure, although some loans may hold an equal ranking with other
senior securities of the borrower. Although the loans generally are secured by
specific collateral, the Fund may invest in loans which are not secured by any
collateral. Uncollateralized loans pose a greater risk of nonpayment of
interest or loss of principal than do collateralized loans. The collateral
underlying a collateralized loan may consist of assets that may not be readily
liquidated, and there is no assurance that the liquidation of such assets would
satisfy fully a borrower's obligation under a loan. The Fund is not subject to
any restrictions with respect to the maturity of the loans in which it
purchases participation interests.
The loans in which the Fund will purchase participation interests generally
are not rated by nationally recognized statistical rating organizations.
Ratings of other securities issued by a borrower do not necessarily reflect
adequately the relative quality of a borrower's loans. Therefore, although the
investment adviser may consider such ratings in determining whether to invest
in a particular loan, such ratings will not be the determinative factor in the
investment adviser's analysis.
The loans are not readily marketable and may be subject to restrictions on
resale. Participation interests in the loans generally are not listed on any
national securities exchange or automated quotation system and no regular
market has developed for such interests. Any secondary purchases and sales of
loan participations generally are conducted in private transactions between
buyers and sellers. Many of the loans in which the Fund expects to purchase
interests are of a relatively large principal amount and are held by a
relatively large number of owners which, in the investment adviser's opinion,
should enhance the relative liquidity of such interests.
When acquiring a loan participation, the Fund will have a contractual
relationship only with the lender (typically an entity in the banking, finance
or financial services industries), not with the borrower. The Fund has the
right to receive payments of principal and interest to which it is entitled
only from the lender selling the loan participation and only upon receipt by
such lender of such payments from the borrower. In connection with purchasing
loan participations, the Fund generally will have no right to enforce
compliance by the borrower with the terms of the loan agreement, nor any rights
with respect to any funds acquired by other lenders through set-off against the
borrower, and the Fund may not directly benefit from the collateral supporting
the loan in which it has purchased the loan participation. As a result, the
Fund may assume the credit risk of both the borrower and the lender selling the
loan participation. In the event of insolvency of the lender selling a loan
participation, the Fund may be treated as a general creditor of such lender,
and may not benefit from any set-off between such lender and the borrower.
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Non-Investment Grade Debt Securities ("Junk Bonds"). The Fund may invest in
junk bonds. Junk bonds, while generally offering higher yields than investment
grade securities with similar maturities, involve greater risks, including the
possibility of default or bankruptcy. They are regarded as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. The special risk considerations in connection with investments in
these securities are discussed below. Refer to Appendix A of this Statement of
Additional Information for a discussion of securities ratings.
(1) Effect of Interest Rates and Economic Changes. The junk bond market
is relatively new and its growth has paralleled a long economic expansion.
As a result, it is not clear how this market may withstand a prolonged
recession or economic downturn. Such an economic downturn could severely
disrupt the market for and adversely affect the value of such securities.
All interest-bearing securities typically experience appreciation when
interest rates decline and depreciation when interest rates rise. In
addition, the market values of junk bond securities tend to reflect
individual corporate developments to a greater extent than do the market
values of higher rated securities, which react primarily to fluctuations in
the general level of interest rates. Junk bond securities also tend to be
more sensitive to economic conditions than are higher rated securities. As
a result, they generally involve more credit risk than securities in the
higher rated categories. During an economic downturn or a sustained period
of rising interest rates, highly leveraged issuers of junk bond securities
may experience financial stress and may not have sufficient revenues to
meet their payment obligations. The risk of loss due to default by an
issuer of these securities is significantly greater then by an issuer of
higher rated securities because such securities are generally unsecured and
are often subordinated to other creditors. Further, if the issuer of a junk
bond security defaults, the Fund may incur additional expenses to seek
recovery. Periods of economic uncertainty and changes would also generally
result in increased volatility in the market prices of these and thus in
the Fund's net asset value.
As previously stated, the value of a junk bond security will generally
decrease in a rising interest rate market and, accordingly, so will the
Fund's net asset value. If the Fund experiences unexpected net redemptions
in such a market, it may be forced to liquidate a portion of its portfolio
securities without regard to their investment merits. Due to the limited
liquidity of junk bond securities, the Fund may be forced to liquidate
these securities at a substantial discount. Any such liquidation would
reduce the Fund's asset base over which expenses could be allocated and
could result in a reduced rate of return for the Fund.
(2) Payment Expectations. Junk bond securities typically contain
redemption, call, or prepayment provisions that permit the issuer of
securities containing such provisions to redeem the securities at its
discretion. During periods of falling interest rates, issuers of these
securities are likely to redeem or prepay the securities and refinance them
with debt securities with a lower interest rate. To the extent an issuer is
able to refinance the securities, or otherwise redeem them, the Fund may
have to replace the securities with a lower yielding securities, which
could result in a lower return for the Fund.
(3) Credit Ratings. Credit ratings are issued by credit rating agencies
and are indicative of the rated securities' safety of principal and
interest payments. They do not, however, evaluate the market value risk of
junk bond securities and, therefore, may not fully reflect the true risks
of such an investment. In addition, credit rating agencies may not make
timely changes in a rating to reflect changes in the economy or in the
condition of the issuer that affect the value of the security.
Consequently, credit ratings are used only as a preliminary indicator of
investment quality. Investments in junk bonds will depend more upon credit
analysis by Nuveen Institutional Advisory Corp. ("NIAC") than investments
in investment grade debt securities. NIAC employs its own credit research
and analysis, which includes a study of the issuer's existing debt, capital
structure, ability to service debts pay dividends, sensitivity to economic
conditions, operating history, and current earnings trend. NIAC continually
monitors the Fund's investments and carefully
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evaluates whether to dispose of or to retain junk bond securities whose
credit ratings or credit quality may have changed.
(4) Liquidity and Valuation. The Fund may have difficulty disposing of
certain junk bond securities because there may be a thin trading market for
such securities. Not all dealers maintain markets in all junk bond
securities. As a result, there is no established retail secondary market
for many of these securities. The Fund anticipates that such securities
could be sold only to a limited number of dealers or institutional
investors. To the extent a secondary trading market does exist, it is
generally not as liquid as the secondary market for higher rated
securities. The lack of a liquid secondary market may have an adverse
impact on the market price of the security. The lack of a liquid secondary
market for certain securities may also make it more difficult for the Fund
to obtain accurate market quotations for purposes of valuing its
securities. Market quotations are generally available on many junk bond
issues only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. During
periods of thin trading, the spread between bid and asked prices is likely
to increase significantly. In addition, adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
value and liquidity of junk bond securities, especially in a thinly traded
market.
Pass-Through Securities. The Fund may invest in various fixed-income
obligations backed by a pool of mortgages or other assets. The pass-through
securities in which the Fund may invest are each described below.
(1) "Mortgage-backed securities" are issued both by U.S. government
agencies, including the Government National Mortgage Association (GNMA),
the Federal National Mortgage Association (FNMA), and the Federal Home Loan
Mortgage Corporation (FHLMC), and by private entities. The payment of
interest and principal on securities issued by U.S. government agencies is
guaranteed by the full faith and credit of the U.S. government (in the case
of GNMA securities) or the issuer (in the case of FNMA and FHLMC
securities). However, the guarantees do not apply to the market prices and
yields of these securities, which vary with changes in interest rates.
Mortgage-backed securities issued by private entities are structured
similarly to mortgage-backed securities issued by GNMA, FNMA, and FHLMC.
These securities and the underlying mortgages are not guaranteed by
government agencies. However, these securities generally are structured
with one or more types of credit enhancement by a third party. Mortgage-
backed securities permit borrowers to prepay their underlying mortgages.
Prepayments by borrowers on underlying obligations can alter the effective
maturity of these instruments.
(2) "Collateralized mortgage obligations" (CMOs) are also backed by a
pool of mortgages or mortgage loans, which are divided into two or more
separate bond issues. CMOs issued by U.S. government agencies are backed by
agency mortgages, while privately issued CMOs may be backed by either
government agency mortgages or private mortgages. Payments of principal and
interest are passed through to each bond at varying schedules resulting in
bonds with different coupons, effective maturities, and sensitivities to
interest rates. In fact, some CMOs may be structured in a way that when
interest rates change the impact of changing prepayment rates on these
securities' effective maturities is magnified.
(3) "Commercial mortgage-backed securities" are backed by mortgages of
commercial property, such as hotels, office buildings, retail stores,
hospitals, and other commercial buildings. These securities may have a
lower prepayment risk than other mortgage-related securities because
commercial mortgage loans generally prohibit or impose penalties on
prepayments of principal. In addition, commercial mortgage-related
securities often are structured with some form of credit enhancement or
protect against potential losses on the underlying mortgage loans. Many of
the risks of investing in commercial mortgage-backed securities reflect the
risks of investing in the real estate securing the underlying mortgage
loans, including the effects of local and other economic conditions on real
estate markets, the ability of tenants to make loan payments, and the
ability of a property to attract and retain tenants.
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(4) "Asset-backed securities" are backed by other assets such as credit
card, automobile or consumer loan receivables, retail installment loans, or
participations in pools of leases. Credit support for these securities may
be based on the underlying assets and/or provided through credit
enhancement by a third party. The values of these securities are sensitive
to changes in the credit quality of the underlying collateral. The credit
strength of the credit enhancement, changes in interest rates, and at times
the financial condition of the issuer. Some asset-backed securities also
may receive prepayments, which can change the securities' effective
maturities.
(5) Other Mortgage-Related Securities. The Fund may invest in real estate
investment conduits which are issued in portions or tranches with varying
maturities and characteristics. Some tranches may only receive the interest
paid on the underlying mortgages (IOs) and others may only receive the
principal payments (POs). The values of IOs and POs are extremely sensitive
to interest rate fluctuations and prepayment rates, and IOs are also
subject to the risk of early repayment of the underlying mortgages, which
will substantially reduce or eliminate interest payments. To the extent
that the Fund invests in IOs and POs, its does not intend to invest more
than 5% of its assets in such securities.
Inflation-Indexed Bonds. The Fund may invest in inflation-indexed bonds
issued by the U.S. Government, its agencies or instrumentalities, or by private
corporations. The principal value of this type of bond is periodically adjusted
according to changes in the rate of inflation. The interest rate is generally
fixed at issuance; however, interest payments are based upon an inflation
adjusted principal value. For example, in a period of falling inflation,
principal value will be adjusted downward, reducing the interest payable.
Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed and will fluctuate. The Fund may also invest in other
bonds which may or may not provide a similar guarantee. If a guarantee of
principal is not provided, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.
Convertible Debt Securities. Among the corporate debt securities in which the
Fund may invest are convertible securities. A convertible debt security is a
bond, debenture, note, or other security that entitles the holder to acquire
common stock or other equity securities of the same or a different issuer. A
convertible security generally entitles the holder to receive interest paid or
accrued until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities have characteristics
similar to non-convertible debt securities. Convertible securities rank senior
to common stock in a corporation's capital structure and, therefore, generally
entail less risk than the corporation's common stock, although the extent to
which such risk is reduced depends in large measure upon the degree to which
the convertible security sells above its value as a fixed income security.
A convertible security may be subject to redemption at the option of the
issuer at a predetermined price. If a convertible security held by the Fund is
called for redemption, the Fund would be required to permit the issuer to
redeem the security and convert it to underlying common stock., or would sell
the convertible security to a third party. The Fund generally would invest in
convertible securities for their favorable price characteristics and total
return potential and would normally not exercise an option to convert. The
convertible securities in which the Fund may invest must be rated at least BBB
by S&P, D&P, or Fitch, or at least Baa by Moody's.
Eurodollar Convertibles. The Fund may invest in eurodollar convertibles.
Eurodollar convertibles are fixed-income securities of a foreign issuer that
are issued in U.S. dollars outside the U.S. and are convertible into or
exchangeable for specified equity securities.
Other Considerations. Obligations of issuers are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In
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addition, the obligations of such issuers may become subject to the laws
enacted in the future by Congress, state legislatures or referenda extending
the time for payment of principal or interest, or both, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability or any issuer to pay, when due, the principal
of an interest on its securities may be materially affected.
During temporary defensive periods (e.g., times when, in NIAC's opinion, the
ability of the Fund to meet its long-term investment objectives and preserve
the asset value of the Fund may be adversely affected by significant adverse
market, economic, political, or other circumstances), and in order to keep cash
on hand fully invested, the Fund may invest any percentage of its assets in
temporary investments. For further information, see "Short-Term Investments"
below.
EQUITY SECURITIES
Under normal market conditions, the Fund invests at least 25% of its assets
in equity securities of mid- and large-cap companies with market
capitalizations of at least $1 billion ("Equity Securities"). Equity Securities
include, but are not limited to, common stocks, warrants to purchase common
stocks or preferred stocks, securities convertible into common or preferred
stocks, such as convertible bonds and debentures, and other securities with
equity characteristics.
In addition, the Fund may invest up to 20% of its equity allocation in
dollar-denominated equity securities of foreign issuers, including American
Depository Receipts ("ADRs") as described in "Foreign Securities" below.
CASH EQUIVALENTS AND SHORT-TERM INSTRUMENTS
Short-Term Fixed Income Securities. The Fund may invest up to 20% of its
assets in cash equivalents and short-term fixed-income securities under normal
market conditions, or to keep cash on hand fully invested. In addition, for
temporary defensive purposes, the Fund may invest up to 100% of its total
assets in such instruments. Short-term fixed-income securities are defined to
include, without limitation, the following:
(1) U.S. government securities, including bills, notes and bonds
differing as to maturity and rates of interest that are either issued or
guaranteed by the U.S. Treasury or by U.S. government agencies or
instrumentalities. U.S. government agency securities include securities
issued by (a) the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, and the Government National Mortgage Association, whose
securities are supported by the full faith and credit of the United States;
(b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of
the agency to borrow from the U.S. Treasury; (c) the Federal National
Mortgage Association, whose securities are supported by the discretionary
authority of the U.S. government to purchase certain obligations of the
agency or instrumentality; and (d) the Student Loan Marketing Association,
whose securities are supported only by its credit. While the U.S.
government provides financial support to such U.S. government-sponsored
agencies or instrumentalities, no assurance can be given that it always
will do so since it is not so obligated by law. The U.S. government, its
agencies, and instrumentalities do not guarantee the market value of their
securities. Consequently, the value of such securities may fluctuate. In
addition, the Fund may invest in sovereign debt obligations of foreign
countries. A sovereign debtor's willingness or ability to repay principal
and interest in a timely manner may be affected by a number of factors,
including its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward principal international lenders and the
political constraints to which it may be subject.
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(2) Certificates of Deposit issued against funds deposited in a bank or a
savings and loan association. Such certificates are for a definite period
of time, earn a specified rate of return, and are normally negotiable. If
such certificates of deposit are non-negotiable, they will be considered
illiquid securities and be subject to the Fund's applicable restriction on
investment in illiquid securities. The issuer of a certificate of deposit
agrees to pay the amount deposited plus interest to the bearer of the
certificate on the dated specified thereon. Under current FDIC regulations,
the maximum insurance payable as to any one certificate of deposit is
$100,000; therefore, certificates of deposit purchased by the Fund may not
be fully insured.
(3) Bankers' acceptances, which are short-term credit instruments used to
finance commercial transactions. Generally, an acceptance is a time draft
drawn on a bank by an exporter or an importer to obtain a stated amount of
funds to pay for specific merchandise. The draft is then "accepted" by a
bank that, in effect, unconditionally guarantees to pay the face value of
the instrument on its maturity date. The acceptance may then be held by the
accepting bank as an asset or it may be sold in the secondary market at the
going rate of interest for a specific maturity.
(4) Repurchase agreements, which involve purchases of debt securities. At
the time the Fund purchases securities pursuant to a repurchase agreement,
it simultaneously agrees to resell and redeliver such securities to the
seller, who also simultaneously agrees to buy back the securities at a
fixed price and time. This assures a predetermined yield for the Fund
during its holding period, since the resale price is always greater than
the purchase price and reflects an agreed-upon market rate. Such actions
afford an opportunity for the Fund to invest temporarily available cash.
The Fund may enter into repurchase agreements only with respect to
obligations of the U.S. government, its agencies or instrumentalities;
certificates of deposit; or bankers' acceptances in which the Fund may
invest. Repurchase agreements may be considered loans to the seller,
collateralized by the underlying securities. The risk to the Fund is
limited to the ability of the seller to pay the agreed-upon sum on the
repurchase date; in the event of default, the repurchase agreement provides
that the Fund is entitled to sell the underlying collateral. If the value
of the collateral declines after the agreement is entered into, and if the
seller defaults under a repurchase agreement when the value of the
underlying collateral is less than the repurchase price, the Fund could
incur a loss of both principal and interest. The investment adviser
monitors the value of the collateral at the time the action is entered into
and at all times during the term of the repurchase agreement. The
investment adviser does so in an effort to determine that the value of the
collateral always equals or exceeds the agreed-upon repurchase price to be
paid to the Fund. If the seller were to be subject to a federal bankruptcy
proceeding, the ability of the Fund to liquidate the collateral could be
delayed or impaired because of certain provisions of the bankruptcy laws.
(5) Bank time deposits, which are monies kept on deposit with banks or
savings and loan associations for a stated period of time at a fixed rate
of interest. There may be penalties for the early withdrawal of such time
deposits, in which case the yields of these investments will be reduced.
(6) Commercial paper, which consists of short-term unsecured promissory
notes, including variable rate master demand notes issued by corporations
to finance their current operations. Master demand notes are direct lending
arrangements between the Fund and a corporation. There is no secondary
market for such notes. However, they are redeemable by the Fund at any
time. The investment adviser will consider the financial condition of the
corporation (e.g., earning power, cash flow, and other liquidity ratios)
and will continuously monitor the corporation's ability to meet all of its
financial obligations, because the Fund's liquidity might be impaired if
the corporation were unable to pay principal and interest on demand.
Investments in commercial paper will be limited to commercial paper rated
in the two highest categories by a major rating agency or unrated
commercial paper which is, in the opinion of the investment adviser, of
comparable quality.
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DURATION AND PORTFOLIO MATURITY
In administering the Fund's investments, NIAC currently intends that the
average portfolio duration of the Fund will normally vary within a three- to
six-year time frame based upon NIAC's forecast for interest rates. Duration is
an indicator of the expected volatility of a bond position in response to
changes in interest rates. In calculating duration, the Fund measures the
average time required to receive all cash flows associated with those debt
securities representing payments of principal and interest by considering the
timing, frequency and amount of payment expected from each portfolio debt
security. The higher the duration, the greater the gains and losses when
interest rates change. Duration generally is a more accurate measure of
potential volatility with a portfolio composed of high-quality debt securities,
such as U.S. Government securities, municipal securities and high-grade U.S.
corporate bonds, than with lower-grade securities.
NIAC may use several methods to manage the duration of the Fund's bond
position in order to increase or decrease its exposure to changes in interest
rates. First, NIAC may adjust duration by adjusting the mix of debt securities
held by the Fund. For example, if NIAC intends to shorten duration, it may sell
debt instruments that individually have a long duration and purchase other debt
instruments that individually have a shorter duration. Among the factors that
will affect a debt security's duration are the length of time to maturity, the
timing of interest and principal payments, and whether the terms of the
security give the issuer of the security the right to call the security prior
to maturity. Second, NIAC may adjust bond duration using derivative
transactions, especially with interest rate futures and options contracts. For
example, if NIAC wants to lengthen the duration of the Fund's bond position, it
could purchase interest rate futures contracts instead of buying longer-term
bonds or selling shorter-term bonds. Similarly, during periods of lower
interest rate volatility, NIAC may use a technique to extend duration in the
event rates rise by writing an out-of-the-money put option and receiving
premium income with the expectation that the option could be exercised. In
managing duration, the use of such derivatives may be faster and more efficient
than trading portfolio securities.
Weighted average maturity is another indicator of potential volatility used
by NIAC with respect to the Fund's bond portfolio, although for certain types
of debt securities, such as high quality debt securities, it is not as accurate
as duration in quantifying potential volatility. Weighted average maturity is
the average of all maturities of the individual debt securities held by the
Fund, weighted by the market value of each security. Generally, the longer the
weighted average maturity, the more bond prices will vary in response to
changes in interest rates.
The Fund buys bonds with different maturities in pursuit of its investment
objective, but maintains under normal market conditions an investment portfolio
with an overall weighted average effective maturity of 5 to 10 years. A bond's
effective maturity may be significantly shorter than its stated maturity due to
certain features (such as puts, an adjustable coupon, or a prepayment schedule
or expected prepayment rate, but not a call provision) that cause the bond to
experience the same price volatility as a shorter-maturity but otherwise
comparable bond. For example, a mortgage-backed security with a 30-year stated
maturity but structured to have an expected maturity of 7 years will generally
experience price changes due to market interest rate movements similar to an
ordinary bond with a 7-year maturity. Consequently, the Fund portfolio's
average stated maturity could be significantly longer than 10 years but,
because its average effective maturity will be less than 10 years, Fund shares
should under normal market conditions experience price volatility similar to an
ordinary bond with a stated maturity of less than 10 years. Is it possible
that, if market interest rates were to rise rapidly and substantially, the Fund
will experience somewhat more volatility than a bond with a stated maturity of
less than 10 years.
The policy of having a weighted average portfolio effective maturity of 5 to
10 years will not limit the effective maturity of any particular bond, and one
or more portfolio bonds may have effective maturities less than 5 years or
greater than 10 years so long as the weighted average effective maturity
remains between 5 and 10 years.
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The average effective maturity policy will apply at all times, even though
changes to the average effective maturity may result from market changes
independent of any portfolio changes. For example, if the average effective
maturity rises above 10 years not because of portfolio changes but rather
because market changes have lengthened the effective maturities of certain
bonds in the portfolio, the adviser will promptly adjust the portfolio to bring
the average below 10 years. The average effective maturity may occasionally
fall below 5 years during a temporary defensive period in response to adverse
market conditions, or because cash on hand awaiting investment in long-term
bonds is invested in short-term securities which tend to lower the portfolio's
overall average effective maturity.
HEDGING STRATEGIES
General Description of Hedging Strategies. The Fund may engage in hedging
activities. NIAC may cause the Fund to utilize a variety of financial
instruments, including options, futures contracts (sometimes referred to as
"futures"), forward contracts, and options on futures contracts to attempt to
hedge the Fund's holdings.
Hedging or derivative instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that the
Fund owns or intends to acquire. Such instruments may also be used to "lock-in"
realized but unrecognized gains in the value of portfolio securities. Hedging
strategies, if successful, can reduce the risk of loss by wholly and partially
offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce the
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. The Fund may also use derivative
instruments to manage the risks of its assets. Risk management strategies
include, but are not limited to, facilitating the sale of Fund securities,
managing the effective maturity or duration of debt obligations that the Fund
holds, establishing a position in the derivatives markets as a substitute for
buying or selling certain securities or creating or alerting exposure to
certain asset classes, such as debt and foreign securities. The use of
derivative instruments may provide a less expensive, more expedient, or more
specifically focused way for the Fund to invest than would "traditional"
securities (i.e., stocks or bonds). The use of hedging instruments is subject
to applicable regulations of the Securities and Exchange Commission (the
"SEC"), the several options and futures exchanges upon which they are traded,
the Commodity Futures Trading Commission (the "CFTC") and various state
regulatory authorities. In addition, the Fund's ability to use hedging
instruments will be limited by tax considerations.
General Limitation on Futures and Options Transactions. The Trust has filed a
notice of eligibility for exclusion from the definition of the term "commodity
pool operator" with the CFTC and the National Futures Association, which
regulate trading in the futures markets. In accordance with Rule 4.5 of the
regulations under the Commodities Exchange Act (the "CEA"), the notice of
eligibility for the Fund includes a representation that the Fund will use
futures contracts and related options solely for "bona fide hedging" purposes
within the meaning of CFTC regulations. The Fund may, however, hold other
positions in futures contracts and related options that do not qualify as a
bona fide hedging position if the aggregate initial margin deposits and
premiums required to establish these positions, less the amount by which any
such futures contracts and related options positions are "in the money," do not
exceed 5% of the Fund's net assets. Adherence to these guidelines does not
limit the Fund's risk to 5% of its assets. In addition to the foregoing
guidelines, the Fund may not enter into options, futures, or options on futures
transactions if more than 30% of its net assets would be committed to such
instruments.
The foregoing limitations are not fundamental policies of the Fund and may be
changed without shareholder approval as regulatory agencies permit. Various
exchanges and regulatory authorities have undertaken reviews of options and
futures trading in light of market volatility. Among the possible actions that
have been presented are proposals to adopt new or more stringent daily price
fluctuation limits for futures and options transactions and proposals to
increase the margin requirements for various types of futures transactions.
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Asset Coverage for Futures and Options Positions. The Fund will comply with
the regulatory requirements of the SEC and the CFTC with respect to coverage of
options and futures positions by registered investment companies and, if the
guidelines so require, will set aside cash, U.S. government securities, high
grade liquid debt securities and/or other liquid assets permitted by the SEC
and CFTC in a segregated custodial account in the amount prescribed. Securities
held in a segregated account cannot be sold while the futures or options
position is outstanding, unless replaced with other permissible assets, and
will be marked-to-market daily.
Options. The Fund may use options for any lawful purpose consistent with its
investment objectives such as hedging or managing risk but not for speculation.
An option is a contract in which the "holder" (the buyer) pays a certain amount
(the "premium") to the "writer" (the seller) to obtain the right, but not the
obligation, to buy from the writer (in a "call") or sell to the writer (in a
"put") a specific asset at an agreed upon price (the "strike price" or
"exercise price") at or before a certain time (the "expiration date"). The
holder pays the premium at inception and has no further financial obligation.
The holder of an option will benefit from favorable movements in the price of
the underlying asset but is not exposed to corresponding losses due to adverse
movements in the value of the underlying asset. The writer of an option will
receive fees or premiums but is exposed to losses due to changes in the value
of the underlying asset. The Fund may purchase (buy) or write (sell) put and
call options on assets, such as securities, currencies, commodities, and
indices of debt and equity securities ("underlying assets") and enter into
closing transactions with respect to such options to terminate an existing
position. Options used by the Fund may include European-, American- and
Bermuda-style options. If an option is exercisable only at maturity, it is a
"European" option; if it is also exercisable prior to maturity, it is an
"American" option; if it is exercisable only at certain times, it is a
"Bermuda" option.
The Fund may purchase and write put and call options and enter into closing
transactions with respect to such options to terminate an existing position.
The purchase of call options serves as a long hedge, and the purchase of put
options serves as a short hedge. Writing put or call options can enable the
Fund to enhance income by reason of the premiums paid by the purchaser of such
options. Writing call options serves as a limited short hedge because declines
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. If the security appreciates to a price
higher than the exercise price of the call option, however, it can be expected
that the option will be exercised and the Fund will be obligated to sell the
security at less than its market value or will be obligated to purchase the
security at a price greater than that at which the security must be sold under
the option. All or a portion of any assets used as cover for OTC options
written by the Fund would be considered illiquid to the extent described under
"Investment Policies and Techniques--Illiquid Securities." Writing put options
serves as a limited long hedge because increases in the value of the hedged
investment would be offset to the extent of the premium received for writing
the option. If the security depreciates to a price lower than the exercise
price of the put option, it can be expected that the put option will be
exercised and the Fund will be obligated to purchase the security at more than
its market value.
The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions.
The Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it has written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a
closing sale transaction. Closing transactions permit the Fund to realize the
profit or limit the loss on an option position prior to its exercise or
expiration.
The Fund may purchase or write both exchange-traded and OTC options.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed that, in effect,
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guarantees completion of every exchange-traded option transaction. In contrast,
OTC options are contracts between the Fund and the other party to the
transaction ("counterparty") (usually a securities dealer or a bank) with no
clearing organization guarantee. Thus, when the Fund purchases or writes an OTC
option, it relies on the counter party to make or take delivery of the
underlying investment upon exercise of the option. Failure by the counter party
to do so would result in the loss of any premium paid by the Fund as well as
the loss of any expected benefit of the transaction.
The Fund's ability to establish and close out positions in exchange-listed
options depends upon the existence on a liquid market for such instruments. The
Fund intends to purchase or write only those exchange-traded options for which
there appears to be a liquid secondary market. However, there can be no
assurance that such a market will exist at any particular time. Closing
transactions can be made for OTC options only by negotiating directly with the
counter party, or by a transaction in the secondary market if any such market
exists. Although the Fund will enter into OTC options only with counter parties
that are expected to be capable of entering into closing transactions, there is
no assurance that the Fund will in fact be able to close at OTC options at
favorable prices prior to expiration. In the event of insolvency of the counter
party, the Fund may be unable to close out an OTC option position at any time
prior to its expiration. If the Fund were unable to effect a closing
transaction for an option it had purchased, it would have to exercise the
option to realize any profit.
The Fund also may engage in options transactions on indices in much the same
manner as the options on securities discussed above, except the index options
may serve as a hedge against overall fluctuations in the securities market in
general. The writing and purchasing of options is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. An imperfect correlation
between the options and securities markets may detract from the effectiveness
of attempted hedging. For instance, the Fund's ability to effectively hedge all
or a portion of the securities in its portfolio, in anticipation of or during a
market decline through transactions in put options on indices, depends on the
degree to which price movements in the underlying index correlate with the
price movements of the securities held by the Fund. Inasmuch as the Fund's
securities will not duplicate the components of an index, the correlation will
not be perfect. Consequently, the Fund will bear the risk that the prices of
its securities being hedged will not move in the same amount as the prices of
its put options on the indexes. It is also possible that there may be a
negative correlation between the index and the Fund's securities which would
result in a loss on both such securities and the options on indexes acquired by
the Fund. The purchase of index options also involves the risk that the premium
and transaction costs paid by the Fund in purchasing an option will be lost as
a result of unanticipated movements in prices of the securities comprising the
index on which the option is based.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rare movements can take place in the underlying markets that cannot be
reflected in the options markets. Options transactions may result in
significantly higher transaction costs and portfolio turnover for the Fund.
Federal Income Tax Treatment of Options. Certain option transactions have
special federal income tax results for the Fund. Expiration of a call option
written by the Fund will result in short-term capital gain. If the call option
is exercised, the Fund will realize a gain or loss from the sale of the
security covering the call option and, in determining such gain or loss, the
option premium will be included in the proceeds of the sale.
If the Fund writes options, or purchases puts that are subject to the loss
deferral rules of Section 1092 of the Internal Revenue Code of 1986, as amended
(the "Code"), any losses on such options transactions, to the extent they do
not exceed the unrecognized gains on the securities covering the options, may
be subject to deferral until the securities covering the options have been
sold.
In the case of transactions involving "nonequity options," as defined in Code
Section 1256, the Fund will treat any gain or loss arising from the lapse,
closing out or exercise of such positions as 60% long-term and 40%
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short-term capital gain or loss as required by Section 1256 of the Code. In
addition, such positions must be marked-to-market as of the last business day
of the year, and gain or loss must be recognized for federal income tax
purposes in accordance with the 60%/40% rule discussed above even though the
position has not been terminated. A "nonequity option" includes an option with
respect to any group of stocks or a stock index if there is in effect a
designation by the CFTC of a contract market for a contract based on such group
of stock or indexes. For example, options involving stock indexes such as the
S&P 500 Index would be "nonequity options" within the meaning of Code Section
1256.
Futures Contracts. The Fund may enter into futures contracts (hereinafter
referred to as "Futures" or "Futures Contracts"), including index Futures as a
hedge against movements in the securities markets, in order to establish more
definitely the effective return on securities held or intended to be acquired
by the Fund, to manage risk or for other purposes permissible under the CEA.
The Fund's hedging may include sales of Futures as an offset against the effect
of expected declines in the prices of securities and purchases of Futures as an
offset against the effect of expected increases in the prices of securities.
The Fund will not enter into Futures Contracts which are prohibited under the
CEA and will, to the extent required by regulatory authorities, enter only into
Futures Contracts that are traded on a national futures exchanges and are
standardized as to maturity date and underlying financial instrument. The
principal interest rate Futures exchanges in the United States are the Board of
Trade of the City of Chicago and the Chicago Mercantile Exchange. Futures
exchanges and trading are regulated under the CEA by the CFTC.
An interest rate futures contract provides for the future sale by one party
and purchase by another party of a specified amount of a specific financial
instrument (e.g., a debt security) or currency for a specified price at a
designated date, time and place. An index Futures Contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index Futures
Contract was originally written. Transaction costs are incurred when a Futures
Contract is bought or sold and margin deposits must be maintained. A Futures
Contract may be satisfied by delivery or purchase, as the case may be, of the
instrument or by payment of the change in the cash value of the index. More
commonly, Futures Contracts are closed out prior to delivery by entering into
an offsetting transaction in a matching Futures Contract. Although the value of
an index might be a function of the value of certain specified securities, no
physical delivery of those securities is made. If the offsetting purchase price
is less than the original sale price, a gain will be realized; if it is more, a
loss will be realized. Conversely, if the offsetting sale price is more than
the original purchase price, a gain will be realized; if it is less, a loss
will be realized. The transaction costs must also be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the Futures Contract.
Margin is the amount of funds that must be deposited by the Fund with its
custodian in a segregated account in the name of the futures commission
merchant in order to indicate Futures trading and to maintain the Fund's open
positions in Futures Contracts. A margin deposit is intended to ensure the
Fund's performance of the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures
Contract is traded and may be significantly modified from time to time by the
exchange during the term of the Futures Contract. Futures Contracts are
customarily purchased and sold on margins that my range upward from less than
5% of the value of the Futures Contract being traded.
If the price of an open Futures Contract changes (by increase in the case of
a sale or by decrease in the case of a purchase) so that the loss on the
Futures Contract reaches a point at which the margin on deposit does not
satisfy margin requirements, the broker will require an increase in the margin.
However, if the value of a position increases because of favorable price
changes in the Futures Contract so that the margin deposit exceeds
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the required margin, the broker will pay the excess to the Fund. In computing
daily net asset value, the Fund will mark to market the current value of its
open Futures Contracts. The Fund expects to earn interest income on its margin
deposits.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess
of the amount initially invested in the Futures Contract. However, the Fund
would presumably have sustained comparable losses if, instead of the Futures
Contract, it had invested in the underlying financial instrument and sold it
after the decline.
Most United States Futures exchanges limit the amount of fluctuation
permitted in Futures Contract prices during a single trading day. The day limit
establishes the maximum amount that the price of a Futures Contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
Futures Contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures Contracts prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of Futures
positions and subjecting some Futures traders to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
Fund seeks to close out a Futures position. The Fund would continue to be
required to meet margin requirements until the position is closed, possibly
resulting in a decline in the Fund's net asset value. In addition, many of the
contracts discussed above are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active
secondary market will develop or continue to exist.
A public market exists in Futures Contracts covering a number of indexes,
including, but not limited to, the Standard & Poor's 500 Index, the Standard &
Poor's 100 Index, the NASDAQ 100 Index, the Value Line Composite Index and the
New York Stock Exchange Composite Index.
Options on Futures. The Fund may also purchase or write put and call options
on Futures contracts and enter into closing transactions with respect to such
options to terminate an existing position. A futures option gives the holder
the right, in return of the premium paid, to assume a long position (call) or
short position (put) in a Futures Contract at a specified exercise price prior
to the expiration of the option. Upon exercise of a call option, the holder
acquires a long position in the Futures Contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true.
Prior to exercise or expiration, a futures option may be closed out by an
offsetting purchase or sale of a futures option of the same series.
The Fund may use options on Futures Contracts in connection with hedging
strategies. Generally, these strategies would be applied under the same market
and market sector conditions in which the Fund uses put and call options on
securities or indexes. The purchase of put options on Futures contracts is
analogous to the purchase of puts on securities or indexes so as to hedge the
Fund's securities holdings against the risk of declining market prices. The
writing of a call option or the purchasing of a put option on a Futures
Contract constitutes a partial hedge against declining prices of the securities
which are deliverable upon exercise of the Futures contract. If the futures
price at expiration of a written call option is below the exercise price, the
Fund will retain the full
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amount of the option premium which provides a partial hedge against any decline
that may have occurred in the Fund's holdings of securities. If the futures
price when the option is exercised is above the exercise price, however, the
Fund will incur a loss, which may be offset, in whole or in part, by the
increase in the value of the securities held by the Fund that were being
hedged. Writing a put option or purchasing a call option on a Futures Contract
serves as a partial hedge against an increase in the value of the securities
the Fund intends to acquire.
As with investments in Futures Contracts, the Fund is required to deposit and
maintain margin with respect to put and call options on Futures Contracts
written by it. Such margin deposits will vary depending on the nature of the
underlying Futures Contract (and the related initial margin requirements), the
current market value of the option, and other futures positions held by the
Fund. The Fund will set aside in a segregated account at the Fund's custodian
liquid assets, such as cash, U.S. government securities or other high grade
liquid debt obligations equal in value to the amount due on the underlying
obligation. Such segregated assets will be marked-to market daily, and
additional assets will be placed in the segregated account whenever the total
value of the segregated account falls below the amount due on the underlying
obligation.
The risks associated with the use of options on Futures Contracts include the
risk that the Fund may close out its position as a writer of an option only if
a liquid secondary market exists for such options, which cannot be assured. The
Fund's successful use of options on Futures Contracts depends on NIAC's ability
to correctly predict the movement in prices of Futures Contracts and the
underlying instruments, which may prove to be incorrect. In addition, there may
be imperfect correlation between the instruments being hedged and the Futures
Contract subject to the option. Certain characteristics of the futures market
might increase the risk that movements in the prices of futures contracts or
options on futures contracts might not correlate perfectly with movements in
the prices of the investment being hedged. For example, all participants in the
futures and options on futures contracts markets are subject to daily variation
margin calls and might be compelled to liquidate futures or options on futures
contracts positions whose prices are moving unfavorably to avoid being subject
to further calls. These liquidations could increase the price volatility of the
instruments and distort the normal price relationship between the futures or
options and the investments being hedged. Also, because of initial margin
deposit requirements in the futures markets are less onerous than margin
requirements in the securities markets, there might be increased participation
by speculators in the futures markets. This participation also might cause
temporary price distortions. In addition, activities of large traders in both
the futures and securities markets involving arbitrage, "program trading," and
other investments strategies might result in temporary price distortions.
Federal Income Tax Treatment of Futures Contracts. For federal income tax
purposes, the Fund is required to recognize as income for each taxable year its
net unrealized gains and losses on Futures Contracts as of the end of the year,
as well as gains and loses actually realized during the year. Except for
transactions in Futures Contracts that are classified as part of a "mixed
straddle" under Code Section 1256, any gain or loss recognized with respect to
a Futures Contract is considered to be 60% long-term capital gain or loss and
40% short-term capital gain or loss, without regard to the holding period of
the Futures Contract. In the case of a Futures transaction not classified as a
"mixed straddle," the recognition of losses may be required to be deferred to a
later taxable year.
Sales of Futures Contracts that are intended to hedge against a change in the
value of securities held by the Fund may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such securities
upon disposition.
The Fund will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on Futures transactions. Such
distributions will be combined with distributions of capital gains realized on
the Fund's other investments and shareholders will be advised of the nature of
the payments.
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Risks and Special Considerations Concerning Derivatives. The use of
derivative instruments involves certain general risks and considerations as
described below. The specific risks pertaining to certain types of derivative
instruments are described in the sections that follow.
(1) Market Risk. Market risk is the risk that the value of the underlying
assets may go up or down. Adverse movements in the value of an underlying
asset can expose the Fund to losses. Market risk is the primary risk
associated with derivative transactions. Derivative instruments may include
elements of leverage and, accordingly, fluctuations in the value of the
derivative instrument in relation to the underlying asset may be magnified.
The successful use of derivative instruments depends upon a variety of
factors, particularly the investment adviser's ability to predict movements
of the securities, currencies, and commodities markets, which may require
different skills than predicting changes in the prices of individual
securities. There can be no assurance that any particular strategy adopted
will succeed. A decision to engage in a derivative transaction will reflect
the investment adviser's judgment that the derivative transaction will
provide value to the Fund and its shareholders and is consistent with the
Fund's objectives, investment limitations, and operating policies. In
making such a judgment, the investment adviser will analyze the benefits
and risks of the derivative transaction and weigh them in the context of
the Fund's overall investments and investment objective.
(2) Credit Risk. Credit risk is the risk that a loss may be sustained as
a result of the failure of a counterpart to comply with the terms of a
derivative instrument. The counterparty risk for exchange-traded
derivatives is generally less than for privately-negotiated or OTC
derivatives, since generally a clearing agency, which is the issuer or
counterparty to each exchange-traded instrument, provides a guarantee of
performance. For privately-negotiated instruments, there is no similar
clearing agency guarantee. In a all transactions, the Fund will bear the
risk that the counterparty will default, and this could result in a loss of
the expected benefit of the derivative transaction and possibly other
losses to the Fund. The Fund will enter into transactions in derivative
instruments only within counterparties that the investment adviser
reasonably believes are capable of performing under the contract.
(3) Correlation Risk. Correlation risk is the risk that there might be an
imperfect correlation, or even no correlation, between price movements of a
derivative instrument and price movements of investments being hedged. When
a derivative transaction is used to completely hedge another position,
changes in the market value of the combined position (the derivative
instrument plus the position being hedged) resulted from an imperfect
correlation between the price movements of the two instruments. With a
perfect hedge, the value of the combined position remains unchanged with
any change in the price of the underlying assert. With an imperfect hedge,
the value of the derivative instrument and its hedge are not perfectly
correlated. For example, if the value of a derivative instrument used in a
short hedge (such as writing a call option, buying a put option or selling
a futures contract) increased by less than the decline in value of the
hedged investments, the hedge would not be perfectly correlated. This might
occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which
these instruments are traded. The effectiveness of hedges using instruments
on indices will depend, in part, on the degree of correlation between price
movements in the index and the price movements in the investments being
hedged.
(4) Liquidity Risk. Liquidity risk is the risk that a derivative
instrument cannot be sold, closed out, or replaced quickly at or very close
to its fundamental value. Generally, exchange contracts are very liquid
because the exchange clearinghouse is the counterparty of every contract.
OTC transactions are less liquid than exchange-traded derivatives since
they often can only be closed out with the other party to the transactions.
The Fund might be required by applicable regulatory requirements to
maintain assets as "cover," maintain segregated accounts, and/or make
margin payments when it takes positions in derivative
S-18
<PAGE>
instruments involving obligations to third parties (i.e., instruments other
than purchase options). If the Fund is unable to close out its positions in
such instruments, it might be required to continue to maintain such assets
or accounts or make such payments until the position expires, matures, or
is closed out. These requirements might impair the Fund's ability to sell a
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to sell or close out a position in
an instrument prior to expiration or maturity depends upon the existence of
a liquid secondary market or, in the absence of such a market, the ability
and willingness of the counterparty to enter into a transaction closing out
the position. Due to liquidity risk, there is no assurance that any
derivatives position can be sold or closed out at a time and price that is
favorable to the Fund.
(5) Legal Risk. Legal risk is the risk of loss caused by the
unenforceability of a party's obligations under the derivative. While a
party seeking price certainty agrees to surrender the potential upside in
exchange for downside protection, the party taking the risk is looking for
a positive payoff. Despite this voluntary assumption of risk, a
counterparty that has lost money in a derivative transaction may try to
avoid payment by exploiting various legal uncertainties about certain
derivative products.
(6) Systemic or "Interconnection" Risk. Systemic or interconnection risk
is the risk that a disruption in the financial markets will cause
difficulties for all market participants. In other words, a disruption in
one market will spill over into other markets, perhaps creating a chain
reaction. Much of the OTC derivatives market takes place among the OTC
dealers themselves, thus creating a large interconnected web of financial
obligations. This interconnectedness raises the possibility that a default
by one large dealer could create losses for other dealers and destabilize
the entire market for OTC derivative instruments.
OTHER INVESTMENT POLICIES AND TECHNIQUES
Illiquid Securities. The Fund may invest in illiquid securities (i.e.,
securities that are not readily marketable). For purposes of this restriction,
illiquid securities include, but are not limited to, restricted (securities the
disposition of which is restricted under the federal securities laws),
securities that may only be resold pursuant to Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act"), but that are deemed to be
illiquid; and repurchase agreements with maturities in excess of seven days.
However, the Fund will not acquire illiquid securities if, as a result, such
securities would comprise more than 15% of the value of the Fund's net assets.
The Board of Trustees or its delegate has the ultimate authority to determine,
to the extent permissible under the federal securities laws, which securities
are liquid or illiquid for purposes of this 15% limitation. The Board of
Trustees has delegated to NIAC the day-to-day determination of the illiquidty
of any fixed-income security, although it has retained oversight and ultimate
responsibility for such determinations. Although no definitive liquidity
criteria are used, the Board of Trustees has directed NIAC to look to such
factors as (i) the nature of the market for a security (including the
institutional private resale market; the frequency of trades and quotes for the
security; the number of dealers willing to purchase or sell the security; and
the amount of time normally needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer), (ii) the terms of certain
securities or other instruments allowing for the disposition to a third party
or the issuer thereof (e.g., certain repurchase obligations and demand
instruments), and (iii) other permissible relevant facts.
Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act. Where registration is required, the Fund may
be obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the
Fund may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Fund might obtain a less favorable price than that which prevailed when it
decided to sell. Illiquid securities will be priced at fair value as determined
in good faith by the Board of Trustees or its delegate. If, through the
appreciation of
S-19
<PAGE>
illiquid securities or the depreciation of liquid securities, the Fund should
be in a position where more than 15% of the value of its net assets are
invested in illiquid securities, including restricted securities which are not
readily marketable, the Fund will take such steps as is deemed advisable, if
any, to protect liquidity.
Dollar Roll Transactions. The Fund may enter into "dollar roll" transactions,
which involve the sale of pass-through securities together with a commitment to
purchase similar, but not identical, securities at a later date. The Fund
assumes the rights and risks of ownership, including the risk of price and
yield fluctuations as of the time of the agreement.
Warrants. The Fund may invest in warrants if, after giving effect thereto,
not more than 5% of its net assets will be invested in warrants other than
warrants acquired in units or attached to other securities. Of such 5%, not
more than 2% of its assets at the time of purchase may be invested in warrants
that are not listed on the New York Stock Exchange or the American Stock
Exchange. Investing in warrants is purely speculative in that they have no
voting rights, pay no dividends, and have no rights with respect to the assets
of the corporation issuing them. Warrants basically are options to purchase
equity securities at a specific price for a specific period of time. They do
not represent ownership of the securities but only the right to buy them.
Warrants are issued by the issuer of the security, which may be purchased on
their exercise. The prices of warrants do not necessarily parallel the prices
of the underlying securities.
When-Issued Securities. The Fund may from time to time purchase securities on
a "when-issued" or other delayed-deliver basis. The price of securities
purchased in such transactions is fixed at the time the commitment to purchase
is made, but delivery and payment for the securities take place at a later
date. Normally, the settlement date occurs within 45 days of the purchase.
During the period between the purchase and settlement, no payment is made by
the Fund to the issuer and no interest is accrued on debt securities or
dividend income is earned on equity securities, although the Fund continues to
earn income on the assets that will be used to pay for the securities. Delayed-
delivery commitments involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. While securities
purchased in delayed-delivery transactions may be sold prior to the settlement
date, the Fund intends to purchase such securities with the purpose of actually
acquiring them. At the time the Fund makes the commitment to purchase a
security in a delayed-delivery transaction, it will record the transaction and
reflect the value of the security in determining its net asset value. The Fund
does not believe that net asset value will be adversely affected by purchases
of securities in delayed-delivery transactions.
The Fund will maintain cash, U.S. government securities, and high grade
liquid debt securities equal in value to commitments for delayed-delivery
securities. Such segregated securities will mature or, if necessary, be sold on
or before the settlement date. When the time comes to pay for delayed-delivery
securities, the Fund will meet its obligations form then-available cash flow,
sale of the securities held in the segregated account described above, sale of
other securities, or, although it would not normally expect to do so, from the
sale of the delayed-delivery securities themselves (which may have a market
value greater or less than the Fund's payment obligation).
Foreign Securities. The Fund will limit foreign bond investments to 20% of
its bonds, and will invest only in U.S. dollar-denominated securities of
foreign issuers whose headquarters are located in a country that is a member of
the Organization for Economic Cooperation and Development (OECD). The Fund may
also invest up to 20% of its equity allocation in foreign securities traded in
the U.S., including ADRs.
Foreign securities are affected by the fact that in many countries there is
less publicly available information about issuers than is available in the
reports and ratings published about companies in the U.S. and companies may not
be subject to uniform accounting, auditing and financial reporting standards.
Other risks inherent in
S-20
<PAGE>
foreign investments include expropriation; confiscatory taxation; withholding
taxes on dividends and interest; less extensive regulation of foreign brokers,
securities markets and issuers; diplomatic developments; and political or
social instability. Foreign economies may differ favorably or unfavorably from
the U.S. economy in various respects, and many foreign securities are less
liquid and their prices tend to be more volatile than comparable U.S.
securities. From time to time, foreign securities may be difficult to liquidate
rapidly without adverse price effects.
Subject to its investment objectives and policies, the Fund may invest in
foreign securities by purchasing depositary receipts, including ADRs.
Generally, ADRs, in registered form, are denominated in U.S. dollars and are
designed for use in the U.S. securities markets. For purposes of the Fund's
investment policies, ADRs are deemed to have the same classification as the
underlying securities they represent, except that ADRs shall be treated as
indirect foreign investments. Thus, an ADR representing ownership of common
stock will be treated as common stock. ADRs do not eliminate all of the risks
associated with directly investing in the securities of foreign issuers.
Depositary receipts may be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by a depositary and the
issuer of the security underlying the receipt. An unsponsored facility may be
established by a depositary without participation by the issuer of the security
underlying the receipt. There are greater risks associated with holding
unsponsored depositary receipts. For example, if the Fund holds an unsponsored
depositary receipt, it will generally bear all of the costs of establishing the
unsponsored facility.
In addition, the depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through to the holders of the receipts voting
rights with respect to the deposited securities.
Foreign Currency Transactions. The Fund may engage in foreign currency
forward contracts, options, and futures transactions. The Fund will enter into
foreign currency transactions for hedging and other permissible risk management
purposes only. Foreign currency futures and options contracts are traded in the
U.S. on regulated exchanges such as the Chicago Mercantile Exchange, the Mid-
America Commodities Exchange, and the Philadelphia Stock Exchange. If the 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, the Fund may also be required to make a variation
margin deposit because the value of futures contracts fluctuates from purchase
to maturity. In addition, the Fund may segregate assets to cover their futures
contracts obligations.
(1) Currency Risks. The exchange rates between the U.S. dollar and
foreign currencies depend upon such factors as supply and demand in the
currency exchange markets, international balances of payments, governmental
intervention, speculation, and other economic and political conditions.
Although the Fund values its assets daily in U.S. dollars, the Fund may not
convert its holdings of foreign currencies to U.S. dollars daily. The Fund
may incur conversion costs when it converts its holdings to another
currency. Foreign exchange dealers may realize a profit on the difference
between the price at which the Fund buy and sell currencies. The Fund will
engage in foreign currency exchange transactions in connection with its
portfolio investments. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through forward
contracts to purchase or sell foreign contracts.
(2) Forward Foreign Currency Exchange Contracts. The Fund may enter into
forward currency exchange contracts. Forward foreign currency exchange
contracts may limit potential gains that could result from a positive
change in such currency relationships. The investment adviser believes that
it is important to have the flexibility to enter into forward foreign
currency exchange contracts whenever it determines that it is in the Fund's
best interest to do so. The Fund will not speculate in foreign currency
exchange.
S-21
<PAGE>
The Fund will not enter into forward currency exchange contracts or
maintain a net exposure in such contracts that it would be obligated to
deliver an amount of foreign currency in excess of the value of its
portfolio securities or other assets denominated in that currency or, in
the case of a "cross-hedge," denominated in a currency or currencies that
the investment adviser believes will tend to be closely correlated with
that currency with regard to price movements. Generally, the Fund will not
enter into a forward foreign currency exchange contract with a term longer
than one year.
(3) Foreign Currency Options. A foreign currency option provides the
option buyer with the right to buy or sell a stated amount of foreign
currency at the exercise price on a specified date or during the option
period. The owner of a call option has the right, but not the obligation,
to buy the currency. Conversely, the owner of a put option has the right,
but not the obligation, to sell the currency. When the option is exercised,
the seller (i.e., writer) of the option is obligated to fulfill the terms
of the sold option. However, either the seller or the buyer may, in the
secondary market, close its position during the option period at any time
prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on a foreign
currency generally rises in value if the underlying currency depreciates in
value. Although purchasing a foreign currency option can protect the Fund
against an adverse movement in the value of a foreign currency, the option
will not limit the movement in the value of such currency. For example, if
the Fund held securities denominated in a foreign currency that was
appreciating and had purchased a foreign currency put to hedge against a
decline in the value of the currency, the Fund would not have to exercise
its put option. Likewise, if the Fund entered into a contract to purchase a
security denominated in foreign currency and, in conjunction with that
purchase, purchased a foreign currency call option to hedge against a rise
in value of the currency, and if the value of the currency instead
depreciated between the date of purchase and the settlement date, the Fund
would not have to exercise its call. Instead, the Fund could acquire in the
spot market the amount of foreign currency needed for settlement.
(4) Special Risks Associated with Foreign Currency Options. Buyers and
sellers of foreign currency options are subject to the same risks that
apply to options generally. In addition, there are certain risks associated
with foreign currency options. The markets in foreign currency options are
relatively new, and the Fund's ability to establish and close out positions
on such options is subject to the maintenance of a liquid secondary market.
Although the Fund will not purchase or write such options unless and until,
in the opinion of the investment adviser, the market for them has developed
sufficiently to ensure that the risks in connection with such options are
not greater than risks in connection with the underlying currency, there
can be no assurance that a liquid secondary market will exist for a
particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a
foreign security. Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those that may
be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally consisting
of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where
S-22
<PAGE>
rates may be less favorable. The interbank market in foreign currencies is
a global, around-the clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the underlying
markets that cannot be reflected in the options markets until they reopen.
(5) Foreign Currency Futures Transactions. By using foreign currency
futures contracts and options on such contracts, the Fund may be able to
achieve many of the same objectives as they would through the use of
forward foreign currency exchange contracts. The Fund may be able to
achieve these objectives possibly more effectively and at a lower cost by
using futures transactions instead of forward foreign currency exchange
contracts.
(6) Special Risks Associated with Foreign Currency Futures Contracts and
Related Options. Buyers and sellers of foreign currency futures contracts
are subject to the same risks that apply to the use of futures generally.
In addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated
with options on currencies, as described above.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the Fund
will not purchase or write options on foreign currency futures contracts unless
and until, in the opinion of the investment adviser, the market for such
options has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with transactions in the
underlying foreign currency futures contracts. Compared to the purchase or sale
of foreign currency futures contracts, the purchase of call or put options on
futures contracts involves less potential risk to the Fund because the maximum
amount at risk is the premium paid for the option (plus transaction costs).
However, there may be circumstances when the purchases of a call or put option
on a futures contract would result in a loss, such as when there is no movement
in the price of the underlying currency or futures contract.
Lending of Portfolio Securities. The Fund may lend its portfolio securities,
up to 33 1/3% of its total assets, including collateral received, to broker-
dealers or institutional investors. Such loans will be secured continuously by
collateral at least equal to the value of the securities lent by "marking to
market" daily. The Fund will continue to receive the equivalent of the interest
or dividends paid by the issuer of the securities lent and will retain the
right to call, upon notice, the lent securities. The Fund may also receive
interest on the investment of the collateral or a fee from the borrower as
compensation for the loan. As with other extensions of credit, there are risks
of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only
to firms deemed by the investment adviser to be of good standing.
Portfolio Turnover. Under normal market conditions, the Fund expects to be
relatively low in order to reduce trading costs and realization of taxable
capital gains. In the event the Fund were to have a turnover rate of 100% of
more in any year, it would result in the payment by the Fund of increased
brokerage costs and could result in the payment by shareholders of increased
taxes on realized investment gains.
S-23
<PAGE>
MANAGEMENT
The Management of the Trust, including general supervision of duties
performed for the Fund under the Investment Management Agreement, is the
responsibility of the Board of Trustees. The Trust currently has five trustees,
one of whom is an "interested person" (as the term "interested person" is
defined in the 1940 Act) and four of whom are "disinterested persons." The
names and business addresses of the trustees and officers of the Trust and
their principal occupations and other affiliations during the past five years
are set forth below, with the trustee who is an "interested person" of the
Trust indicated by an asterisk.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND
OFFICES WITH THE PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Anthony T. Dean* 53 Chairman of the Board President (since July 1996)
333 W. Wacker Drive and Trustee and Director, formerly
Chicago, IL 60606 Executive Vice President, of
The John Nuveen Company
(from March 1992 to July
1996) and John Nuveen & Co.
Incorporated; Director and
President (since July 1996),
formerly Executive Vice
President (from May 1994 to
July 1996) of Nuveen
Institutional Advisory Corp.
and Nuveen Advisory Corp.;
President and Director
(since January 1997) of
Nuveen Asset Management,
Inc.; Chairman and Director
(since 1997) of Rittenhouse
Financial Services, Inc.
- -------------------------------------------------------------------------------
Timothy R. Schwertfeger 49 President Chairman (since July 1996)
333 W. Wacker Drive and Director, formerly
Chicago, IL 60606 Executive Vice President, of
The John Nuveen Company
(from March 1992 to July
1996) and John Nuveen & Co.
Incorporated; Director and
Chairman (since July 1996),
formerly Executive Vice
President (from May 1994 to
July 1996) of Nuveen
Institutional Advisory and
Nuveen Advisory Corp.;
Chairman and Director (since
January 1997) of Nuveen
Asset Management, Inc.;
Director (since 1966) of
Institutional Capital
Corporation.
- -------------------------------------------------------------------------------
James E. Bacon 67 Trustee Business consultant; a
333 W. Wacker Drive Director of Lone Star
Chicago, IL 60606 Industries, Inc. (cement);
previously Director and
Executive Vice President of
U.S. Trust Corporation and
Trustee of United States
Trust Company of New York.
- -------------------------------------------------------------------------------
William L. Kissick 66 Trustee Professor, School of
333 W. Wacker Drive Medicine and the Wharton
Chicago, IL 60606 School of Management and
Chairman, Leonard Davis
Institute of Health,
Economics, University of
Pennsylvania.
- -------------------------------------------------------------------------------
Thomas E. Leafstrand 66 Trustee Retired, previously Vice
333 W. Wacker Drive President in charge of
Chicago, IL 60606 Municipal Underwriting and
Dealer Sales at The Northern
Trust Company.
- -------------------------------------------------------------------------------
Sheila W. Wellington 66 Trustee President of Catalyst (a
333 W. Wacker Drive not-for-profit organization
Chicago, IL 60606 focusing on women's
leadership development in
business and the
professions).
</TABLE>
S-24
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND
OFFICES WITH THE PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Alan G. Berkshire 37 Vice President and Vice President and General
333 W. Wacker Drive Assistant Secretary Counsel (since September
Chicago, IL 60606 1997) and Secretary (since
May 1998) of The John Nuveen
Company, John Nuveen & Co.
Incorporated, Nuveen Advisory
Corp. and Nuveen
Institutional Advisory Corp.,
prior thereto, Partner in the
law firm of Kirkland & Ellis.
- -------------------------------------------------------------------------------
Stephen D. Foy 44 Vice President and Vice President of John Nuveen
333 W. Wacker Drive Controller & Co. Incorporated.
Chicago, IL 60606
- -------------------------------------------------------------------------------
Lorna C. Ferguson 52 Vice President Vice President of John Nuveen
333 W. Wacker Drive & Co. Incorporated; Vice
Chicago, IL 60606 President (since January
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory Corp.
- -------------------------------------------------------------------------------
Richard A. Huber 35 Vice President Vice President of Nuveen
333 W. Wacker Drive Institutional Advisory Corp.
Chicago, IL 60606 (since March 1998) and Nuveen
Advisory Corp (since January
1997); prior thereto, Vice
President and Portfolio
Manager of Flagship
Financial, Inc.
- -------------------------------------------------------------------------------
Larry W. Martin 47 Vice President and Vice President, Assistant
333 W. Wacker Drive Assistant Secretary Secretary and Assistant
Chicago, IL 60606 General Counsel of John
Nuveen & Co. Incorporated;
Vice President (since May
1993)
and Assistant Secretary of
Nuveen Advisory Corp. and
Nuveen Institutional Advisory
Corp.; Vice President and
Assistant Secretary (since
January 1997) of Nuveen Asset
Management, Inc.; Assistant
Secretary of The John Nuveen
Company (since February
1993).
- -------------------------------------------------------------------------------
Edward F. Neild, IV 34 Vice President Vice President (since
333 W. Wacker Drive September 1996), previously
Chicago, IL 60606 Assistant Vice President
(since December 1993) of
Nuveen Advisory Corp.,
Portfolio Manager prior
thereto; Vice President
(since September 1996),
previously Assistant Vice
President (since May 1995),
of Nuveen Institutional
Advisory Corp., Portfolio
Manager prior thereto.
- -------------------------------------------------------------------------------
Stuart W. Rogers 42 Vice President Vice President of John Nuveen
333 W. Wacker Drive & Co. Incorporated
Chicago, IL 60606
- -------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 47 Vice President Vice President of Nuveen
333 W. Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp.;
Chartered Financial Analyst.
</TABLE>
S-25
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
POSITIONS AND
OFFICES WITH THE PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
H. William Stabenow 64 Vice President and Vice President and Treasurer of
333 W. Wacker Drive Treasurer The John Nuveen Company, John
Chicago, IL 60606 Nuveen & Co. Incorporated, Nuveen
Advisory Corp., Nuveen Asset
Management, Inc. (since January
1997) and Nuveen Institutional
Advisory Corp.
- -------------------------------------------------------------------------------
William S. Swanson 33 Vice President Vice President of John Nuveen &
333 W. Wacker Drive Co. Incorporated (since October
Chicago, IL 60606 1997); prior thereto, Assistant
Vice President (since September
1996); formerly, Associate of John
Nuveen & Co. Incorporated.
- -------------------------------------------------------------------------------
Gifford R. Zimmerman 42 Vice President and Vice President, Assistant
333 W. Wacker Drive Secretary Secretary and Associate General
Chicago, IL 60606 Counsel (since September 1997),
formerly Assistant General
Counsel, of John Nuveen & Co.
Incorporated; Vice President and
Assistant Secretary of Nuveen
Advisory Corp., Nuveen Asset
Management, Inc. (since January
1997) and Nuveen Institutional
Advisory Corp.
</TABLE>
- --------------------------------------------------------------------------------
Anthony Dean and Thomas Leafstrand serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee, which meets
between regular meetings of the Board of Trustees, is authorized to exercise
all of the powers of the Board of Trustees.
Mr. Dean is a director and trustee of 99 Nuveen open-end and closed-end funds
advised by NIAC and Nuveen Advisory Corp.
Messrs. Bacon, Kissick, Leafstrand and Ms. Wellington serve as board members
of 10 open-end and closed-end funds advised by NIAC.
S-26
<PAGE>
The table below shows the compensation paid to each of the disinterested
trustees and disinterested directors of the Trust and the total compensation
paid to each such trustee and director during the fiscal year ended June 30,
1998. The Trust has no retirement or pension plans. The officers and trustees
affiliated with Nuveen serve without any compensation from the Trust.
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM TRUST
FROM THE AND OTHER
NAME OF TRUSTEE/DIRECTOR TRUST NUVEEN FUNDS
------------------------ ------------ ------------
<S> <C> <C>
Robert P. Bremner*............................ $ $
Lawrence H. Brown*............................ $ $
Anne E. Impellizzeri*......................... $ $
Peter R. Sawers*.............................. $ $
William J. Schneider*......................... $ $
Judith M. Stockdale*.......................... $ $
James E. Bacon................................ ** $29,000
William L. Kissick............................ ** $28,000
Thomas E. Leafstrand.......................... ** $30,600
Sheila W. Wellington.......................... ** $28,000
</TABLE>
- --------
*Served on the Board of Directors of the Trust (formerly known as Flagship
Admiral Funds Inc.) until , 1998.
**Elected to the Board of Trustees of the Trust in , 1998. As a result,
received no compensation from the Trust during the fiscal year ended June
30, 1998.
Each trustee who is not affiliated with Nuveen or NIAC receives a fee. The
Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
The officers and trustees of the Fund, in the aggregate, own less than 1% of
the shares of the Fund.
The following table sets forth the percentage ownership of each person, who,
as of November , 1998, owns of record and not beneficially, 5% or more of
any class of the Fund's shares.
<TABLE>
<CAPTION>
PERCENTAGE
CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
----- ------------------------- ------------
<C> <S> <C>
Class A Shares................. A.G. Edwards & Son 16.8%
1 N. Jefferson Ave.
St. Louis, MO 63103
Class A Shares................. Merrill Lynch Pierce 29.8%
Fenner
& Smith ("MLPFS")
Attn: Fund Admn/#97NBD
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246
Class A Shares................. Paine Webber Incorporated 7.3%
("PW")
100 Harbor Blvd.
Weekawken, NJ 07087
</TABLE>
S-27
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
----- ------------------------- ------------
<C> <S> <C>
Class A Shares................. Suntrust Bank Central FL 6.5%
NA P.O. Box 3833
Orlando, FL 32801
Class C Shares................. Banc One Securities Corp. 7.2%
733 Greencrest Dr.
Westerville, OH 43081
Class C Shares................. Key Clearing Corp. 15.8%
4900 Tiedeman Rd.
Cleveland, OH 44144
Class C Shares................. MLPFS 33.8%
Class C Shares................. PW 11.3%
</TABLE>
S-28
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Institutional Advisory Corp. ("NIAC") acts as investment adviser for
and manages the investment and reinvestment of the assets of the Fund. NIAC
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Fund
Service Providers" in the Prospectus.
Pursuant to an investment management agreement between NIAC and the Trust,
the Fund has agreed to pay an annual management fee at the rates set forth
below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE FEE MANAGEMENT FEE
- --------------------------------- --------------
<S> <C>
For the first $125 million....................................... .7500%
For the next $125 million........................................ .7375%
For the next $250 million........................................ .7250%
For the next $500 million........................................ .7125%
For the next $1 billion.......................................... .7000%
For assets over $2 billion....................................... .6750%
</TABLE>
NIAC has agreed to waive some or all of its fees or reimburse expenses to
prevent total operating expenses (not counting distribution and service fees,
taxes, interest, fees incurred in acquiring and disposing of portfolio
securities and, to the extent permitted, extraordinary expenses) from exceeding
0.95% of the Fund's average daily net assets through July 31, 1999.
For the last three fiscal years, the Fund paid net management fees to Nuveen
Advisory Corp. or Flagship Financial Inc., the predecessor advisers of the
Fund, as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------
6/30/96 6/30/97 6/30/98
------- ------- -------
<S> <C> <C> <C>
Management Fees Net of Expense Reimbursement Paid to
Nuveen Advisory Corp.................................. $ $ $
Fee Waivers and Expense Reimbursements................. $ $ $
</TABLE>
In addition to the management fee, the Fund pays all other costs and expenses
of its operations and a portion of the Trust's general administrative expenses.
NIAC is a wholly owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. Nuveen and its affiliates have
sponsored or under written more than $60 billion of investment company
securities. Over 1,300,000 individuals have invested to date in Nuveen
investment products. Founded in 1898, Nuveen is a subsidiary of The John Nuveen
Company which, in turn, is approximately 78% owned by The St. Paul Companies,
Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota and is
principally engaged in providing property-liability insurance through
subsidiaries.
NIAC's portfolio managers call upon the resources of Nuveen's Research
Department.
The Fund, the other Nuveen funds, NIAC and other related entities have
adopted a code of ethics which essentially prohibits all Nuveen fund management
personnel, including Nuveen fund portfolio managers, from engaging in personal
investments which compete or interfere with, or attempt to take advantage of,
the Fund's anticipated or actual portfolio transactions, and is designed to
assure that the interests of Fund shareholders are placed before the interests
of Nuveen personnel in connection with personal investment transactions.
S-29
<PAGE>
PORTFOLIO TRANSACTIONS
NIAC is responsible for decisions to buy and sell securities for the Fund and
for the Placement of the Fund's securities business, the negotiation of the
commissions to be paid on brokered transactions, the prices for principal
trades in securities, and the allocation of portfolio brokerage and principal
business. It is the policy of NIAC to seek the best execution at the best
security price available with respect to each transaction, and with respect to
each brokered transaction, in light of the overall quality of brokerage and
research services provided. The best price to the Fund means the best net price
without regard to the mix between purchase or sale price and commission, if
any. Purchases may be made from underwriters, dealers, and, on occasion, the
issuers. Commissions will be paid on the Fund's futures and options
transactions, if any. The purchase price of portfolio securities purchased from
an underwriter or dealer may include underwriting commissions and dealer
spreads. The Fund may pay mark-ups on principal transactions. In selecting
broker-dealers and in negotiating commissions, the portfolio manager considers,
among other things, the firm's reliability, the quality of its execution
services on a continuing basis and its financial condition. Brokerage will not
be allocated based on the sale of a Fund's shares.
Section 28(e) of the Securities Act of 1934 ("Section 28(e)") permits an
investment adviser, under certain circumstances, to cause an account to pay a
broker or dealer who supplies brokerage and research services a commission for
effecting a transaction in excess of the amount of commission another broker or
dealer would have charged for effecting the transaction. Brokerage and research
services include (a) furnishing advice as to the value of securities, the
advisability of investing, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody).
In light of the above, in selecting brokers, NIAC considers investment and
market information and other research, such as economic, securities and
performance measurement research, provided by such brokers, and the quality and
reliability of brokerage services, including execution capability, performance,
and financial responsibility. Accordingly, the commissions charged by any such
broker may be greater than the amount another firm might charge if NIAC
determines in good faith that the amount of such commissions is reasonable in
relation to the value of the research information and brokerage services
provided by such broker to NICA or the Fund. NIAC believes that the research
information received in this manner provides the Fund with benefits by
supplementing the research otherwise available to the Fund. The Management
Agreement provide that such higher commission will not be paid by the Fund
unless NIAC determines in good faith that the amount is reasonable in relation
to the services provided. The investment advisory fees paid by the Fund to NIAC
are not reduced as a result of receipt by NIAC of research services.
NIAC places portfolio transactions for other advisory accounts managed by it.
Research services furnished by firms through with the Fund effects its
securities transactions may be used by NIAC in servicing all of its accounts;
not all of such services may be used by NIAC in connection with the Fund. NIAC
believes it is not possible to measure separately the benefits from research
services to each of the accounts (including the Fund) managed by it. Because
the volume and nature of the trading activities of the accounts are not
uniform, the amount of commissions in excess of those charged by another broker
paid by each account for brokerage and research services will vary. However,
NIAC believes such costs to the Fund will not be disproportionate to the
benefits received by the Fund on a continuing basis. NIAC seeks to allocate
portfolio transactions equitably whenever concurrent decisions are made to
purchase or sell securities by the Fund and another advisory account. In some
cases, this procedure could have an adverse effect on the price or the amount
of securities available to the Fund. In making such allocation between the Fund
and other advisory accounts, the main factors considered by NIAC are the
respective investment objectives, the relative size of portfolio holdings of
the same of
S-30
<PAGE>
comparable securities, the availability of cash for investment and the size of
investment commitments generally held.
During fiscal years 1998, 1997 and 1996, the Fund paid brokerage commissions
of $ , $ , and $ , respectively, to brokers who furnished
research services to the Fund or NIAC on purchases and sales aggregating
$ , $ and $ , respectively.
Under the 1940 Act, the Fund may not purchase portfolio securities from any
underwriting syndicate of which Nuveen is a member except under certain limited
conditions set forth in Rule 10f-3. The Rule sets forth requirements relating
to, among other things, the terms of a security purchased by the Fund, the
amount of securities that may be purchased in any one issue and the assets of
the Fund that may be invested in a particular issue. In addition, purchases of
securities made pursuant to the terms of the Rule must be approved at least
quarterly by the Board of Trustees, including a majority of the trustees who
are not interested persons of the Trust.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Fund
will be determined separately for each class of the Fund's shares by The Chase
Manhattan Bank, the Fund's custodian, as of the close of trading (normally 4:00
p.m. Eastern Time) on each day on which the New York Stock Exchange (the
"Exchange") is normally open for trading. The Exchange is not open for trading
on New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of a class of shares of the Fund will be computed by dividing
the value of the Fund's assets attributable to the class, less the liabilities
attributable to the class, by the number of shares of the class outstanding.
In determining net asset value for the Fund, the Fund's custodian utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the trustees. Securities for which quotations are not readily available
(which constitute a majority of the securities held by the Fund) are valued at
fair value as determined by the pricing service using methods which include
consideration of the following: yields or prices of fixed-income securities of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The pricing service may
employ electronic data processing techniques and/or a matrix system to
determine valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision of the
Board of Trustees.
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the
advice of Bell, Boyd & Lloyd, counsel to the Trust.
The Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, the Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, the Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second,
the Fund must diversify its holdings so that, at the close of each quarter of
its taxable year, (i) at least 50% of the value of its total assets is
comprised of cash, cash items,
S-31
<PAGE>
United States Government securities, securities of other regulated investment
companies and other securities limited in respect of any one issuer to an
amount not greater in value than 5% of the value of its total assets and to not
more than 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of the total assets is invested in the securities of
any one issuer (other than United States Government securities and securities
of other regulated investment companies) or two or more issuers controlled by
the Fund and engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of long-
term capital loss, and any other taxable income other than "net capital gain"
(as defined below) and is reduced by deductible expenses) and (ii) its net tax-
exempt interest (the excess of its gross tax-exempt interest income over
certain disallowed deductions). The Fund may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its short-term capital loss). However, if the Fund retains any net capital
gain or any investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. If the Fund retains any capital
gain, it may designate the retained amount as undistributed capital gains in a
notice to its shareholders who, if subject to federal income tax on long-term
capital gains, (i) will be required to include in income for federal income tax
purposes, as long-term capital gain, their shares of such undistributed amount,
and (ii) will be entitled to credit their proportionate shares of the tax paid
by the Fund against their federal income tax liabilities if any, and to claim
refunds to the extent the credit exceeds such liabilities. For federal income
tax purposes, the tax basis of shares owned by a shareholder of the Fund will
be increased by an amount equal under current law to the difference between the
amount of undistributed capital gains included in the shareholder's gross
income and the tax deemed paid by the Shareholder under clause (ii) of the
preceding sentence. The Fund intends to distribute at least annually to its
shareholders all or substantially all of its net tax-exempt interest and any
investment company taxable income and net capital gain.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
Distributions by the Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by the Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
Any net long-term capital gains realized by the Fund and distributed to
shareholders in cash or additional shares, will be taxable to shareholders as
long-term capital gains regardless of the length of time investors have owned
shares of the Fund. Distributions by the Fund that do not constitute ordinary
income dividends or capital gain dividends will be treated as a return of
capital to the extent of (and in reduction of) the shareholder's tax basis in
his or her shares. Any excess will be treated as gain from the sale of his or
her shares, as discussed below.
If the Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
S-32
<PAGE>
Prior to purchasing shares in the Fund, an investor should carefully consider
the impact of dividends or distributions which are expected to be or have been
declared, but not paid. Any dividend or distribution declared shortly after a
purchase of such shares prior to the record date will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received
by the shareholders) on December 31.
The redemption or exchange of the shares of the Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gains (i.e., the excess of net long-term
capital gain over net short-term capital loss) with respect to securities will
be taxed at a maximum rate of 20%, while short-term capital gains and other
ordinary income will be taxed at a maximum rate of 39.6%. Because of the
limitations on itemized deductions and the deduction for personal exemptions
applicable to higher income taxpayers, the effective tax rate may be higher in
certain circumstances.
All or a portion of a sales charge paid in purchasing shares of the Fund
cannot be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of the Fund or another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. In addition, no
loss will be allowed on the redemption or exchange of shares of the Fund if the
shareholder purchases other shares of the Fund (whether through reinvestment of
distributions or otherwise) or the shareholder acquires or enters into a
contract or option to acquire securities that are substantially identical to
shares of the Fund within a period of 61 days beginning 30 days before and
ending 30 days after such redemption or exchange. If disallowed, the loss will
be reflected in an adjustment to the basis of the shares acquired.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which the Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Fund intends to make timely distributions in
compliance with these requirements and consequently it is anticipated that it
generally will not be required to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, and distributions
to its shareholders would be taxable to shareholders as ordinary dividend
income for federal income tax purposes to the extent of the Fund's earnings and
profits.
The Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Fund their correct taxpayer identification number
(in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
S-33
<PAGE>
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Fund transactions. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal taxation of the Funds and
the income tax consequences to their shareholders.
S-34
<PAGE>
PERFORMANCE INFORMATION
The Fund may quote its yield, distribution rate, average annual total return
or cumulative total return in reports to shareholders, sales literature and
advertisements each of which will be calculated separately for each class.
In accordance with a standardized method prescribed by rules of the SEC,
yield is computed by dividing the net investment income per share earned during
the specified one month or 30-day period by the maximum offering price per
share on the last day of the period, according to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 5.25%.
In computing yield, the Fund follows certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Fund uses to prepare its annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in the Fund's financial statements.
The Fund may from time to time in its advertising and sales materials report
a quotation of its current distribution rate. The distribution rate represents
a measure of dividends distributed for a specified period. Distribution rate is
computed by taking the most recent monthly dividend per share, multiplying it
by 12 to annualize it, and dividing by the appropriate price per share (e.g.,
net asset value for purchases to be made without a load such as reinvestments
from Nuveen defined portfolios, or the maximum public offering price). The
distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because the Fund may be paying out more than its
earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
The distribution rates as of June 30, 1998, based on the maximum public
offering price then in effect for the Fund, and assuming the imposition of the
maximum sales charge for Class A Shares of 5.25%, were % for Class A Shares
and % for Class C Shares.
All total return figures assume the reinvestment of all dividends and measure
the net investment income generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the underlying investments in the
Fund over a specified period of time. Average annual total return figures are
annualized and therefore represent the average annual percentage change over
the specified period. Cumulative total return figures are not annualized and
represent the aggregate percentage or dollar value change over a stated period
of time. Average annual total return and cumulative total return are based upon
the historical results of the Fund and are not necessarily representative of
the future performance of the Fund.
The average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then
S-35
<PAGE>
expressed as a percentage. The calculation assumes that all income and capital
gains distributions have been reinvested in Fund shares at net asset value on
the reinvestment dates during the period. Average annual and cumulative total
returns may also be presented in advertising and sales literature without the
inclusion of sales charges.
Total returns for the oldest class of the Fund reflect actual performance for
all periods. For other classes, total returns reflect actual performance for
periods since class inception, and the oldest class's performance for periods
prior to inception, adjusted for the differences in sales charges and fees
between the classes.
The inception dates for each class of the Fund's shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATE
---------------
<S> <C>
Class A Shares............................................ August 26, 1983
Class B Shares............................................ , 1998
Class C Shares............................................ July 6, 1993
Class R Shares............................................ , 1998
</TABLE>
The Fund's average annual return figures, including the effect of the maximum
sales charge for Class A Shares, for the one-year, five-year and ten-year
periods ended June 30, 1998, for Class A Shares and Class C Shares,
respectively, were as follows:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
-----------------------------
ONE YEAR FIVE YEARS TEN YEARS
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
1998 1998 1998
-------- ---------- ---------
<S> <C> <C> <C>
Class A Shares.............................. % % %
Class C Shares.............................. % % %
</TABLE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Cumulative total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
The Fund's cumulative total return figures, including the effect of the
maximum sales charge for the Class A Shares, for the one-year, five-year and
ten-year periods ended June 30, 1998, respectively, using the performance of
the oldest class for periods prior to the inception of the newer classes, as
described above were as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------------
ONE YEAR FIVE YEARS TEN YEARS
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
1998 1998 1998
-------- ---------- ---------
<S> <C> <C> <C>
Class A Shares.............................. % % %
Class C Shares.............................. % % %
</TABLE>
S-36
<PAGE>
Class A Shares of the Fund are sold at net asset value plus a current maximum
sales charge of 5.25% of the offering price. This current maximum sales charge
will typically be used for purposes of calculating performance figures. Yield,
returns and net asset value of each class of shares of the Fund will fluctuate.
Factors affecting the performance of the Fund include general market
conditions, operating expenses and investment management. Any additional fees
charged by a securities representative or other financial services firm would
reduce returns described in this section. Shares of the Fund are redeemable at
net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Fund may also compare their performance with that of: (1)
the Consumer Price Index ; (2) other fixed-income mutual funds or equity mutual
fund indexes as reported by Lipper Analytical Services, Inc. ("Lipper"),
Morningstar, Inc. ("Morningstar"), Wiesenberger Investment Companies Service
("Wiesenberger") and CDA Investment Technologies, Inc. ("CDA") or similar
independent services which monitor the performance of mutual funds, or other
industry or financial publications such as Barron's, Changing Times, Forbes and
Money Magazine. Performance comparisons by these indexes, services or
publications may rank mutual funds over different periods of time by means of
aggregate, average, year-by-year, or other types of total return and
performance figures. Any given performance quotation or performance comparison
should not be considered as representative of the performance of the Fund for
any future period.
There are differences and similarities between the investments which the Fund
may purchase and the investments measured by the indexes and reporting services
which are described herein. The Consumer Price Index is generally considered to
be a measure of inflation. Lipper, Morningstar, Wiesenberger and CDA are widely
recognized mutual fund reporting services whose performance calculations are
based upon changes in net asset value with all dividends reinvested and which
do not include the effect of any sales charges.
The Fund may from time to time in its advertising and sales materials compare
its current yield or total return with the yield or total return on taxable
investments such as corporate or U.S. Government bonds, bank certificates of
deposit (CDs) or money market funds. These taxable investments have investment
characteristics that differ from those of the Fund. U.S. Government bonds, for
example, are long-term investments backed by the full faith and credit of the
U.S. Government, and bank CDs are generally short-term. FDIC-insured
investments, which pay fixed principal and interest but are subject to
fluctuating rollover rates. Money market funds are short-term investments with
stable net asset values, fluctuating yields and special features enhancing
liquidity.
S-37
<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES
As described in the Prospectus, the Fund provides you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of the Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among the Fund's classes of shares. There are no conversion, preemptive or
other subscription rights, except that Class B shares automatically convert
into Class A shares as described below.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include
distribution and service fees.
The expenses to be borne by specific classes of shares may include (i)
transfer agency fees attributed to a specific class of shares, (ii) printing
and postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current shareholders
of a specific class of shares, (iii) SEC and state securities registration fees
incurred by a specific class, (iv) the expense of administrative personnel and
services required to support the shareholders of a specific class of shares,
(v) litigation or other legal expenses relating to a specific class of shares,
(vi) trustees' fees or expenses incurred as a result of issues relating to a
specific class of shares, (vii) accounting expenses relating to a specific
class of shares and (viii) additional incremental expenses subsequently
identified and determined to be property allocated to one or more classes of
shares.
INITIAL AND SUBSEQUENT PURCHASES OF SHARES
You may buy Fund shares through Authorized Dealers or by calling or directing
your financial adviser to call Nuveen toll-free at 800-257-8787. You may pay
for your purchases by Federal Reserve draft or by check made payable to
"Dividend and Growth Fund, Class [A], [B], [C], [R]"' delivered to the
financial adviser through whom the investment is to be made for forwarding to
Nuveen Investor Services. When making your initial investment, you must also
furnish the information necessary to establish you Fund account by completing
and enclosing with your payment the application form attached to the Prospectus
(the "Application Form"). After your initial investment, you may make
subsequent purchases at any time by forwarding to your financial adviser or
Nuveen Investor Services a check, in the amount of your purchase, made payable
to "Dividend and Growth Fund, Class [A], [B], [C], [R]," and indicating on the
check your account number. All payments need to be in U.S. dollars and should
be sent directly to Nuveen Investor Services at P.O. Box 5186, Bowling Green
Station, New York, NY 10004-5186. A check drawn on a foreign bank or payable
other than to the order of your Fund generally will not be acceptable. You may
also wire Federal Funds directly to Nuveen Investor Services, but you may be
charge a fee for this. For instructions on how to make Fund purchases by wire
transfer, call Nuveen toll-free at 800-257-8787.
PURCHASE PRICE
The price at which you purchase a class of Fund shares is based on the next
calculation of the net asset value for that share class after the order is
placed. The net asset value per share of each share class is determined as of
the close of trading (normally 4:00 p.m. Eastern Time) on each day the New York
Stock Exchange is open for business. See "Net Asset Value," for a description
of how net asset value is calculated.
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<PAGE>
MINIMUM INVESTMENT REQUIREMENTS
The minimum initial investment is $3,000 per Fund share class ($1,000 for a
Traditional/Roth IRA Account; $500 for an Education IRA Account), and $500 for
accounts opened through fee-based programs for which the program sponsor has
established a single master account with the Fund's transfer agent and performs
all sub-accounting services related to that account. Additional purchases may
be in amounts of $50 or more. These minimums may be changed at any time by the
Fund. There are exceptions to these minimums for shareholders who qualify under
reinvestment programs.
SYSTEMATIC INVESTMENT PROGRAMS
The Fund offers you several opportunities to capture the benefits of "dollar
cost averaging" through systematic investment programs. In a regularly followed
dollar cost averaging program, you would purchase more shares when Fund share
prices are lower and fewer shares when Fund share prices are higher, so that
the average price paid for Fund shares is less than the average price of the
Fund shares over the same time period. Dollar cost averaging does not assure
profits or protect against losses in a steadily declining market. Since dollar
cost averaging involves continuous investment regardless of fluctuating price
levels, you should consider your financial ability to continue investing in
declining as well as rising markets before deciding to invest in this way. The
Fund offers two different types of systematic investment programs:
Systematic Investment Plan. Once you have established a Fund account, you may
make regular investments in an amount of $50 or more each month by authorizing
Nuveen Investor Services to draw preauthorized checks on your bank account.
There is no obligation to continue payments and you may terminate your
participation at any time at your discretion. No charge in additional to the
applicable sales charge is made in connection with this Plan, and there is no
cost to your Fund. To obtain an application form for the Systematic Investment
Plan, check the applicable box on the Application Form or call Nuveen toll-free
at 800-257-8787.
Payroll Direct Deposit Plan. Once you have established a Fund account, you
may, with your employer's consent, make regular investments in Fund shares of
$25 or more per pay period (meeting the monthly minimum of $50) by authorizing
your employer to deduct this amount automatically from your paycheck. There is
no obligation to continue payments and you may terminate your participation at
any time at your discretion. No charge in addition to the applicable sales
charge is made for this Plan, and there is no cost to your Fund. To obtain an
application form for the Payroll Direct Deposit Plan, check the applicable box
on the Application Form or call Nuveen toll-free at 800-257-8787.
CLASS A SHARES
Class A Shares may be purchased at a public offering price equal to the
applicable net asset value per share plus an up-front sales charge imposed at
the time of purchase as set forth in the Prospectus. Shareholders may qualify
for a reduced sales charge, or the sales charge may be waived in its entirety,
as described below. Class A Shares are also subject to an annual service fee of
.25%. See "Distribution and Service Plan." Set forth below is an example of the
method of computing the offering price of the Class A Shares. The example
assumes a purchase on June 30, 1998 of Class A Shares from the Fund aggregating
less than $50,000 subject to the schedule of sales charges set forth in the
Prospectus at a price based upon the net asset value of the Class A Shares.
<TABLE>
<S> <C>
Net Asset Value per share......................................... $13.06
Per Share Sales Charge--5.25% of public offering price (5.51% of
net asset value per share)....................................... $ .72
------
Per Share Offering Price to the Public............................ $13.78
</TABLE>
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<PAGE>
The Fund receives the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
The following Class A sales charges and commissions apply to the Fund:
CLASS A SALES CHARGES AND COMMISSIONS
<TABLE>
<CAPTION>
AUTHORIZED
DEALER
SALES CHARGE COMMISSION
------------------------------- ----------
AS % OF AS % OF
PUBLIC AS % OF PUBLIC
OFFERING YOUR NET OFFERING
PURCHASE AMOUNT PRICE INVESTMENT PRICE
------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 5.25% 5.54% 5.00%
$50,000-100,000 4.25 4.44 4.00
$100,000-250,000 3.50 3.63 3.25
$250,000-500,000 2.75 2.83 2.00
$500,000-1,000,000 2.00 2.04 1.75
$1,000,000 and over -(*) - 1.00(*)
</TABLE>
(*) Nuveen pays Authorized Dealers a commission equal to the sum of 1.00% of
the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
any amount over $5 million. Unless the Authorized Dealer waived the
commission, you may be assessed a contingent deferred sales charge (CDSC)
of 1.00% if you redeem any of your Class A Shares within 18 months of
purchase. The CDSC is calculated on the lower of your purchase price or
redemption proceeds.
REDUCTION OR ELIMINATION OF UP-FRONT SALES CHARGE ON CLASS A SHARES
Rights of Accumulation. You may qualify for a reduced sales charge on a
purchase of Class A Shares of the Fund if the amount of your purchase, when
added to the value that day of all of your prior purchases of shares of the
Fund or of another Nuveen Mutual Fund, or Nuveen exchange-traded fund, or
units of a Nuveen defined portfolio, on which an up-front sales charge or
ongoing distribution fee is imposed, or is normally imposed, falls within the
amounts stated in the Class A Sales Charges and Commissions table in "How to
Select a Purchase Option" in the Prospectus. You or your financial adviser
must notify Nuveen or the Fund's transfer agent of any cumulative discount
whenever you plan to purchase Class A Shares of the Fund that you wish to
qualify for a reduced sales charge.
Letter of Intent. You may qualify for a reduced sales charge on a purchase
of Class A Shares of the Fund if you plan to purchase Class A Shares of Nuveen
Mutual Funds over the next 13 months and the total amount of your purchases
would, if purchased at one time, qualify you for one of the reduced sales
charges shown in the Class A Sales Charges and Commissions table in "How to
Select a Purchase Option" in the Prospectus. In order to take advantage of
this option, you must complete the applicable section of the Application Form
or sign and deliver either to an Authorized Dealer or to the Fund's transfer
agent a written Letter of Intent in a form acceptable to Nuveen. A Letter of
Intent states that you intend, but are not obligated, to purchase over the
next 13 months a stated total amount of Class A shares that would qualify you
for a reduced sales charge shown above. You may count shares of a Nuveen
Mutual Fund that you already own on which you paid an up-front sales charge or
an ongoing distribution fee and any Class B or Class C Shares of a Nuveen
Mutual Fund that you purchase over the next 13 months towards completion of
your investment program, but you will receive a reduced sales charge only on
new Class A Shares you purchase with a sales charge over the 13 months. You
cannot count towards completion of your investment program Class A Shares that
you purchase without a sales charge through investment of distributions from a
Nuveen Mutual Fund or a Nuveen defined portfolio, or otherwise.
S-40
<PAGE>
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of the Fund following execution of the Letter of Intent will be
at least 5% of the total amount of your intended purchases. You further agree
that shares representing 5% of the total amount of your intended purchases will
be held in escrow pending completion of these purchases. All dividends and
capital gains distributions on Class A Shares held in escrow will be credited
to your account. If total purchases, less redemptions, prior to the expiration
of the 13 month period equal or exceed the amount specified in your Letter of
Intent, the Class A Shares held in escrow will be transferred to your account.
If the total purchases, less redemptions, exceed the amount specified in your
Letter of Intent and thereby qualify for a lower sales charge than the sales
charge specified in your Letter of Intent, you will receive this lower sales
charge retroactively, and the difference between it and the higher sales charge
paid will be used to purchase additional Class A Shares on your behalf. If the
total purchases, less redemptions, are less than the amount specified, you must
pay Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to given instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Defined Portfolio Distributions. You may purchase
Class A Shares without an up-front sales charge by reinvestment of
distributions from any of the various defined portfolios sponsored by Nuveen.
There is no initial or subsequent minimum investment requirement for such
reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may
purchase Class A Shares of the Fund or of another Nuveen Mutual Fund at the
reduced sales charge applicable to the group's purchases taken as a whole. A
"qualified group" is one which has previously been in existence, has a purpose
other than investment, has ten or more participating members, has agreed to
include Fund sales publications in mailings to members and has agreed to comply
with certain administrative requirements relating to its group purchases.
Under any group purchase program, the minimum initial investment in Class A
Shares of the Fund or portfolio for each participant is $3,000 and, the minimum
monthly investment in Class A Shares of the Fund or portfolio by each
participant in the program is $50. No certificate will be issued for any
participant's account. All dividends and other distributions by the Fund will
be reinvested in additional Class A Shares of the Fund. No participant may
utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each
participant must fill out special application materials, which the group
administrator may obtain from the group's financial adviser, by calling Nuveen
toll-free at (800) 257-8787.
Class A shares of the Fund may be purchased at net asset value without a
sales charge, and may be purchased by the following categories of investors:
. investors purchasing $1,000,000 or more
. officers, trustees and former trustees of the Trust or any fund sponsored
by Nuveen, any parent company of Nuveen or subsidiaries thereof;
. bona fide, full-time and retired employees and directors of Nuveen, any
parent company of Nuveen, and subsidiaries thereof, or their immediate
family members;
S-41
<PAGE>
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
and
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
. any eligible employer-sponsored qualified defined contribution retirement
plan. Eligible plans are those with at least 25 employees and which
either (a) make an initial purchase of one or more Nuveen Mutual Funds
aggregating $500,000 or more or (b) execute a Letter of Intent to
purchase in the aggregate $500,000 or more of fund shares. Nuveen will
pay Authorized Dealers a sales commission on such purchases equal to
1.00% of the first $2.5 million, plus 2.5% of any amount purchased over
$5.0 million. For this category of investors a contingent deferred sales
charge of 1% will be assessed on redemptions within 18 months of
purchase, unless waived.
For investors that purchased Class A Shares at net asset value because they
purchased such shares through an eligible employer-sponsored qualified defined
contribution plan or because the purchase amount equaled or exceeded $1 million
and the Authorized Dealer did not waive the sales commission, a contingent
deferred sales charge of 1.00% will be assessed on redemptions within 18 months
of purchase.
Any Class A Shares purchased pursuant to a special sales charge waiver must
be acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Fund. You or your family
adviser must notify Nuveen or the Fund's transfer agent whenever you make a
purchase of Class A Shares of the Fund that you wish to be covered under these
special sales charge waivers.
Class A Shares of the Fund may be issued at net asset value without a sales
charge in connection with the acquisition by the Fund of another investment
company. All purchases under the special sales charge waivers will be subject
to minimum purchase requirements as established by the Fund.
In determining the amount of your purchase of Class A Shares of the Fund that
may qualify for a reduced sales charge, the following purchases may be
combined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their
immediate family members (i.e., their spouses, parents, children, grandparents,
grandchildren parents-in-law, sons- and daughters-in-law, siblings, a sibling's
spouse, and a spouse's siblings); or (3) all purchases made through a group
purchase program as described above.
CLASS B SHARES
You may purchase Class B Shares without any up-from sales charge at a price
equal to their net asset value, but subject to a contingent deferred sales
charge ("CDSC") if you redeem shares within six years of purchase. Class B
Shares are also subject to an annual fee designed to compensate Authorized
Dealers over time for the sale of Fund shares.
S-42
<PAGE>
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any
conversion of Class B Shares into Class A Shares will be subject to the
continuing availability of an opinion of counsel or a private letter ruling
from the Internal Revenue Service to the effect that the conversion of shares
would not constitute a taxable event under federal income tax law. Conversion
of Class B Shares into Class A Shares might be suspended if such an opinion or
ruling were no longer available.
CLASS C SHARES
You may purchase Class C Shares without any up-front sales charge at a price
equal to their net asset value, but subject to an annual distribution fee
designed to compensate Authorized Dealers over time for the sale of Fund
shares. Class C Shares are subject to a contingent deferred sales charge for
redemption within 12 months of purchase.
Holders of Class C Shares acquired on or before January 31, 1997 can convert
those shares to Class A Shares of the Fund at the shareholder's affirmative
request six years after date of purchase. Holders of Class C Shares must submit
their request to the transfer agent no later than the last business day of the
71st month following the month in which they purchased their Class C shares.
Holders of Class C Shares purchased after that date will not have the option to
convert those shares to Class A Shares.
CLASS R SHARE PURCHASE ELIGIBILITY
Class R Shares are available for purchases of $2.5 million or more and for
purchases using dividends and capital gains distributions on Class R Shares.
Class R Shares also are available for the following categories of investors:
. officers, trustees and former trustees of the Trust and their immediate
family members or trustees/directors of any fund, sponsored by Nuveen,
any parent company of Nuveen and subsidiaries thereof and their immediate
family members;
. bona fide, full-time and retired employees and directors of Nuveen, any
parent company of Nuveen, and subsidiaries thereof, or their immediate
family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
S-43
<PAGE>
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
. Any shares purchased by investors falling within any of the first four
categories listed above must be acquired for investment purposes and on
the condition that they will not be transferred or resold except through
redemption by the fund.
In addition, purchasers of Nuveen defined portfolios may reinvest their
distributions from such defined portfolios in Class R Shares, if, before
September 6, 1994, such purchasers had elected to reinvest distributions in
Nuveen Fund shares. Shareholders may exchange their Class R Shares of any
Nuveen Fund into Class R Shares of any other Nuveen Fund.
The reduced sales charge programs may be modified or discontinued by the
Funds at any time.
If you are eligible to purchase either Class R Shares or Class A Shares
without a sales charge at net asset value, you should be aware of the
differences between these two classes of shares. Class A Shares are subject to
an annual service fee to compensate Authorized Dealers for providing you with
ongoing account service. Class R Shares are not subject to a distribution or
service fee and, consequently, holders of Class R Shares may not receive the
sale types or levels of services from Authorized Dealers. In choosing between
Class A Shares and Class R Shares, you should weigh the benefits of the
services to be provided by Authorized Dealers against the annual service fee
imposed upon the Class A Shares.
For more information about the purchase of Class A Shares or reduced sales
charge programs, or to obtain the required application forms, call Nuveen toll-
free at (800) 257-8787.
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
Class A Shares are normally redeemed at net asset value, without any
Contingent Deferred Sales Charge ("CDSC"). However, in the case of Class A
Shares purchased at net asset value because the purchase amount exceeded $1
million, where the Authorized Dealer did not waive the sales commission, a CDSC
of 1% is imposed on any redemption within 18 months of purchase. In the case of
Class B Shares redeemed within six years of purchase, a CDSC is imposed,
beginning at 5% for redemptions within the first year, declining to 4% for
redemptions within years two and three, and declining by 1% each year
thereafter until disappearing after the sixth year. Class C Shares are redeemed
at net asset value, without any CDSC, except that a CDSC of 1% is imposed upon
redemption of Class C Shares that are redeemed within 12 months of purchase.
In determining whether a CDSC is payable, the Fund will first redeem shares
not subject to any charge, or that represent an increase in the value of the
Fund account due to capital appreciation, and then will redeem shares held for
the longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen money market fund. You may not
exchange Class B Shares for shares of a Nuveen money market fund. The holding
period is calculated on a monthly basis and begins the first day of the month
in which the order for investment is received. The CDSC is calculated based on
the lower of the redeemed shares' cost or net asset value at the time of the
redemption and is deducted from the redemption proceeds. Nuveen receives the
amount of any CDSC shareholders pay. If Class A or Class C shares subject to a
CDSC are exchanged for shares of a Nuveen money market fund, the CDSC would be
imposed on the subsequent redemption of those money market fund shares, and the
period during which the shareholder holds the money market fund shares would be
counted in determining the remaining
S-44
<PAGE>
duration of the CDSC. The Fund may elect not to so count the period during
which the shareholder held the money market fund shares, in which event the
amount of any applicable CDSC would be reduced in accordance with applicable
SEC rules by the amount of any 12b-1 plan payments to which those money market
funds shares may be subject.
The CDSC may be waived or reduced under the following six special
circumstances: 1) redemptions within one year following the death or
disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of a shareholder; 2) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; 3) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge; 4)
in connection with the exercise of a reinstatement privilege whereby the
proceeds of a redemption of the Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; 5) in
connection with the exercise of the Fund's right to redeem all shares in an
account that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of such Fund; and 6) redemptions made pursuant to the Fund's systematic
withdrawal plan, up to 12% of the current market value. If the Fund waives or
reduces the CDSC, such waiver or reduction would be uniformly applied to all
Fund shares in the particular category. In waiving or reducing a CDSC, the
Funds will comply with the requirements of Rule 22d-1 of the Investment Company
Act of 1940, as amended.
GENERAL MATTERS
The Fund may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are
expected to sell certain minimum amounts of shares of the Nuveen mutual funds
during specified time periods.
To help advisers and investors better understand and most efficiently use the
Fund to reach their investment goals, the Fund may advertise and create
specific investment programs and systems. For example, this may include
information on how to use the Fund to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Fund may produce
software or additional sales literature to promote the advantages of using the
Fund to meet these and other specific investor needs.
The Fund has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee accepts the
order. Customer orders received by such broker (or their designee) will be
priced at the Fund's net asset value next computed after they are accepted by
an authorized broker (or their designee). Orders accepted by an authorized
broker (or their designee) before the close of regular trading on the New York
Stock Exchange will receive that day's share price; orders accepted after the
close of trading will receive the next business day's share price.
Exchanges of shares of the Fund for shares of a Nuveen money market fund may
be made on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
S-45
<PAGE>
for business. In addition to the holidays observed by the Fund, the Nuveen
money market funds observe and will not make fund shares available for purchase
on the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans Day.
In addition, you may exchange Class R Shares of the Fund for Class A Shares
without a sales charge if the current net asset value of those Class R Shares
is at least $3,000 or you already own Class A Shares of the Fund.
The Fund may suspend the right of redemption, or delay payment to redeeming
shareholders for more than seven days, when the New York Stock Exchange is
closed (not including customary weekend and holiday closings); when trading in
the markets the Fund's portfolio securities or determination of the Fund's net
assets value is not reasonably practical; or the SEC by order permits the
suspension of the right of redemption or the delay in payment to redeeming
shareholders for more than seven days.
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to the Fund's transfer agent. No share
certificates will be issued for fractional shares.
For more information on the procedure for purchasing shares of the Fund and
on the special purchase programs available thereunder, see "How to Buy Fund
Shares" in the Prospectus.
Nuveen serves as the principal underwriter of the shares of the Fund pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Trust, dated August 26, 1998 ("Distribution Agreement"). Pursuant to the
Distribution Agreement, the Trust appointed Nuveen to be its agent for the
distribution of the Funds' shares on a continuous offering basis. Nuveen sells
shares to or through brokers, dealers, banks or other qualified financial
intermediaries (collectively referred to as "Dealers"), or others, in a manner
consistent with the then effective registration statement of the Trust.
Pursuant to the Distribution Agreement, Nuveen, at its own expense, finances
certain activities incident to the sale and distribution of the Fund's shares,
including printing and distributing of prospectuses and statements of
additional information to other than existing shareholders, the printing and
distributing of sales literature, advertising and payment of compensation and
giving of concessions to Dealers. Nuveen receives for its services the excess,
if any, of the sales price of the Fund's shares less the net asset value of
those shares, and reallows a majority or all of such amounts to the Dealers who
sold the shares; Nuveen may act as such a Dealer. Nuveen also receives
compensation pursuant to a distribution plan adopted by the Trust pursuant to
Rule 12b-1 and described herein under "Distribution and Service Plan." Nuveen
receives any CDSCs imposed on redemptions of Shares.
The aggregate amounts of underwriting commissions with respect to the sale of
Fund shares and the amount thereof retained by Nuveen, were as follows (all
figures are to the nearest thousand):
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY
COMMISSIONS NUVEEN
------------ -----------
<S> <C> <C>
Year Ended 6/30/98..................................... $ $
Year Ended 6/30/97..................................... $ $
Year Ended 6/30/96..................................... $ $
</TABLE>
S-46
<PAGE>
DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under the
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of
preparing, printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of Class B and Class C
Shares, certain other expenses associated with the distribution of Class B and
Class C Shares, and any distribution-related expenses that may be authorized
from time to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under the Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
The Fund may spend up to .25 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
The Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .25 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. The Fund may spend up to .75 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.25 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
For the fiscal year ended June 30, 1998, 100% of service fees and
distribution fees were paid out as compensation to Authorized Dealers.
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1998*
----------------------
<S> <C>
Class A............................................ $
Class C............................................ $
</TABLE>
- --------
*Reflects payments under the Fund's previous Plan in which Class A Shares and
Class C Shares were each subject to a .20% service fee and Class C Shares
were subject to a .55% distribution fee.
Under the Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest in the Plan cast in
person at a meeting called for the purpose of voting on the Plan. The Plan may
be continued only if the trustees who vote to approve such continuance
conclude, in the exercise of reasonable business judgment and in light of their
fiduciary duties under applicable law, that there is a reasonable likelihood
that the
S-47
<PAGE>
Plan will benefit the Fund and its shareholders. The Plan may not be amended to
increase materially the cost which a class of shares may bear under the Plan
without the approval of the shareholders of the affected class, and any other
material amendments of the Plan must be approved by the non-interested trustees
by a vote cast in person at a meeting called for the purpose of considering
such amendments. During the continuance of the Plan, the selection and
nomination of the non-interested trustees of the Trust will be committed to the
discretion of the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603, has been selected as auditors for the Trust. In
addition to audit services, the auditors will provide consultation and
assistance on accounting, internal control, tax and related matters. The
financial statements incorporated by reference elsewhere in this Statement of
Additional Information and the information for prior periods set forth under
"Financial Highlights" in the Prospectus have been audited by the respective
auditors as indicated in their report with respect thereto, and are included in
reliance upon the authority of that firm in giving that report.
The custodian of the assets of the Fund is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting and portfolio accounting services.
The Fund's transfer, shareholder services, and dividend paying agent is Chase
Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108.
FINANCIAL STATEMENTS
The audited financial statements for the Fund's most recent fiscal year
appear in the Fund's Annual Report and are incorporated herein by reference.
The Annual Report accompanies this Statement of Additional Information.
S-48
<PAGE>
GENERAL TRUST INFORMATION
The Fund is a series of Nuveen Investment Trust IV. The Trust is an open-end
diversified management investment company under the 1940 Act. The Trust was
organized as a Massachusetts business Trust in August 1998. The Board of
Trustees of the Trust is authorized to issue an unlimited number of shares in
one or more series or "Funds," which may be divided into classes of shares.
Currently, there is only one series authorized and outstanding, which is
divided into four classes of shares designated Class A Shares, Class B Shares,
Class C Shares and Class R Shares. Each class of shares represents an interest
in the same portfolio of investments of the Fund. Each class of shares has
equal rights as voting, redemption, dividends and liquidation, except that each
bears different class expenses, including different distribution and service
fees, and each has exclusive voting rights with respect to any distribution or
service plan applicable to its shares. There are no conversion, preemptive or
other subscription rights, except that Class B Shares automatically convert
into Class A Shares, as described herein. The Board of Trustees of Trust has
the right to establish additional series and classes of shares in the future,
to change those series or classes and to determine the preferences, voting
powers, rights and privileges thereof.
The Trust is not required and does not intend to hold annual meetings of
shareholders. Shareholders owning more than 10% of the outstanding shares of
the Fund have the right to call a special meeting to remove Trustees or for any
other purpose.
Under Massachusetts law applicable to Massachusetts business trusts,
shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for its obligations. However, the Declaration of
Trust of the Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Trust's Declaration of Trust further provides
for indemnification out of the assets and property of the Trust for all losses
and expenses of any shareholder held personally liable of the Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which both inadequate insurance
existed and the Trust or the Fund itself was unable to meet its obligations.
The Trust believes the likelihood of the occurrence of these circumstances is
remote.
S-49
<PAGE>
APPENDIX A
RATINGS OF INVESTMENTS
STANDARD & POOR'S RATINGS GROUP--A brief description of the applicable
Standard & Poor's Ratings Group ("S&P") rating symbols and their meanings (as
published by S&P) follows:
LONG TERM DEBT
An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAADebt rated "AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated "AA' has a very strong capacity to pay interest and repay
principal, and differs from the highest-rated issues only in small
degree.
A Debt rated "A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-
rated categories.
BBBDebt rated "BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-
rated categories.
SPECULATIVE GRADE RATING
Debt rated "BB,' "B,' "CCC,' "CC' and "C' is regarded as having predominantly
speculative characteristics, with respect to capacity to pay interest and repay
principal. "BB' indicates the least degree of speculation and "C' the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse
conditions.
BB
Debt rated "BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
A-1
<PAGE>
could lead to inadequate capacity to meet timely interest and principal
payments. the "BB' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "BBB-' rating.
B Debt rated "B' has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal.
The "B' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BB' or "BB-' rating.
CCCDebt rated "CCC' has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it
is not likely to have the capacity to pay interest and repay principal.
The "CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "B' or "B-' rating.
CC The rating "CC' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC' debt rating.
C The rating "C' typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-' debt rating. The "C' rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI The rating "CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated "D' is in payment default. The "D' rating category is used
when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The "D' rating
also will be used upon the filling of a bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or Minus (-): the ratings from "AA' to "CCC' may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings: the letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project financed by the debt being rated and indicates that payment
of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion of the project,
makes no comment on the likelihood of, or the risk of default upon
failure of, such completion. The investor should exercise judgment with
respect to such likelihood and risk.
L
The letter "L' indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
federally insured by the Federal Savings & Loan Insurance Corp. or the
Federal Deposit Insurance Corp.* and interest is adequately
collateralized. In the case of certificates of deposit, the letter "L'
indicates that the deposit, combined with other deposits being held in
the same right and capacity, will be honored for principal and accrued
pre-default interest up to the federal insurance limits within 30 days
after closing of the insured institution or, in the event that the
deposit is assumed by a successor insured institution, upon maturity.
NR
Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
A-2
<PAGE>
COMMERCIAL PAPER
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:
A-1This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated "A-1."
A-3Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished
to S&P by the issuer or obtained by S&P from other sources it considers
reliable. S&P does not perform an audit in connection with any rating and may,
on occasion, rely on unaudited financial information. the ratings may be
changed, suspended, or withdrawn as a result of changes in or unavailability of
such information or based on other circumstances.
MOODY'S INVESTORS SERVICE, INC.--A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings
(as published by Moody's) follows:
LONG TERM DEBT
AAABonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are mostly unlikely to impair the fundamentally strong
position of such issues.
AA
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
BAA
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present,
A-3
<PAGE>
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
BA Bonds which are rated Ba are judged to have speculative elements; their
future can not be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby, not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
CAABonds which are rated Caa are of poor standing. Such issues may be in
default, or there may be present elements of danger with respect to
principal or interest.
CA Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
NOTE:
Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
COMMERCIAL PAPER
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of senior short-term promissory obligations. Prime-1
repayment capacity will often be evidenced by many of the following
characteristics:
-- Leading market positions in well-established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of senior short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Issuers rated PRIME-3 (or related supporting institutions) have an acceptable
capacity for repayment of senior short-term promissory obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial
leverage.
A-4
<PAGE>
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
DUFF & PHELPS, INC.--A brief description of the applicable Duff & Phelps,
Inc. ("D&P") ratings symbols and their meanings (as published by D&P) follows:
LONG TERM DEBT
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and
expertise. The projected viability of the obligor at the trough of the cycle is
a critical determination.
Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security classes
in the capital structure, the overall credit strength of the issuer, and the
nature of covenant protection.
The Credit Rating Committee formally reviews all ratings once per quarter
(more frequently, if necessary). Ratings of "BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities. Structured finance issues, including real estate,
asset-backed and mortgage-backed financings, use this same rating scale. Duff &
Phelps Credit Rating claims paying ability ratings of insurance companies use
the same scale with minor modification in the definitions. Thus, an investor
can compare the credit quality of investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for specific ratings)
addresses the likelihood that aggregate principal and interest will equal or
exceed the rated amount under appropriate stress conditions.
<TABLE>
<CAPTION>
RATING
SCALE DEFINITION
- -------------------------------------------------------------------------------
<C> <S>
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest, but
AA may vary slightly from time to time because of economic conditions.
AA-
A+ Protection factors are average but adequate. However, risk factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- cycles.
BB+ Below investment grade but deemed likely to meet obligations when due.
BB Present or prospective financial protection factors fluctuate according
BB- to industry conditions or company fortunes. Overall quality may move up
or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will not be
B met when due. Financial protection factors will fluctuate widely
B- according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
RATING
SCALE DEFINITION
- -------------------------------------------------------------------------------
<C> <S>
CCC Well below investment grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow, and risk can be substantial with
unfavorable economic/industry conditions and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
</TABLE>
SHORT-TERM DEBT RATINGS
Duff & Phelps' short-term ratings are consistent with the rating criteria
used by money market participants. The ratings apply to all obligations with
maturities of under one year, including commercial paper, the uninsured portion
of certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit Ratings' short-term
ratings is the refinement of the traditional "1' category. The majority of
short-term debt issuers carry the highest rating, yet quality differences exist
within that tier. As a consequence, Duff & Phelps Credit Rating has
incorporated gradations of "1+' (one plus) and "1-' (one minus) to assist
investors in recognizing those differences.
These ratings are recognized by the SEC for broker-dealer requirements,
specifically capital computation guidelines. These ratings meet Department of
labor ERISA guidelines governing pension and profit-sharing investments. State
regulators also recognize the ratings of Duff & Phelps Credit Rating for
insurance company investment portfolios.
<TABLE>
<CAPTION>
RATING
SCALE DEFINITION
- -------------------------------------------------------------------------------
<C> <S>
D-1+ HIGH GRADE
Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
D-2 GOOD GRADE
Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
RATING
SCALE DEFINITION
- -------------------------------------------------------------------------------
<C> <S>
D-3 SATISFACTORY GRADE
Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
D-4 NON-INVESTMENT GRADE
Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
D-5 DEFAULT
Issuer failed to meet scheduled principal and/or interest payments.
</TABLE>
FITCH INVESTORS SERVICE, INC.--A brief description of the applicable Fitch
Investors Service, Inc. ("Fitch") ratings symbols and meanings (as published by
Fitch) follows:
LONG TERM DEBT
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
<TABLE>
<C> <S>
AAA Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA'. Because bonds rated in
the "AAA' and "AA' categories are not significantly vulnerable to
foreseeable future developments, short-term debt of the issuers is
generally rated "F-1+'.
</TABLE>
A-7
<PAGE>
<TABLE>
<C> <S>
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds and, therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
</TABLE>
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB' to "C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD' to "D') is an
assessment of the ultimate recovery value through reorganization or
liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories can not fully reflect the
differences in the degrees of credit risk.
<TABLE>
<C> <S>
BB Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service
requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business
and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, Bonds are in default on interest and/or principal payments. Such bonds
DD are extremely speculative and should be valued on the basis of their
AND D ultimate recovery value in liquidation or reorganization of the obligor.
"DDD' represents the highest potential for recovery of these bonds, and
"D' represents the lowest potential for recovery.
</TABLE>
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificate of deposit, medium-term notes, and municipal and
investment notes.
A-8
<PAGE>
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
<TABLE>
<C> <S>
F-1+ EXCEPTIONALLY STRONG CREDIT QUALITY Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 VERY STRONG CREDIT QUALITY Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated "F-1+'.
F-2 GOOD CREDIT QUALITY Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not
as great as for issues assigned "F-1+' and "F-1' ratings.
F-3 FAIR CREDIT QUALITY Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate;
however, near-term adverse changes could cause these securities to be
rated below investment grade.
F-S WEAK CREDIT QUALITY Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
D DEFAULT Issues assigned this rating are in actual or imminent payment
default.
LOC The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
</TABLE>
A-9
<PAGE>
VAI-RIT 10-98
<PAGE>
NUVEEN
Growth and Income
Mutual Funds
June 30, 1998
Annual Report
Seeking income for today
and growth for tomorrow.
[PHOTO APPEARS HERE]
Utility
Income Fund
<PAGE>
Highlights
As of June 30, 1998
For Class A shares on net asset value
Industry Diversification
[PIE CHART APPEARS HERE]
Electric Utility 46%
Forest and Paper Products 4%
Financial 24%
Consumer Cyclical 4%
Telecommunications 14%
Natural Gas/Pipeline 8%
Performance Highlights
. One-year total return of 19.32%
. Steady dividend since June 1993
. 4.02% yield on NAV; 3:85% yield on offer
Contents
1 Dear Shareholder
3 Portfolio Manager's Comments
4 Performance Overview
5 Report of Independent
Public Accountants
6 Portfolio of Investments
8 Statement of Net Assets
9 Statement of Operations
10 Statement of Changes in Net Assets
11 Notes to Financial Statements
14 Financial Highlights
16 Building Better Portfolios
17 Fund Information
Is it Time for a Financial Check-Up?
Now is a great time to sit down with your financial adviser and review your
financial plan. How can you make sure that your investment strategy is strong
enough to provide the income you need today and versatile enough to change as
your goals do? Here are some guidelines:
. Make sure you and your adviser understand your current situation. How have
your goals, objectives and risk profile changed? What are your current tax
concerns, interests, lifestyle?
. Revisit your current investment choices. If the value of one portion of your
portfolio has grown substantially, it may be time to rebalance asset classes.
. Determine how your asset mix will be implemented. Changing your asset
allocation is generally a gradual process. Make sure you and your adviser
have a clear understanding of each other's responsibilities. Define and
discuss what you want in terms of support from your adviser.
. Keep revisiting your plan. Don't assume that once you've revised your plan
and reallocated your portfolio the process is finished.
It's recommended that you meet at least once a year with your financial
adviser - and usually more if there have been significant changes in interest
rates, tax laws, retirement plan distributions, lifestyle or health.
Even if things haven't changed, it makes good financial sense to keep in touch
with your adviser.
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
I'm pleased to report that the Flagship Utility Income Fund continued to meet
its objectives of providing shareholders with attractive income and growth
potential, despite a volatile year in the utility industry. Since the onset of
the recent wave of utility deregulation, the industry has experienced constant
change as companies adapt to the new competitive environment. Nuveen's
experience in the utility sector has enabled the fund to navigate through this
changing market environment.
The fund continues to provide an attractive investment opportunity for investors
seeking a high level of income for today, along with the appreciation potential
that historically has helped keep investors ahead of inflation. Our portfolio
strategy of focusing on securities with strong income potential has resulted in
very attractive yields for investors. In fact, the Utility Income Fund is ranked
as one of the highest-yielding funds in its peer group and the fund's Class A
shares have maintained a steady dividend since June 1993.
The Economy in Review
Over the past year, the equity markets exhibited continued strength despite
recent volatility sparked by Asia's financial problems. Fixed-income investments
also enjoyed bullish performance, as declining interest rates and low inflation
spurred a bond market rally. A year-to-year comparison shows that today's rates
are significantly lower than those of a year ago. The continued fall of interest
rates has tended to make the value of higher-yielding stocks like those in the
Utility Income Fund even greater. Added strength for income-oriented investments
came from the low inflationary environment, which was caused in part by the
Asian financial crisis. Thanks to a strong dollar and weak commodity prices, the
Consumer Price Index rose only 1.7% for the 12 months ended June 30, 1998, among
its lowest levels in years. Defensive stocks such as utilities gained additional
strength from the "flight to quality," as investors sought a haven from ongoing
Asian uncertainty by moving assets into defensive stocks and fixed-income
securities.
1
<PAGE>
"Today, more than ever, you can count on Nuveen for a wide range of investments
and services that can help you build a well-balanced portfolio designed to
achieve your financial goals."
In coming months, we will continue to watch several key factors affecting the
future of the economy, including the demand for goods and services, the
availability of qualified employees, international economic activity,
particularly in Asia, and indications from the Federal Reserve. We expect that
these factors will continue to influence the tone of the stock and bond markets
during the remainder of the year.
Diversification:
The Key to a Better Portfolio
In the months ahead, we believe that investors will find diversification to be
an increasingly important investment strategy. An appropriately diversified
portfolio one that balances different types of investments, risk levels, and tax
management can help cushion your portfolio against volatility and enhance your
long-term return potential.
Many investors select Nuveen funds because their emphasis on dependable income
and attractive after-tax returns makes them ideal for building and sustaining
long-term financial security. Our range of stock and bond investments can help
create the foundation for a diversified, well-balanced portfolio. We encourage
you to talk with your financial adviser about diversifying your portfolio with
Nuveen's equity and balanced funds, including the Nuveen European Value Fund.
This new equity mutual fund offers a portfolio of quality European company
stocks for investors seeking long-term growth potential and international
diversification. Today, more than ever, you can count on Nuveen for a wide range
of investments and services that can help you build a well-balanced portfolio
designed to achieve your financial goals.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of Nuveen. We thank you for your continued
confidence in us and our family of investments.
Sincerely,
/s/Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 15, 1998
2
<PAGE>
Flagship Utility Income Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber reviews the past year in the utility sector
and talks about the performance of the fund and his outlook for the future.
Comments cover the one-year period ended June 30, 1998, and all
performance statistics are quoted for Class A shares on net asset value.
Utility Sector Review
Deregulation continues to force utility companies in all sectors to become more
cost-efficient, growth-oriented entities. The process of deregulation for
electric utilities continues throughout the country, and President Clinton has
announced plans to assess deregulation on a national scale. Thus far, the plan
looks favorable for most electric utilities and will allow them to pass along at
least some of the costs of their power plants to customers in the coming years.
However, deregulation has also brought with it tremendous volatility, although
the volatility levels for utility stocks have still been lower than those found
in the overall stock market. In addition, this sector has tremendous growth
potential because deregulation has ended what was essentially a "ceiling" on
utility company earnings growth. However, that improved growth potential is
accompanied by concerns over the earnings of these companies, since their
profits are no longer effectively guaranteed. The recent rash of large-scale
acquisitions also raised a number of issues, particularly in telecommunications
sector as the MCI-WorldCom and SBC-Ameritech mergers were announced. Some
analysts are concerned over the impact of these mergers on corporate earnings,
as well as the new conglomerates' ability to adapt quickly to a changing
environment.
Utility stocks were generally able to reap the benefits of the continued
strength of the bull market on Wall Street. In addition, demand for utility
stocks continued to grow as the financial problems in Asia prodded many
investors to consider more defensive securities such as utility stocks. The
continued fall of interest rates also benefited the sector as the attractive
dividends paid by many utilities drew investors seeking competitive income
levels.
Fund Performance
For the year ended June 30, 1998, the fund generated a total return of 19.32%.
Although this return falls below the 30.24% return provided by the benchmark
Standard & Poor's Utility Index, the fund's performance remains attractive when
considering that the Index is comprised purely of common stocks, while the
Utility Income Fund presently holds only 54% of its investments in common
stocks. The remainder is held in bonds and preferred stocks (which are
securities that perform similarly to bonds), helping the fund maintain a steady
income level and subjecting the fund to much less price volatility than common
stocks. In addition, the fund provided shareholders with a yield of 4.02% and
has maintained its current dividend per share level since 1993.
Key Strategies
As the utility sector remained volatile during the year, we began to focus on
the fund's income component and choose those securities that would support the
fund's dividend level and help protect shareholder capital. As a result, we
moved from a weighting of 73% in electric utilities six months ago to an
allocation of 46% at fiscal year-end. The relative price instability of this
sector led us to focus on those high-quality, financially strong companies that
we felt would be the most successful in the changing market environment. In
general, we avoided natural gas company stocks because the commodity-oriented
nature of that business forces tight pricing margins that can hinder
profitability. We also focused on diversifying the fund's holdings over the past
year, working to choose those companies in each of the key utility sectors that
we expected to perform well as the industry evolves. In general, we looked for
the most stable companies - those with strong earnings records, nimble
management and enhanced performance potential in the competitive marketplace.
Outlook for the Future
With the sweeping changes that deregulation has introduced over the past several
years, the dynamics of the utility industry have changed dramatically. As the
stocks in this sector have generally become more volatile, the task of finding
appropriate securities that will provide the dividend income and relative
stability we seek has become more complex. As a result, we are exploring new
strategies to help the fund meet its objectives. For example, we will be looking
for companies that have or plan to successfully diversify into non-regulated
areas of their businesses. This strategy is illustrated by Ameritech, which was
once strictly a local telephone service provider, and has recently expanded into
internet service, cable television and even home security services. These are
the companies that we feel will be most successful in the future and will be
able to outperform their competitors. In addition, we will closely watch
companies that have been able to successfully expand internationally, and have
been able to bring their international experience back to the U.S. For example,
Texas Utilities has recently acquired several utility companies in the United
Kingdom and Australia, which are unregulated markets. Thus far, the company has
been able to learn from these ventures how to thrive in a competitive,
unregulated utility market. We are evaluating these and other strategies to
ensure that the fund is well-positioned to achieve its goals of providing income
for today and growth for the future.
3
<PAGE>
Flagship Utility Income Fund
Performance Overview
As of June 30, 1998
Top Ten Common Stock Holdings
Carolina Power & Light 3.46%
DQE Inc. 2.88%
Sprint Corp. 2.81%
Ameritech Corporation 2.68%
Piedmont Natural Gas 2.68%
CMS Energy Corporation 2.63%
Rochester Gas & Electric Company 2.55%
Texas Utilities Company 2.49%
Florida Progress Corporation 2.46%
Florida Power & Light Company 2.39%
Portfolio Allocation
[PIE CHART APPEARS HERE]
Common Stocks 54%
Preferred Stocks 38%
Bonds 8%
Dividend History (Class A Shares)
[BAR CHART APPEARS HERE]
0.05290 July 1997
0.05290 August 1997
0.05290 September 1997
0.05290 October 1997
0.05290 November 1997
0.05290 December 1997
0.05290 January 1998
0.05290 February 1998
0.05290 March 1998
0.05290 April 1998
0.05290 May 1998
0.05290 June 1998
<TABLE>
<CAPTION>
Fund Highlights
Share Price A C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Inception Date 8/83 7/93
Net Asset Value $13.06 $ 13.03
Monthly Dividend .0529 .0470
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Net Assets ($000) $25,719
Number of Holdings 42
Turnover Rate 101%
- --------------------------------------------------------------------------------
Annualized Total Return/1/
Share Class A (On NAV) A (On Offer) C
- --------------------------------------------------------------------------------
1-Year 19.32% 14.35% 18.65%
3-Year 14.61% 12.98% 13.96%
5-Year 9.60% 8.67% 8.99%
10-Year/2/ 7.67% 7.27% N/A
Yields/3/
Distribution Rate 4.86% 4.66% 4.33%
SEC 30-Day Yield 4.02% 3.85% 3.47%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Index Comparison /4/
[LINE CHART APPEARS HERE]
Utility Income Fund (Offer) Utility Income Fund (NAV) S&P Utility Index S&P 500
<S> <C> <C> <C> <C>
6/88 9,580 10,000 10,000 10,000
6/89 9,417 9,830 12,759 12,053
6/90 9,658 10,082 14,439 14,042
6/91 9,548 9,967 14,809 15,078
6/92 10,951 11,431 16,939 17,103
6/93 12,685 13,241 21,247 19,435
6/94 11,819 12,337 19,662 19,709
6/95 13,324 13,908 22,667 24,845
6/96 15,299 15,970 27,868 31,303
6/97 16,812 17,549 29,386 42,170
6/98 20,062 20,942 38,276 54,892
</TABLE>
[_] S&P 500 $54,892
[_] S&P Utility Index $38,276
[_] Utility Income Fund (NAV) $20,942
[_] Utility Income Fund (Offer) $20,062
Past performance is not predictive of future results.
/1/ All returns are actual. Class A shares have a 4.20% maximum sales charge.
Class C shares have a 1% CDSC for redemptions within one year, which is not
reflected in the one-year total return.
/2/ The fund changed its investment objectives and policies as of July 1, 1992,
from a corporate cash management fund to that of a utility fund.
/3/ SEC Yield is a standardized measure of the fund's earnings over the
previous 30-day period. Distribution Rate is the most recent dividend,
multiplied by 12, divided by price. It sometimes differs from SEC Yield due
to a number of factors, including that distribution yield may not reflect
amortization of bond premiums arising after purchase and that the fund may
be paying out more or less than it is currently earning.
/4/ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Utility Income Fund compared with the Standard &
Poor's 500 Index and the Standard & Poor's Utility Index. The S&P Indexes
do not reflect any initial or ongoing expenses. The fund return depicted in
the chart reflects the initial maximum sales charge applicable to Class A
shares (4.20%) and all ongoing fund expenses.
4
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
Flagship Utility Income Fund
We have audited the accompanying statement of net assets, including the
portfolio of investments, of the Flagship Utility Income Fund (the "Fund") (one
of the series constituting the Flagship Admiral Funds (a Maryland corporation))
as of June 30, 1998 and the related statement of operations, and changes in net
assets and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The financial statements
and financial highlights for the Fund for the years ended June 30, 1997 and
prior were audited by other auditors whose report dated August 20, 1997,
expressed and an unqualified opinion on those financial statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1998, by
correspondence with the custodian and brokers. As to securities purchased but
not received, we requested confirmation from brokers and, when replies were not
received, we carried out alternative auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of Flagship
Utility Income Fund as of June 30, 1998 and the results of its operations, the
changes in its net assets, and its financial highlights for the year then ended,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 17, 1998
5
<PAGE>
Portfolio of Investments
Flagship Utility Income Fund
June 30, 1998
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 53.0%
Electric Utility -- 35.9%
15,000 CMS Energy Corporation $ 660,000
20,000 Carolina Power & Light Company 867,500
31,200 Dayton Power & Light Company 565,500
20,050 DQE, Incorporated 721,800
9,500 Florida Power & Light Company 598,500
15,000 Florida Progress Corporation 616,875
10,000 Illinova Corporartion 300,000
20,000 LG&E Energy Corporation 541,250
20,000 MCN Corporation 497,500
10,000 New England Electric System 432,500
20,000 Pacificorp 452,500
20,000 Rochester Gas & Electric Company 638,750
15,000 SCANA Corporation 447,188
10,000 Sonat Incorporated 386,250
15,000 Texas Utilities Company 624,375
20,000 The Southern Company 553,750
10,000 Williams Companies Incorporated 337,500
- --------------------------------------------------------------------------------
Natural Gas/Pipeline -- 7.8%
10,000 Consolidated Natural Gas Company 588,750
10,000 National Fuel Gas Company 435,625
7,600 Nicor Incorporated 304,950
20,000 Piedmont Natural Gas 672,500
- --------------------------------------------------------------------------------
Telecommunications -- 9.3%
15,000 Ameritech Corporation 673,125
10,000 Bell Atlantic Corporation 456,250
10,000 GTE Corporation 556,250
10,000 Sprint Corporation 705,000
- --------------------------------------------------------------------------------
Total Common Stocks -- (cost $11,324,523) 13,634,188
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 36.6%
Electric Utility -- 9.2%
17,969 HL&P Capital Tollroad Trust I (8.125%) 458,210
20,000 Illinois Power Company, Series A (9.450%) 516,250
30,000 MCN Michigan Limited Partnership (9.375%) 774,375
25,000 Western Resource Inc., Series A (7.875%), 629,688
- --------------------------------------------------------------------------------
Finance -- 23.4%
25,000 Bank America Capital (7.000%) 618,750
25,000 Chase Capital IV (7.340%) 626,563
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Shares Description Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Finance (continued)
30,000 The Coastal Corporation, Coastal Finance I (8.375%) $ 736,875
30,000 Equitable Resources, Incorporated (7.350%) 746,250
30,000 Merrill Lynch Capital Trust 1 (7.000%) 738,750
30,000 Metropolitan Edison (9.000%) 768,750
20,000 Mission Capital L P (9.875%) 520,000
26,875 Pacific Telesis Group (7.560%) 673,555
22,804 Textron Capital (7.920%) 575,801
- ------------------------------------------------------------------------------------
Telecommunications - 4.0%
20,000 GTE Corporation, Series Z (9.250%) 518,750
20,000 MCI Communications Corporation, Series A (8.000%) 508,750
- ------------------------------------------------------------------------------------
Total Preferred Stocks - (cost $9,311,475) 9,411,317
- ------------------------------------------------------------------------------------
Principal
Amount Description Market Value
- ------------------------------------------------------------------------------------
CORPORATE BONDS - 7.9%
Forest and Paper Products - 4.0%
$1,000,000 Georgia-Pacific Corporation Debenture, 7.375%, 12/01/25 1,039,812
- ------------------------------------------------------------------------------------
Consumer Cyclical - 3.9%
1,000,000 TRW Incorporated, 6.250%, 1/15/10 999,222
- ------------------------------------------------------------------------------------
Total Corporate Bonds - (cost $2,020,694) 2,039,034
------------------------------------------------------------------------
Total Investments - (cost $22,656,692) - 97.5% 25,084,539
------------------------------------------------------------------------
Other Assets Less Liabilities - 2.5% 634,902
------------------------------------------------------------------------
Net Assets - 100% $25,719,441
========================================================================
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
Statement of Net Assets
June 30, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Assets
<S> <C>
Investment securities, at market value (cost $22,656,692) (note 1) $25,084,539
Cash 32,869
Receivables:
Dividends and interest 112,672
Investments sold 1,113,163
Other assets 1,061
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 26,344,304
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 457,850
Shares redeemed 28,019
Accrued expenses:
Management fees (note 6) 8,189
12b-1 distribution and service fees (notes 1 and 6) 6,850
Other 21,147
Dividends payable 102,808
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 624,863
- -----------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $25,719,441
=============================================================================================================================
Class A Shares (note 1)
Net assets $20,012,542
Shares outstanding 1,532,478
Net asset value and redemption price per share $ 13.06
Offering price per share (net asset value per share plus maximum sales charge of 4.20% of offering price) $ 13.63
=============================================================================================================================
Class C Shares (note 1)
Net assets $ 5,706,899
Shares outstanding 438,103
Net asset value, offering and redemption price per share $ 13.03
=============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Statement of Operations
Year Ended June 30, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Investment Income (note 1)
<S> <C>
Dividends $1,509,247
Interest 112,922
- ------------------------------------------------------------------------------------------------
Total investment income 1,622,169
- ------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 129,390
12b-1 service fees - Class A (notes 1 and 6) 40,415
12b-1 distribution and service fees - Class C (notes 1 and 6) 42,528
Shareholders' servicing agent fees and expenses 38,438
Custodian's fees and expenses 40,908
Professional fees 10,281
Shareholders' reports - printing and mailing expenses 64,683
Federal and state registration fees 8,581
Other expenses 4,811
- ------------------------------------------------------------------------------------------------
Total expenses before reimbursement 380,035
Expense reimbursement (note 6) (2,443)
- ------------------------------------------------------------------------------------------------
Net expenses 377,592
- ------------------------------------------------------------------------------------------------
Net investment income 1,244,577
- ------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 2,296,988
Net change in unrealized appreciation or depreciation of investments 990,857
- ------------------------------------------------------------------------------------------------
Net gain from investments 3,287,845
- ------------------------------------------------------------------------------------------------
Net increase in net assets from operations $4,532,422
================================================================================================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
6/30/98 6/30/97
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,244,577 $ 1,657,466
Net realized gain from investment transactions
(notes 1 and 4) 2,296,988 2,155,531
Net change in unrealized appreciation or depreciation
of investments 990,857 (1,227,092)
- ---------------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,532,422 2,585,905
- ---------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,033,890) (1,294,422)
Class C (259,894) (301,321)
- ---------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (1,293,784) (1,595,743)
- ---------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 1,302,662 2,079,070
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 839,065 814,896
- ---------------------------------------------------------------------------------------------------
2,141,727 2,893,966
- ---------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,372,175) (9,484,267)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (3,230,448) (6,590,301)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 8,190 (5,600,139)
Net assets at the beginning of year 25,711,251 31,311,390
- ---------------------------------------------------------------------------------------------------
Net assets at the end of year $25,719,441 $25,711,251
===================================================================================================
Balance of undistributed net investment income at end of year $ 12,516 $ 61,723
===================================================================================================
</TABLE>
10
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Flagship Utility Income Fund (the "Fund") is a series of Flagship Admiral
Funds Inc. (the "Corporation"), a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund seeks to provide current income and
long-term growth of income and capital by investing primarily in the preferred
and common stocks of companies in the public utilities industry. The Fund will
seek capital appreciation as a secondary objective.
The John Nuveen Company ("Nuveen"), parent of John Nuveen &Co. Incorporated, the
distributor ("Distributor") of the Fund, entered into an agreement under which
Nuveen acquired Flagship Resources Inc. and after the close of business on
January 31, 1997, consolidated their respective mutual fund businesses. This
agreement was approved at a meeting by the shareholders of the Flagship Funds in
December 1996.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange on which such securities are primarily
traded; however, securities traded on a national securities exchange for which
there are no transactions on a given day or securities not listed on a national
securities exchange are valued at the mean between the last reported bid and
asked prices. Any securities or assets for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Board of Directors. Short-term investments 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 June
30, 1998, the Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premiums and accretion of discounts.
Dividends and Distributions to Shareholders
Net investment income is declared and distributed to shareholders monthly. Net
realized capital gains from investment transactions, if any, are declared and
distributed to shareholders not less frequently than annually. Furthermore,
capital gains are distributed only to the extent they exceed available capital
loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may occur and will
be classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from investment transactions,
where applicable.
Federal Income Taxes
The Fund intends to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
Flexible Sales Charge Program
The Fund is authorized to issue Class A, B, C and R Shares but to date has not
issued Class B or R Shares. Class A Shares are sold with a sales charge and
incur an annual 12b-1 service fee. Class A Share purchases of $1 million or more
are sold at net asset value without an up-front sales charge but may be subject
to a 1% contingent deferred sales charge ("CDSC") if redeemed within 18 months
of purchase. Class B Shares are sold without a sales charge but incur annual
12b-1 distribution and service fees. An investor purchasing Class B Shares
agrees to pay a CDSC of up to 5% depending upon the length of time the shares
are held by the investor (CDSC is reduced to 0% at the end of six years). Class
B Shares convert to Class A Shares at the end of eight years.
11
<PAGE>
Notes to Financial Statements (continued)
Derivative Financial Instruments
The Fund may invest in options and futures transactions, which are sometimes
referred to as derivative transactions as well as restricted securities.
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 June 30, 1998.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
6/30/98 6/30/97
------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 99,136 $ 1,259,086 139,470 $ 1,528,638
Class C 3,043 43,576 49,660 550,432
Shares issued to shareholders due to reinvestment of distributions:
Class A 52,493 645,383 58,233 645,196
Class C 15,831 193,682 15,336 169,700
- --------------------------------------------------------------------------------------------------------------------------
170,503 2,141,727 262,699 2,893,966
- --------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (370,411) (4,588,730) (700,730) (7,812,755)
Class C (64,162) (783,445) (150,184) (1,671,512)
- --------------------------------------------------------------------------------------------------------------------------
(434,573) (5,372,175) (850,914) (9,484,267)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (264,070) $(3,230,448) (588,215) $(6,590,301)
=========================================================================================================================
3. Distributions to Shareholders
The Fund declared a dividend distribution from its net investment income which
was paid on August 3, 1998, to shareholders of record on July 9, 1998, as
follows:
- --------------------------------------------------------------------------------------------------------------------------
Dividend per share:
Class A $ .0529
Class C .0470
==========================================================================================================================
</TABLE>
12
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investment securities, U.S.
government obligations and short-term investments for the fiscal year ended June
30, 1998, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Purchases:
Investment securities $22,811,520
U.S. government obligations 3,030,370
Short-term investments 9,750,000
Sales:
Investment securities 26,170,004
U.S. government obligations 3,005,410
Short-term investments 9,750,000
================================================================================
</TABLE>
At June 30, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes.
At June 30, 1998, the Fund had unused capital loss carryforwards of $3,653,149
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, $891,661 will expire in the year 1999, $1,241,875
will expire in the year 2002 and $1,519,613 will expire in the year 2003.
5. Unrealized Appreciation (Depreciation)
At June 30, 1998, net unrealized appreciation aggregated $2,427,847 of which
$2,619,760 related to appreciated securities and $191,913 related to depreciated
securities.
6. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with Nuveen Advisory Corp. (the
"Adviser"), a wholly owned subsidiary of The John Nuveen Company, the Fund pays
an annual management fee, payable monthly, which is based upon the average daily
net asset value of the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5000 of 1%
For the next $125 million .4875 of 1
For the next $250 million .4750 of 1
For the next $500 million .4625 of 1
For the next $1 billion .4500 of 1
For net assets over $2 billion .4250 of 1
================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Fund pays no
compensation directly to those of its Directors who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Fund from the Adviser.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended June 30, 1998, the Distributor collected sales
charges on purchases of Class A Shares of approximately $24,800 of which
approximately $21,600 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 June 30, 1998, the Distributor compensated
authorized dealers with approximately $800 in commission advances at the time of
purchase. To compensate for commissions advanced to authorized dealers, all 12b-
1 distribution and service fees collected on Class C Shares during the first
year following a purchase are retained by the Distributor. The Distributor
retained approximately $3,600 of such 12b-1 fees. The remaining 12b-1 fees
charged to the Fund were paid to compensate authorized dealers for providing
services to shareholders relating to their investments. The Distributor also
collected and retained approximately $900 of CDSC on share redemptions for the
fiscal year ended June 30, 1998.
7. Composition of Net Assets
At June 30, 1998, the Fund had 200,000,000 shares of $.001 par value common
stock authorized. Net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------
Capital paid-in $26,994,700
Balance of undistributed net investment income 12,516
Accumulated net realized gain (loss) from investment transactions (3,715,622)
Net unrealized appreciation of investments 2,427,847
- --------------------------------------------------------------------------------
Net assets $25,719,441
================================================================================
</TABLE>
13
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------- ----------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
June 30, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/83)
1998 $11.51 $.61 $ 1.57 $2.18 $(.63) $ -- $(.63) $13.06 19.32%
1997 11.09 .66 .40 1.06 (.64) -- (.64) 11.51 9.89
1996 10.24 .64 .85 1.49 (.64) -- (.64) 11.09 14.82
1995 9.69 .64 .55 1.19 (.64) -- (.64) 10.24 12.73
1994 11.04 .63 (1.34) (.71) (.64) -- (.64) 9.69 (6.83)
Class C (7/93)
1998 11.49 .55 1.56 2.11 (.57) -- (.57) 13.03 18.65
1997 11.08 .61 .38 .99 (.58) -- (.58) 11.49 9.25
1996 10.24 .58 .84 1.42 (.58) -- (.58) 11.08 14.15
1995 9.69 .59 .55 1.14 (.59) -- (.59) 10.24 12.14
1994 (c) 11.05 .59 (1.39) (.80) (.56) -- (.56) 9.69 (7.52)*
==============================================================================================================================
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After after Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment(a) ment(a) Rate
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$20,013 1.35% 4.92% 1.34% 4.93% 101%
20,157 1.54 5.41 .98 5.97 128
25,010 1.45 5.35 .98 5.82 115
25,000 1.52 6.00 1.00 6.52 159
26,921 1.38 5.48 .94 5.92 193
5,707 1.90 4.38 1.89 4.39 101
5,555 2.09 4.91 1.53 5.47 128
6,302 2.00 4.79 1.52 5.27 115
5,501 2.06 5.49 1.54 6.01 159
5,129 2.04* 5.11* 1.46* 5.69* 193
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses by
Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
15
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers(SM) including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse
Growth Fund
Growth and
Income
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
16
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
17
<PAGE>
Serving Investors for Generations
[PHOTO APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
NUVEEN 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime./TM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
EAN-UI-6-98
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
<TABLE>
<C> <S> <C>
(a)(1) Declaration of Trust of Registrant
(2) Establishment and Declaration of Classes
(3) Designation of Series
(b) By-Laws of Registrant
(c) Specimen certificate of Shares
(d) Investment Management Agreement between Registrant and
Nuveen Institutional Advisory Corp.
(e) Distribution Agreement between Registrant and John Nuveen
& Co. Incorporated
(f) Not applicable
(g) Custodian Agreement between Registrant and Chase Manhattan
Bank
(h) Transfer Agent and Service Agreement between Registrant
and Chase Global Funds Services Company
(i)(a) Opinion of Bingham Dana LLP
(i)(b) Opinion of Bell, Boyd & Lloyd
(j)(a) Consent of Arthur Andersen LLP, Independent Public Accoun-
tants
(b) Consent of Deloitte & Touche LLP, Independent Public Ac-
countants
(k) Not applicable
(l) Not applicable
(m) Plan of Distribution and Service Pursuant to Rule 12b-1
for the Class A Shares, Class B Shares and Class C Shares
of the Fund
(n) Financial Data Schedule
(o) Multi-Class Plan Adopted Pursuant to Rule 18f-3
(z)(1) Original Powers of Attorney for the Trustees authorizing,
among others, Gifford R. Zimmerman and Larry W. Martin to
execute the Registration Statement
(z)(3) Code of Ethics and Reporting Requirements
</TABLE>
- --------
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
C-1
<PAGE>
ITEM 25: INDEMNIFICATION
Section 4 of Article XII of Registrant's Declaration of Trust provides as
follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the
Trust, including persons who serve at the request of the Trust as directors,
trustees, officers, employees or agents of another organization in which the
Trust has an interest as a shareholder, creditor or otherwise (hereinafter
referred to as a "Covered Person"), shall be indemnified by the Trust to the
fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit
or proceeding in which he becomes involved as a party or otherwise by virtue
of his being or having been such a Trustee, director, officer, employee or
agent and against amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of such
a person. Nothing contained herein shall affect any rights to indemnification
to which Trust personnel other than Covered Persons may be entitled by
contract or otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other
proceeding on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and
C-2
<PAGE>
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
The trustees and officers of the Registrant are covered by an Investment
Trust Errors and Omission policy in the aggregate amount of $20,000,000 (with
a maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to the officers, trustees or controlling persons of
the Registrant pursuant to the Declaration of Trust of the Registrant or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by an officer or
trustee or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such officer, trustee or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Nuveen Institutional Advisory Corp. ("NIAC") manages the Registrant and
serves as investment adviser or manager to other open-end and closed-end
management investment companies and to separately managed accounts. The
principal business address for all of these investment companies is 333 West
Wacker Drive, Chicago, Illinois 60606.
A description of any other business, profession, vocation or employment of a
substantial nature in which the directors or officers, of NIAC who serve as
officers or trustees of the Registrant has engaged during the last two years
for his account or in the capacity of director, officer, employee, partner or
trustee appears under "Management" in the Statement of Additional Information.
Such information for the remaining senior officers of NIAC appears below:
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT DURING PAST
NIAC TWO YEARS
---------------------- --------------------------------------------------------------
<S> <C>
John P. Amboian,
Executive Vice Executive Vice President and Secretary of The Nuveen Company;
President.............. Executive Vice President of John Nuveen & Co. Incorporated,
Nuveen Advisory Corp. and Nuveen Asset Management, Inc. and
Executive Vice President and Director of Rittenhouse Financial
Services, Inc.
Jerome S. Contro,
Vice President......... Vice President of Nuveen Asset Management, Inc.
Clifton L. Fenton,
Vice President......... Vice President of John Nuveen & Co. Incorporated
Thomas C. Spalding,
Vice President......... Vice President of Nuveen Advisory Corp
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) John Nuveen & Co., Incorporated ("Nuveen") acts as principal underwriter
to the following open-end management type investment companies: Nuveen
Flagship Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen
Flagship Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen
Flagship Municipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-
Free Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc.,
Nuveen Tax-Free Reserves, Inc., Nuveen Investment Trust, Nuveen Investment
Trust II, Nuveen Investment Trust III and Nuveen Investment Trust IV. Nuveen
also acts as depositor and principal underwriter of the Nuveen Tax-Exempt Unit
Trust and Nuveen Unit Trusts, registered unit investment trusts.
C-3
<PAGE>
Nuveen has also served or is serving as co-managing underwriter to the
following closed-end management type investment companies: Nuveen Municipal
Value Fund, Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New
York Municipal Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen
Premium Income Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund,
Inc., Nuveen California Performance Plus Municipal Fund, Inc., Nuveen New York
Performance Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc.,
Nuveen Municipal Market Opportunity Fund, Inc., Nuveen California Municipal
Market Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc.,
Nuveen California Investment Quality Municipal Fund, Inc., Nuveen New York
Investment Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal
Fund, Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen New
Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment
Quality Municipal Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen
California Select Quality Municipal Fund, Inc., Nuveen New York Select Quality
Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen
Insured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income
Municipal Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen
Ohio Quality Income Municipal Fund, Inc., Nuveen Texas Quality Income
Municipal Fund, Nuveen California Quality Income Municipal Fund, Inc., Nuveen
New York Quality Income Municipal Fund, Inc., Nuveen Premier Municipal Income
Fund, Inc., Nuveen Premier Insured Municipal Income Fund, Inc., Nuveen Premium
Income Municipal Fund 2, Inc., Nuveen Insured California Premium Income
Municipal Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund,
Inc., Nuveen Select Maturities Municipal Fund, Nuveen Arizona Premium Income
Municipal Fund, Inc., Nuveen Insured Florida Premium Income Municipal Fund,
Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium
Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc.,
Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen
Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income
Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen
Virginia Premium Income Municipal Fund, Nuveen Washington Premium Income
Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen
Georgia Premium Income Municipal Fund, Nuveen Missouri Premium Income
Municipal Fund, Nuveen North Carolina Premium Income Municipal Fund, Nuveen
California Premium Income Municipal Fund, Nuveen Insured Premium Income
Municipal Fund 2, Nuveen Select Tax-Free Income Portfolio, Nuveen Select Tax-
Free Income Portfolio 2, Nuveen Insured California Select Tax-Free Income
Portfolio, Nuveen Insured New York Select Tax-Free Income Portfolio and Nuveen
Select Tax-Free Income Portfolio 3.
C-4
<PAGE>
(b)
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Chairman of the Board, President
Schwertfeger Chief Executive Officer
333 West Wacker
Drive
Chicago, IL
60606
Anthony T. Dean President Chairman of the Board and Trustee
333 West Wacker
Drive
Chicago, IL
60606
Bruce P. Bedford Executive Vice President None
333 West Wacker
Drive
Chicago, IL
60606
John P. Amboian Executive Vice President None
333 West Wacker and Chief Financial Officer
Drive
Chicago, IL
60606
William Adams IV Vice President None
333 West Wacker
Drive
Chicago, IL
60606
Alan G. Vice President Vice President and
Berkshire and Secretary Assistant Secretary
333 West Wacker
Drive
Chicago, IL
60606
Clifton L. Fen- Vice President None
ton
333 West Wacker
Drive
Chicago, IL
60606
Kathleen M. Vice President None
Flanagan
333 West Wacker
Drive
Chicago, IL
60606
Stephen D. Foy Vice President Vice President and
333 West Wacker Controller
Drive
Chicago, IL
60606
Michael G. Gaff- Vice President None
ney
333 West Wacker
Drive
Chicago, IL
60606
Anna R. Vice President None
Kucinskis
333 West Wacker
Drive
Chicago, IL
60606
Robert B. Kup- Vice President None
penheimer
19900 MacArthur
Blvd.
Irvine, CA 92612
Larry W. Martin Vice President and Vice President and
333 West Wacker Assistant Secretary Assistant Secretary
Drive
Chicago, IL
60606
Thomas C. Muntz Vice President None
333 West Wacker
Drive
Chicago, IL
60606
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------------------------------------------------------------------------
<S> <C> <C>
Judson T. Bergman Vice President None
333 West Wacker Drive
Chicago, IL 60606
James Connors Vice President None
333 West Wacker Drive
Chicago, IL 60606
Stuart W. Rogers Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Margaret E. Wilson Vice President None
333 West Wacker Drive and Corporate Controller
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Nuveen Institutional Advisory Corp., 333 West Wacker Drive, Chicago,
Illinois 60606, maintains the Declaration of Trust, By-Laws, minutes of
trustees and shareholder meetings and contracts of the Registrant and all
advisory material of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004
maintains all general and subsidiary ledgers, journals, trial balances,
records of all portfolio purchases and sales, and all other required records
not maintained by Nuveen Institutional Advisory Corp., or Chase Global Funds
Services Company.
Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108 maintains all the required records in its capacity as
transfer, dividend paying, and shareholder service agent for the Fund.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 15TH DAY OF
OCTOBER, 1998.
NUVEEN INVESTMENT TRUST IV
/s/ Gifford R. Zimmerman
------------------------------------------
Gifford R. Zimmerman, Vice
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ Stephen D. Foy October 15, 1998
-------------------------------
Stephen D. Foy Vice President and
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger President and Trustee
(Principal Executive
Officer)
Anthony T. Dean Chairman of the Board
and Trustee
James E. Bacon Trustee
William L. Kissick Trustee
Thomas E. Leafstrand Trustee
Sheila W. Wellington Trustee
/s/ Gifford R. Zimmerman
By__________________________
Gifford R. Zimmerman
Attorney-in-Fact
October 15, 1998
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, GIFFORD R. ZIMMERMAN
AND LARRY W. MARTIN TO EXECUTE THIS REGISTRATION STATEMENT, AND AMENDMENTS
THERETO, FOR EACH OF THE TRUSTEES OF REGISTRANT ON WHOSE BEHALF THIS
REGISTRATION STATEMENT IS FILED, HAS BEEN EXECUTED AND FILED AS AN EXHIBIT.
</TABLE>
C-7
<PAGE>
SCHEDULE OF EXHIBITS TO FORM N-1A
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
------- ------- ------
<C> <S> <C>
(a)(1) Declaration of Trust of Registrant
(2) Establishment and Declaration of Classes
(3) Designation of Series
(b) By-Laws of Registrant
(c) Specimen certificate of Shares
(d) Investment Management Agreement between Registrant and
Nuveen Institutional Advisory Corp.
(e) Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated
(f) Not applicable
(g) Custodian Agreement between Registrant and Chase Manhattan
Bank
(h) Transfer Agent and Service Agreement between Registrant and
Chase Global Funds Services Company
(i)(a) Opinion of Bingham Dana LLP
(i)(b) Opinion of Bell, Boyd & Lloyd
(j)(a) Consent of Arthur Andersen LLP, Independent Public Accoun-
tants
(b) Consent of Deloitte & Touche LLP, Independent Public Ac-
countants
(k) Not applicable
(l) Not applicable
(m) Plan of Distribution and Service Pursuant to Rule 12b-1 for
the Class A Shares, Class B Shares and Class C Shares of
the Fund
(n) Financial Data Schedule
(o) Multi-Class Plan Adopted Pursuant to Rule 18f-3
(z)(1) Original Powers of Attorney for the Trustees authorizing,
among others, Gifford R. Zimmerman and Larry W. Martin to
execute the Registration Statement
(z)(3) Code of Ethics and Reporting Requirements
</TABLE>
C-8
<PAGE>
DECLARATION OF TRUST
OF
NUVEEN INVESTMENT TRUST IV
DECLARATION OF TRUST made as of this 20th day of August, 1998 by the
Trustees hereunder.
WHEREAS, the Trustees desire to establish a trust fund for the purposes of
carrying on the business of a management investment company; and
WHEREAS, in furtherance of such purpose, the Trustees and any successor
Trustees elected in accordance with Article V hereof are acquiring and may
hereafter acquire assets and properties which they will hold and manage as
trustees of a Massachusetts business trust with transferable shares in
accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees and any successor Trustees elected or
appointed in accordance with Article V hereof hereby declare that they will hold
all cash, securities and other assets and properties, which they may from time
to time acquire in any manner as Trustees hereunder, IN TRUST, and that they
will manage and dispose of the same upon the following terms and conditions for
the benefit of the holders from time to time of shares of beneficial interest in
this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1. Name. This Trust shall be known as the "Nuveen Investment
Trust IV" and the Trustees shall conduct the business of the Trust under that
name or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts voluntary association
established by this Declaration of Trust, as amended from time to time;
(b) "Trustee" or "Trustees" refers to each signatory to this
Declaration of Trust so long as such signatory shall continue in office in
accordance with the terms hereof, and all other individuals who at the time
in question have been duly elected or appointed and qualified in accordance
with Article V hereof and are then in office;
(c) "Shares" mean the shares of beneficial interest described in
Article
<PAGE>
-2-
IV hereof and include fractions of Shares as well as whole Shares;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and
any successor statute) and the Rules and Regulations thereunder, all as
amended from time to time;
(f) The terms "Commission," "Interested Person," "Principal
Underwriter" and "vote of a majority of the outstanding voting securities"
shall have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" or "Declaration" shall mean this
Declaration of Trust as amended or restated from time to time; and
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time.
ARTICLE II
NATURE AND PURPOSE OF TRUST
The Trust is a voluntary association with transferable shares (commonly
known as a business trust) of the type referred to in Chapter 182 of the General
Laws of the Commonwealth of Massachusetts. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as, a general or a limited
partnership, joint venture, corporation or joint stock company, nor shall the
Trustees or Shareholders or any of them for any purpose be deemed to be, or be
treated in any way whatsoever as though they were, liable or responsible
hereunder as partners or joint venturers. The purpose of the Trust is to engage
in, operate and carry on the business of an open-end management investment
company and to do any and all acts or things as are necessary, convenient,
appropriate, incidental or customary in connection therewith.
The Trust set forth in this instrument shall be deemed made in the
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust. No provision of this Declaration shall be
effective to require a waiver of compliance with any provision of the Securities
Act of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or
order of the Commission thereunder.
ARTICLE III
REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS
The name of the registered agent of the Trust is CT Corporation System at 2
Oliver Street, Boston, Massachusetts. The principal place of business of the
Trust is 333 West Wacker Drive, Chicago, Illinois 60606. The Trustees may,
without the approval of
<PAGE>
-3-
Shareholders, change the registered agent of the Trust and the principal place
of business of the Trust.
ARTICLE IV
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest. The beneficial interest in the
Trust shall be divided into such transferable Shares of beneficial interest, of
such series or classes, and of such designations and par values (if any) and
with such rights, preferences, privileges and restrictions as shall be
determined by the Trustees in their sole discretion, without Shareholder
approval, from time to time and shall initially consist of one class of
transferable shares, par value $.01 per share. The number of Shares is
unlimited and each Share shall be fully paid and nonassessable. The Trustees
shall have full power and authority, in their sole discretion and without
obtaining any prior authorization or vote of the Shareholders of the Trust or of
the Shareholders of any series or class of Shares, to create and establish (and
to change in any manner) Shares or any series or classes thereof with such
preferences, voting powers, rights and privileges as the Trustees may from time
to time determine; to divide or combine the Shares or the Shares of any series
or classes thereof into a greater or lesser number; to classify or reclassify
any issued Shares into one or more series or classes of Shares; to abolish any
one or more series or classes of Shares; and to take such other action with
respect to the Shares as the Trustees may deem desirable. Except as may be
specifically set forth in Section 2 of this Article IV or in an instrument
establishing and designating classes or series of Shares, the Shares shall have
the powers, preferences, rights, qualifications, limitations and restrictions
described below:
(i) In the event of the termination of the Trust the holders of the
Shares shall be entitled to receive pro rata the net distributable assets
of the Trust.
(ii) Each holder of Shares shall be entitled to one vote for each
Share held on each matter submitted to a vote of Shareholders, and the
holders of outstanding Shares shall vote together as a single class.
(iii) Dividends or other distributions to Shareholders, when, as and
if declared or made by the Trustees, shall be shared equally by the holders
of Shares on a share for share basis, such dividends or other distributions
or any portion thereof to be paid in cash or to be reinvested in full and
fractional Shares of the Trust as the Trustees shall direct.
(iv) Any Shares purchased, redeemed or otherwise reacquired by the
Trust shall be retired automatically and such retired Shares shall have the
status of authorized but unissued Shares.
(v) Shares may be issued from time to time, without the vote of the
<PAGE>
-4-
Shareholders (or, if the Trustees in their sole discretion deem advisable,
with a vote of Shareholders), either for cash or for such other
consideration (which may be in any one or more instances a certain
specified consideration or certain specified considerations) and on such
terms as the Trustees, from time to time, may deem advisable, and the Trust
may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities).
(vi) The Trust may issue Shares in fractional denominations to the
same extent as its whole Shares, and Shares in fractional denominations
shall be Shares having proportionately to the respective fractions
represented thereby all the rights of whole Shares, including, without
limitation, the right to vote, the right to receive dividends and
distributions and the right to participate upon termination of the Trust.
The Trustees may from time to time, without the vote of Shareholders,
divide or combine Shares into a greater or lesser number without thereby
changing their proportionate beneficial interest in the Trust.
Section 2. Establishment of Series and Classes of Shares.
(a) Series. The Trustees, in their sole discretion, without obtaining any
prior authorization or vote of the Shareholders of the Trust or of the
Shareholders of any series or class of Shares, from time to time may authorize
the division of Shares into two or more series, the number and relative rights,
privileges and preferences of which shall be established and designated by the
Trustees, in their discretion, upon and subject to the following provisions:
(i) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series as to purchase price, right of redemption, and the price, terms and
manner or redemption, and special and relative rights as to dividends and on
liquidation.
(ii) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(iii) The power of the Trustees to invest and reinvest the assets of
the Trust allocated or belonging to any particular series shall be governed by
Section 1, Article VI hereof unless otherwise provided in the instrument of the
Trustees establishing such series which is hereinafter described.
(iv) Each Share of a series shall represent a beneficial interest in
the net assets allocated or belonging to such series only, and such interest
shall not extend to the assets of the Trust generally. Dividends and
distributions on Shares of a particular series may be paid with such frequency
as the Trustees may determine, which may be monthly or otherwise, pursuant to a
standing vote or votes adopted only once or with such frequency as the Trustees
may determine, to the Shareholders of that series only, from such of the income
and capital gains, accrued or realized, from the assets belonging to
<PAGE>
-5-
that series. All dividends and distributions on Shares of a particular series
shall be distributed pro rata to the Shareholders of that series in proportion
to the number of Shares of that series held by such Shareholders at the date and
time of record established for the payment of such dividends or distributions.
Shares of any particular series of the Trust may be redeemed solely out of the
assets of the Trust allocated or belonging to that series. Upon liquidation or
termination of a series of the Trust, Shareholders of such series shall be
entitled to receive a pro rata share of the net assets of such series only.
(v) Notwithstanding any provision hereof to the contrary, on any
matter submitted to a vote of the Shareholders of the Trust, all Shares then
entitled to vote shall be voted by individual series, except that (i) when
required by the 1940 Act to be voted in the aggregate, Shares shall not be voted
by individual series, (ii) when the Trustees have determined that the matter
affects only the interests of Shareholders of one or more series, only
Shareholders of such series shall be entitled to vote thereon, and (iii) all
series shall vote together on the election of Trustees.
(vi) The establishment and designation of any series of Shares shall
be effective upon the execution by a majority of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series or as otherwise provided in such instrument.
(b) Classes. Notwithstanding anything in this Declaration to the
contrary, the Trustees may, in their discretion, without obtaining any prior
authorization or vote of the Shareholders of the Trust or of the Shareholders of
any series or class of Shares, from time to time authorize the division of
Shares of the Trust or any series thereof into Shares of one or more classes
upon the execution by a majority of the Trustees of an instrument setting forth
such establishment and designation and the relative rights and preferences of
such class or classes. All Shares of a class shall be identical with each other
and with the Shares of each other class of the same series except for such
variations between classes as may be approved by the Board of Trustees and set
forth in such instrument of establishment and designation and be permitted under
the 1940 Act or pursuant to any exemptive order issued by the Commission.
Section 3. Ownership of Shares. The ownership and transfer of Shares
shall be recorded on the books of the Trust or its transfer or similar agent.
No certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates,
transfer of Shares and similar matters. The record books of the Trust, as kept
by the Trust or any transfer or similar agent of the Trust, shall be conclusive
as to who are the holders of Shares and as to the number of Shares held from
time to time by each Shareholder.
Section 4. No Preemptive Rights, Etc. The holders of Shares shall not, as
such holders, have any right to acquire, purchase or subscribe for any Shares or
securities of the Trust which it may hereafter issue or sell, other than such
right, if any, as the Trustees in their discretion may determine. The holders
of Shares shall have no appraisal rights
<PAGE>
-6-
with respect to their Shares and, except as otherwise determined by resolution
of the Trustees in their sole discretion, shall have no exchange or conversion
rights with respect to their Shares.
Section 5. Assets and Liabilities of Series. In the event that the Trust,
pursuant to Section 2(a) of this Article IV, shall authorize the division of
Shares into two or more series, the following provisions shall apply:
(a) All consideration received by the Trust for the issue or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of the Trust. Such
consideration, assets, income, earnings, profits and proceeds, including any
proceeds derived from the sale, exchange or liquidation of such assets and any
funds or payments derived from any reinvestment of such proceeds, in whatever
form the same may be, together with any General Items (as hereinafter defined)
allocated to that series as provided in the following sentence, are herein
referred to as "Assets belonging to" that series. In the event that there are
any assets, income, earnings, profits or proceeds thereof, funds or payments
which are not readily identifiable as belonging to any particular series
(collectively "General Items"), the Trustees shall allocate such General Items
to and among any one or more of the series created from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable; and any General Items allocated to a particular series shall belong
to that series. Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all series for all purposes.
(b) The assets belonging to a particular series shall be charged with the
liabilities of the Trust in respect of that series and with all expenses, costs,
charges and reserves attributable to that series and shall be so recorded upon
the books of the Trust. Liabilities, expenses, costs, charges and reserves
charged to a particular series, together with any General Items (as hereinafter
defined) allocated to that series as provided in the following sentence, are
herein referred to as "liabilities belonging to" that series. In the event
there are any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular series
(collectively "General Items"), the Trustees shall allocate and charge such
General Items to and among any one or more of the series created from time to
time in such manner and on such basis as the Trustees in their sole discretion
deem fair and equitable; and any General Items so allocated and charges to a
particular series shall belong to that series. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all series for
all purposes.
Section 6. Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of this Declaration of
Trust and to have become a party thereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees,
<PAGE>
-7-
but only to the rights of said decedent under this Trust. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or division of the same or
for an accounting. Neither the Trustees, nor any officer, employee or agent of
the Trust shall have any power to bind any Shareholder personally or to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription for any Shares or otherwise.
ARTICLE V
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. Qualification and Number. Each Trustee shall be a natural
person. A Trustee need not be a Shareholder, a citizen of the United States, or
a resident of the Commonwealth of Massachusetts. By the vote or consent of a
majority of the Trustees then in office, the Trustees may fix the number of
Trustees at a number not less than two (2) nor more than twelve (12) and may
fill the vacancies created by any such increase in the number of Trustees.
Except as determined from time to time by resolution of the Trustees, no
decrease in the number of Trustees shall have the effect of removing any Trustee
from office prior to the expiration of his term, but the number of Trustees may
be decreased in conjunction with the removal of a Trustee pursuant to Section 4
of Article V.
Section 3. Term and Election. Each Trustee shall hold office until the
next meeting of Shareholders called for the purpose of considering the election
or re-election of such Trustee or of a successor to such Trustee, and until his
successor is elected and qualified, and any Trustee who is appointed by the
Trustees in the interim to fill a vacancy as provided hereunder shall have the
same remaining term as that of his predecessor, if any, or such term as the
Trustees may determine. Any vacancy resulting from a newly created Trusteeship
or the death, resignation, retirement, removal, or incapacity of a Trustee may
be filled by the affirmative vote or consent of a majority of the Trustees then
in office.
Section 4. Resignation and Removal. Any Trustee may resign his trust or
retire as a Trustee (without need for prior or subsequent accounting except in
the event of removal) by an instrument in writing signed by him and delivered or
mailed to the Chairman, if any, the President or the Secretary, and such
resignation or retirement shall be effective upon such delivery, or at a later
date according to the terms of the instrument. Any Trustee who has become
incapacitated by illness or injury as determined by a majority of the other
Trustees, may be retired by written instrument signed by a majority of the other
Trustees. Except as aforesaid, any Trustee may be removed from office only
<PAGE>
-8-
for "Cause" (as hereinafter defined) and only (i) by action of at least sixty-
six and two-thirds percent (66-2/3%) of the outstanding Shares, or (ii) by
written instrument, signed by at least sixty-six and two-thirds percent (66-
2/3%) of the remaining Trustees, specifying the date when such removal shall
become effective. "Cause" shall require willful misconduct, dishonesty, fraud or
a felony conviction.
Section 5. Vacancies. The death, declination, resignation, retirement,
removal, or incapacity, of the Trustees, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided herein, or the
number of Trustees as fixed is reduced, the Trustees in office, regardless of
their number, shall have all the powers granted to the Trustees, and during the
period during which any such vacancy shall occur, only the Trustees then in
office shall be counted for the purposes of the existence of a quorum or any
action to be taken by such Trustees.
Section 6. Ownership of Assets of the Trust. The assets of the Trust
shall be held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or any successor
Trustees. All of the assets of the Trust shall at all times be considered as
automatically vested in the Trustees as shall be from time to time in office.
Upon the resignation, retirement, removal, incapacity or death of a Trustee,
such Trustee shall automatically cease to have any right, title or interest in
any of the Trust property, and the right, title and interest of such Trustee in
the Trust property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective without the execution or
delivery of any conveyancing or other instruments. No Shareholder shall be
deemed to have a severable ownership in any individual asset of the Trust or any
right of partition or possession thereof.
Section 7. Voting Requirements. In addition to the voting requirements
imposed by law or by any other provision of this Declaration of Trust, the
provisions set forth in this Article V may not be amended, altered or repealed
in any respect, nor may any provision inconsistent with this Article V be
adopted, without the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding Shares. In the event the
holders of the outstanding shares of any series or class are required by law or
any other provision of this Declaration of Trust to approve such an action by a
class vote of such holders, such action must be approved by the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding Shares of
such series or class or such lower percentage as may be required by law or any
other provision of this Declaration of Trust.
ARTICLE VI
POWERS OF TRUSTEES
Section 1. Powers. The Trustees in all instances shall have full,
absolute and exclusive power, control and authority over the Trust assets and
the business and affairs of the Trust to the same extent as if the Trustees were
the sole and absolute owners thereof in their own right. The Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may
<PAGE>
-9-
consider necessary or appropriate in connection with the management of the
Trust. The enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers. In construing the provisions of this Declaration
of Trust, there shall be a presumption in favor of the grant of power and
authority to the Trustees. Subject to any applicable limitation in this
Declaration, the Trustees shall have power and authority:
(a) To invest and reinvest in, to buy or otherwise acquire, to hold,
for investment or otherwise, to sell or otherwise dispose of, to lend or to
pledge, to trade in or deal in securities or interests of all kinds,
however evidenced, or obligations of all kinds, however evidenced, or
rights, warrants, or contracts to acquire such securities, interests, or
obligations, of any private or public company, corporation, association,
general or limited partnership, trust or other enterprise or organization
foreign or domestic, or issued or guaranteed by any national or state
government, foreign or domestic, or their agencies, instrumentalities or
subdivisions (including but not limited to, bonds, debentures, bills, time
notes and all other evidences or indebtedness); negotiable or non-
negotiable instruments; any and all options and futures contracts,
derivatives or structured securities; government securities and money
market instruments (including but not limited to, bank certificates of
deposit, finance paper, commercial paper, bankers acceptances, and all
kinds of repurchase agreements) and, without limitation, all other kinds
and types of financial instruments;
(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders;
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(d) To set record dates for any purpose;
(e) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, investment subadviser,
transfer agent, custodian, underwriter or other independent contractor or
agent;
(f) Subject to Article IX, Section 1 hereof, to merge, or consolidate
the Trust with any other corporation, association, trust or other
organization; or to sell, convey, transfer, or lease all or substantially
all of the assets of the Trust;
(g) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees
shall deem proper;
(h) To exercise powers and rights of subscription or otherwise which
<PAGE>
-10-
in any manner arise out of ownership of securities;
(i) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or either
in their or the Trust's name or in the name of a custodian or a nominee or
nominees;
(j) To issue, sell, repurchase, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer and otherwise deal in Shares and in
any options, warrants or other rights to purchase Shares or any other
interests in the Trust other than Shares;
(k) To set apart, from time to time, out of any funds of the Trust a
reserve or reserves for any proper purpose, and to abolish any such
reserve;
(l) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or
property of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any security held in the
Trust;
(m) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not
limited to, claims for taxes;
(n) To make distributions to Shareholders;
(o) To borrow money and to pledge, mortgage, or hypothecate the
assets of the Trust;
(p) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon such terms as
shall be established by the Trustees;
(q) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(r) To purchase and pay for out of Trust property such insurance as
they may deem necessary or appropriate for the conduct of the business of
the Trust, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, investment
subadvisers or managers, principal underwriters, or independent contractors
of the Trust individually against all
<PAGE>
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claims and liabilities of every nature arising by reason of holding, being
or having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person as Shareholder,
Trustee, officer, employee, agent, investment adviser, subadviser or
manager, principal underwriter, or independent contractor, whether or not
any such action may be determined to constitute negligence, and whether or
not the Trust would have the power to indemnify such person against such
liability; and
(s) To pay pensions for faithful service, as deemed appropriate by
the Trustees, and to adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
Any determination made by or pursuant to the direction of the Trustees in
good faith and consistent with the provisions of this Declaration of Trust shall
be final and conclusive and shall be binding upon the Trust and every holder at
any time of Shares, including, but not limited to the following matters: the
amount of the assets, obligations, liabilities and expenses of the Trust; the
amount of the net income of the Trust from dividends, capital gains, interest or
other sources for any period and the amount of assets at any time legally
available for the payment of dividends or distributions; the amount, purpose,
time of creation, increase or decrease, alteration or cancellation of any
reserves or charges and the propriety thereof (whether or not any obligation or
liability for which such reserves or charges were created shall have been paid
or discharged); the market value, or any quoted price to be applied in
determining the market value, of any security or other asset owned or held by
the Trust; the fair value of any security for which quoted prices are not
readily available, or of any other asset owned or held by the Trust; the number
of Shares of the Trust issued or issuable; the net asset value per Share; any
matter relating to the acquisition, holding and depositing of securities and
other assets by the Trust; any question as to whether any transaction
constitutes a purchase of securities on margin, a short sale of securities, a
borrowing, or an underwriting of the sale of, or participation in any
underwriting or selling group in connection with the public distribution of, any
securities, and any matter relating to the issue, sale, redemption, repurchase,
and/or other acquisition or disposition of Shares of the Trust. No provision of
this Declaration of Trust shall be effective to protect or purport to protect
any Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Section 2. Manner of Acting, By-Laws. The By-Laws shall make
provision from time to time for the manner in which the Trustees may take
action, including, without limitation, at meetings within or without
Massachusetts, including meetings held by means of a conference telephone or
other communications equipment, or by written consents, the quorum and notice,
if any, that shall be required for any meeting or other action, and the
delegation of some or all of the power and authority of
<PAGE>
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the Trustees to any one or more committees which they may appoint from their own
number, and terminate, from time to time.
ARTICLE VII
EXPENSES OF THE TRUST
The Trustees shall have the power to reimburse themselves from the Trust
property for their expenses and disbursements, to pay reasonable compensation to
themselves from the Trust property, and to incur and pay out of the Trust
property any other expenses which in the opinion of the Trustees are necessary
or incidental to carry out any of the purposes of this Declaration of Trust, or
to exercise any of the powers of the Trustees hereunder.
ARTICLE VIII
INVESTMENT ADVISER, UNDERWRITER
AND TRANSFER AGENT
Section 1. Investment Adviser. The Trust may enter into written contracts
with one or more persons (which term shall include any firm, corporation, trust
or association), to act as investment adviser or investment subadviser to the
Trust, and as such to perform such functions as the Trustees may deem reasonable
and proper, including, without limitation, investment advisory, management,
research, valuation of assets, clerical and administrative functions, under such
terms and conditions, and for such compensation, as the Trustees may in their
discretion deem advisable.
Upon the termination of any contract with Nuveen Institutional Advisory
Corp., or any corporation affiliated with John Nuveen & Co. Incorporated, acting
as investment adviser or manager, the Trustees are hereby required to promptly
change the name of the Trust to a name which does not include "Nuveen" or any
approximation or abbreviation thereof.
Section 2. Underwriter; Transfer Agent. The Trust may enter into a
written contract or contracts with an underwriter or underwriters or distributor
or distributors whereby the Trust may either agree to sell Shares to the other
party or parties to the contract or appoint such other party or parties its
sales agent or agents for such Shares and with such other provisions as the
Trustees may deem reasonable and proper, and the Trustees may in their
discretion from time to time enter into transfer agency and/or shareholder
service contract(s), in each case with such terms and conditions, and providing
for such compensation, as the Trustees may in their discretion deem advisable.
Section 3. Parties to Contract. Any contract of the character described
in Sections 1 and 2 of this Article VIII or in Article X hereof may be entered
into with any corporation, firm, partnership, trust or association, including,
without limitation, the investment adviser, any investment subadviser or an
affiliate of the investment adviser or investment subadviser, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, or
otherwise interested in such contract and no such contract shall be invalidated
or
<PAGE>
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rendered voidable by reason of the existence of any such relationship, nor
shall any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was not inconsistent
with the provisions of this Article VIII, Article X, or the By-Laws. The same
person (including a firm, corporation, partnership, trust or association) may be
the other party to contracts entered into pursuant to Sections 1 and 2 above or
Article X, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 3.
ARTICLE IX
SHAREHOLDERS' VOTING POWERS AND MEETINGS
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Section 1. Voting Powers. The Shareholders shall have power to vote only:
(a) for the election or removal of Trustees as provided in Article V, (b) with
respect to any investment advisory or management contract to the extent required
by the 1940 Act, (c) with respect to any termination of the Trust or a series
thereof to the extent and as provided in this Article IX, Section 1, (d) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Article XIII, Section 4, (e) with respect to a merger or
consolidation of the Trust or any series thereof with any corporation,
association, trust or other organization or a reorganization or recapitalization
of the Trust or series thereof, or a sale, lease or transfer of all or
substantially all of the assets of the Trust or any series thereof (other than
in the regular course of the Trust's investment activities) to the extent and as
provided in this Article IX, Section 1, (f) to the same extent as the
shareholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, and (g) with
respect to such additional matters relating to the Trust as may be required by
law, the 1940 Act, this Declaration of Trust, the By-Laws of the Trust, or any
registration of the Trust with the Commission or any State, or as the Trustees
may consider necessary or desirable.
An affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding Shares of the Trust (or, in the event of
any action set forth below affecting only one or more series or classes of the
Trust, an affirmative vote of the holders of at least sixty-six and two-thirds
percent of the outstanding Shares of such affected series or class) shall be
required to approve, adopt or authorize (i) a merger or consolidation of the
Trust or a series of the Trust with any corporation, association, trust or other
organization or a reorganization or recapitalization of the Trust or a series of
the Trust, (ii) a sale, lease or transfer of all or substantially all of the
assets of the Trust or series of the Trust (other than in the regular course of
the Trust's investment activities), or (iii) a termination of the Trust or a
series of the Trust (other than a termination by the Trustees as provided for in
Section 1 of Article XIII hereof), unless in any case such action is
recommended by the Trustees, in which case the affirmative vote of a majority of
the outstanding voting securities of the Trust or the affected series or class
shall be required. Nothing contained herein shall be construed as requiring
approval of Shareholders for any transaction, whether deemed a merger,
consolidation, reorganization or otherwise whereby the Trust issues Shares in
connection with the acquisition of assets (including those subject to
liabilities) from any other investment company or similar entity).
Section 2. Meetings. Meetings of the Shareholders of the Trust or any one
or more series thereof may be called and held from time to time for the purpose
of taking action upon any matter requiring the vote or authority of the
Shareholders as herein provided or upon any other matter deemed by the Trustees
to be necessary or desirable. Meetings of the Shareholders shall be
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held at such place within the United States as shall be fixed by the Trustees,
and stated in the notice of the meeting. Meetings of the Shareholders may be
called by the Trustees and shall be called by the Trustees upon the written
request of Shareholders owning at least one-tenth of the outstanding Shares
entitled to vote. Shareholders shall be entitled to at least ten days' written
notice of any meeting, except where the meeting is an adjourned meeting and the
date, time and place of the meeting were announced at the time of the
adjournment.
Section 3. Quorum and Action. (a) The Trustees shall set in the By-Laws
the quorum required for the transaction of business by the Shareholders at a
meeting, which quorum shall in no event be less than thirty percent (30%) of the
Shares entitled to vote at such meeting. If a quorum is present when a duly
called or held meeting is convened, the Shareholders present may continue to
transact business until adjournment, even though the withdrawal of a number of
Shareholders originally present leaves less than the proportion or number
otherwise required for a quorum.
(b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the Shares present in person or by proxy and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by any provision of this Declaration of
Trust or the By-Laws.
Section 4. Voting. Each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted. In the event that there is more than
one series of the Shares, Shares shall be voted by individual series on any
matter submitted to a vote of the Shareholders of the Trust except as provided
in Sections 2(a)(v) and 2(b) of Article IV. There shall be no cumulative voting
in the election of Trustees or on any other matter submitted to a vote of the
Shareholders. Shares may be voted in person or by proxy. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required or permitted by law, this Declaration of Trust or the By-Laws of
the Trust to be taken by Shareholders.
Section 5. Action by Written Consent in Lieu of Meeting of Shareholders.
Any action required or permitted to be taken at a meeting of the Shareholders
may be taken without a meeting by written action signed by all of the
Shareholders entitled to vote on that action. The written action is effective
when it has been signed by all of those Shareholders, unless a different
effective time is provided in the written action.
<PAGE>
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ARTICLE X
CUSTODIAN
All securities and cash of the Trust shall be held by one or more
custodians and subcustodians, each meeting the requirements for a custodian
contained in the 1940 Act, or shall otherwise be held in accordance with the
1940 Act.
ARTICLE XI
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may in their sole discretion from
time to time declare and pay, or may prescribe and set forth in a duly adopted
vote or votes of the Trustees, the bases and time for the declaration and
payment of, such dividends and distributions to Shareholders as they may deem
necessary or desirable, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with good accounting practices.
Section 2. Redemption of Shares. All shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. The Trust shall redeem the Shares of the Trust or any series or
class thereof at the price determined as hereinafter set forth, upon the
appropriately verified application of the record holder thereof (or upon such
other form of request as the Trustees may determine) at such office or agency as
may be designated from time to time for that purpose by the Trustees. The
Trustees may from time to time specify additional conditions, not inconsistent
with the 1940 Act, regarding the redemption of Shares in the Trust's then
effective prospectus under the Securities Act of 1933.
Section 3. Redemption Price. Shares shall be redeemed at their net asset
value (less any applicable redemption fee or sales charge) determined as set
forth in Section 7 of this Article XI as of such time as the Trustees shall have
theretofore prescribed by resolution. In the absence of such resolution, the
redemption price of Shares deposited shall be the net asset value of such Shares
next determined as set forth in such Section hereof after receipt of such
application.
Section 4. Payment. Payment of the redemption price of Shares of the
Trust or any series or class thereof shall be made in cash or in property or
partly in cash and partly in property to the Shareholder at such time and in the
manner, not inconsistent with the 1940 Act or other applicable laws, as may be
specified from time to time in the Trust's then effective prospectus under the
Securities Act of 1933.
<PAGE>
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Section 5. Redemption of Shareholder's Interest. The Trustees, in their
sole discretion, may cause the Trust to redeem all of the Shares of the Trust or
one or more series of the Trust held by any Shareholder if the value of such
Shares held by such Shareholder is less than the minimum amount established from
time to time by the Trustees.
Section 6. Suspension of Right of Redemption. Notwithstanding the
foregoing, the Trust may postpone payment of the redemption price and may
suspend the right of the holders of Shares to require the Trust to redeem Shares
(a) during any period when the New York Stock Exchange (the "Exchange") is
closed (other than customary weekend and holiday closings), (b) when trading in
the markets the Trust normally utilizes is restricted, or an emergency exists as
determined by the Commission so that disposal of the Trust's investments or
determination of its net asset value is not reasonably practicable, or (c) for
such other periods as the Commission may by order, rule or otherwise permit.
Section 7. Determination of Net Asset Value and Valuation of Portfolio
Assets. The Trustees may in their sole discretion from time to time prescribe
and shall set forth in the By-Laws or in a duly adopted vote or votes of the
Trustees such bases and times for determining the per Share net asset value of
the Shares and the valuation of portfolio assets as they may deem necessary or
desirable.
The Trust may suspend the determination of net asset value during any
period when it may suspend the right of the holders of Shares to require the
Trust to redeem Shares.
<PAGE>
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ARTICLE XII
LIMlTATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust. Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee. Nothing contained herein shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of State of the Commonwealth
of Massachusetts, shall recite that the same was executed or made by or on
behalf of the Trust by them as Trustees or Trustee or as officers or officer and
not individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further recitals as they
or he may deem appropriate, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or Shareholders or Shareholder
individually.
All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment under
such credit, contract or claim; and neither the Shareholders nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor.
Section 2. Trustees' Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions thereunder shall be
binding upon everyone interested. A Trustee shall be liable only for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of
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Trust and their duties as Trustees hereunder, and shall be under no liability
for any act or omission in accordance with such advice or for failing to follow
such advice. In discharging their duties, the Trustees, when acting in good
faith, shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of any other
party to any contract entered into hereunder. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Indemnification. Subject to the exceptions and limitations
contained in this Section 4, every person who is, or has been, a Trustee,
officer, employee or agent of the Trust, including persons who serve at the
request of the Trust as directors, trustees, officers, employees or agents of
another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason
of a final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a payment by
a Covered Person, unless there has been either a determination
<PAGE>
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that such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition,
or a reasonable determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting
on the matter (provided that a majority of the Disinterested Trustees
then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising
out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act
on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
<PAGE>
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As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
Section 5. Shareholders. No personal liability for any debt or obligation
of the Trust shall attach to any Shareholder or former Shareholder of the Trust.
In case any Shareholder or former Shareholder of the Trust shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of the Trust to
be held harmless from and indemnified against all loss and expense arising from
such liability; provided, however, there shall be no liability or obligation of
the Trust arising hereunder to reimburse any Shareholder for taxes paid by
reason of such Shareholder's ownership of any Share or for losses suffered by
reason of any changes in value of any Trust assets. The Trust shall, upon
request by the Shareholder or former Shareholder, assume the defense of any
claim made against the Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon.
ARTICLE XIII
MISCELLANEOUS
Section 1. Termination of Trust. Unless terminated as provided herein,
the Trust shall continue without limitation of time. The Trust or any series of
the Trust may be terminated at any time by the Trustees by written notice to the
Shareholders of the Trust, or such Series as the case may be, without a vote of
the Shareholders of the Trust, or of such series, or the Trust or any series of
the Trust may be terminated by the affirmative vote of the Shareholders in
accordance with Section 1 of Article IX hereof.
Upon termination of the Trust or any series thereof, after paying or
otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees consider appropriate,
reduce the remaining assets of the Trust or of the particular series thereof to
distributable form in cash or other securities, or any
<PAGE>
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combination thereof, and distribute the proceeds to the holders of the Shares of
the Trust or such series in the manner set forth by resolution of the Trustees.
Section 2. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept in the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment shall be filed by the Trustees with the
Secretary of State of the Commonwealth of Massachusetts, as well as any other
governmental office where such filing may from time to time be required,
provided, however, that the failure to so file will not invalidate this
instrument or any properly authorized amendment hereto. Anyone dealing with the
Trust may rely on a certificate by an officer or Trustee of the Trust as to
whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Trustee of the Trust to
be a copy of this instrument or of any such amendments. In this instrument or in
any such amendment, references to this instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this instrument
as a whole and as amended or affected by any such amendment, and masculine
pronouns shall be deemed to include the feminine and the neuter, as the context
shall require. Headings are placed herein for convenience of reference only, and
in case of any conflict, the text of this instrument, rather than the headings,
shall control. This instrument may be executed in any number of counterparts,
each of which shall be deemed an original.
Section 3. Trustees May Resolve Ambiguities. The Trustees may construe
any of the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good faith shall be conclusive as to the
meaning to be given to such provisions.
Section 4. Amendments. Except as otherwise specifically provided in this
Declaration of Trust, this Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees with the consent
of Shareholders holding more than fifty percent (50%) of Shares entitled to vote
except that an amendment which in the determination of the Trustees shall affect
the holders of one or more series or classes of Shares but not the holders of
all outstanding series or classes shall be authorized by vote of the
Shareholders holding a majority of the Shares entitled to vote of each series
and class affected and no vote of Shareholders of a series or class not affected
shall be required. In addition, notwithstanding any other provision to the
contrary contained in this Declaration of Trust, the Trustees may amend this
Declaration of Trust without the vote or consent of Shareholders (i) at any time
if the Trustees deem it necessary in order for the Trust or any series or class
thereby to meet the requirements of applicable Federal or State laws or
regulations, or the
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requirements of the regulated investment company provisions of the Internal
Revenue Code, (ii) to designate series or classes or exercise other powers with
respect thereto in accordance with Section 1 and 2 or Article IV hereof, (iii)
change the name of the Trust or to supply any omission, cure any ambiguity or
cure, correct or supplement any defective or inconsistent provision contained
herein, or (iv) for any reason at any time before a registration statement under
the Securities Act of 1933, as amended, covering the initial public offering of
Shares has become effective.
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IN WITNESS WHEREOF, the undersigned, being the sole Trustees of the Trust,
have executed this instrument as of the date first written above.
/s/ Anthony T. Dean /s/ Timothy R. Schwertfeger
- ------------------------------ ----------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOlS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named persons who are known to me to be
Trustees of the Trust whose names and signatures are affixed to the foregoing
Declaration of Trust and who acknowledged the same to be his free act and deed,
before me this 20th day of August, 1998.
/s/ Karen L. Healy
-------------------------------------------------
Notary Public
My Commission Expires: 12/30/99
---------------------------
<PAGE>
NUVEEN INVESTMENT TRUST IV
ESTABLISHMENT AND DESIGNATION OF CLASSES
The undersigned, being the sole Trustees of Nuveen Investment Trust IV, a
Massachusetts business trust (the "Trust"), acting pursuant to Sections 1 and 2
of Article IV of the Declaration of Trust dated August 20, 1998 (the
"Declaration"), do hereby divide the Shares of its series, whether currently
existing or created in the future, into four Classes of Shares effective as of
the date hereof, as follows:
1. The four Classes of Shares are designated "Class A Shares", "Class B
Shares", "Class C Shares" and "Class R Shares".
2. Class A Shares, Class B Shares, Class C Shares and Class R Shares shall
be entitled to all the rights and preferences accorded to Shares under the
Declaration.
3. The number of Shares of each Class designated hereby shall be
unlimited.
4. The purchase price of Class A Shares, Class B Shares, Class C Shares
and Class R Shares, the method of determination of the net asset value of Class
A Shares, Class B Shares, Class C Shares and Class R Shares, the price, terms
and manner of redemption of Class A Shares, Class B Shares, Class C Shares and
Class R Shares, any conversion or exchange feature or privilege of the Class A
Shares, Class B Shares, Class C Shares and Class R Shares, and the relative
dividend rights of the holders of Class A Shares, Class B Shares, Class C Shares
and Class R Shares shall be established by the Trustees of the Trust in
accordance with the Declaration and shall be set forth in the current prospectus
and statement of additional information of the Trust or any series thereof, as
amended from time to time, contained in the Trust's registration statement under
the Securities Act of 1933, as amended (the "Prospectus").
5. Each of the Class A Shares, Class B Shares, Class C Shares and Class R
Shares shall bear the expenses of payments under any distribution and service
agreements entered into by or on behalf of the Trust with respect to that Class,
and any other expenses that are properly allocated to such Class in accordance
with the Investment Company Act of
<PAGE>
-2-
1940, or any rule or order issued thereunder and applicable to the Trust (the
"1940 Act").
6. As to any matter on which shareholders are entitled to vote, Class A
Shares, Class B Shares, Class C Shares and Class R Shares of a series shall vote
together as a single class; provided however, that notwithstanding the
provisions of Section 4 of Article IX of the Declaration to the contrary, (a) as
to any matter with respect to which a separate vote of any Class is required by
the 1940 Act or is required by a separate agreement applicable to such Class,
such requirements as to a separate vote by the Class shall apply, (b) except as
required by (a) above, to the extent that a matter affects more than one Class
and the interests of two or more Classes in the matter are not materially
different, then the Shares of such Classes whose interests in the matter are not
materially different shall vote together as a single Class, but to the extent
that a matter affects more than one Class and the interests of a Class in the
matter are materially different from that of each other Class, then the Shares
of such Class shall vote as a separate class; and (c) except as required by (a)
above or as otherwise required by the 1940 Act, as to any matter which does not
affect the interests of a particular Class, only the holders of Shares of the
one or more affected Classes shall be entitled to vote.
7. The designation of Class A Shares, Class B Shares, Class C Shares and
Class R Shares hereby shall not impair the power of the Trustees from time to
time to designate additional classes of Shares of the Trust.
8. Subject to the applicable provisions of the 1940 Act, the Trustees may
from time to time modify the preferences, voting powers, rights and privileges
of any of the Classes designated hereby or redesignate any of the Classes
designated hereby without any action or consent of the Shareholders.
<PAGE>
-3-
IN WITNESS WHEREOF, the undersigned, being the sole Trustees of the Trust,
have executed this instrument as of this 20th day of August, 1998.
/s/ Anthony T. Dean /s/ Timothy R. Schwertfeger
- --------------------------------- ---------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named persons who are known to me to be
Trustees of the Trust whose names and signatures are affixed to the foregoing
Establishment and Designation of Classes and who acknowledged the same to be his
free act and deed, before me this 20th day of August, 1998.
/s/ Karen L. Healy
---------------------------------
Notary Public
My Commission Expires: 12/30/99
----------
<PAGE>
NUVEEN INVESTMENT TRUST IV
ESTABLISHMENT AND DESIGNATION OF SERIES OF
SHARES OF BENEFICIAL INTEREST
WHEREAS, pursuant to Section 2 of Article IV of the Declaration of Trust
dated August 20, 1998 (the "Declaration"), of Nuveen Investment Trust IV, a
Massachusetts business trust (the "Trust"), the Trustees of the Trust, this 20th
day of August, 1998, hereby establish and designate one series of Shares (as
defined in the Declaration) (the "Fund") to have the special and relative rights
of such series;
1. The following Fund is established and designated:
Nuveen Dividend and Growth Fund
2. The Fund shall be authorized to hold cash, invest in securities,
instruments and other property and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of each Fund shall be redeemable, shall be
entitled to one vote (or fraction thereof in respect of a fractional share) on
matters on which Shareholders of that Fund may vote in accordance with the
Declaration, shall represent a pro rata beneficial interest in the assets
allocated or belonging to such Fund, and shall be entitled to receive its pro
rata share of the net assets of such Fund upon liquidation of such Fund, all as
provided in Article IV, Sections 2 and 5 of the Declaration. The proceeds of
the sale of Shares of each Fund, together with any income and gain thereon, less
any diminution or expenses thereof, shall irrevocably belong to such Fund,
unless otherwise required by law.
3. Shareholders of each Fund shall vote either separately as a class on
any matter to the extent required by, and any matter shall be deemed to have
been effectively acted upon with respect to such Fund as provided in Rule 18f-2,
as from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rules, and by the Declaration.
<PAGE>
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4. The assets and liabilities of the Trust shall be allocated among each
Fund and any other series of Shares that may be established from time to time as
set forth in Article IV, Section 5 of the Declaration.
5. The designation of each Fund hereby shall not impair the power of the
Trustees from time to time to designate additional series of Shares of the
Trust.
6. Subject to the applicable provisions of the 1940 Act and the provisions
of Article IV, Sections 2 and 5 of the Declaration, the Trustees shall have the
right at any time and from time to time to reallocate assets and expenses or to
change the designation of each Fund now or hereafter created, or to otherwise
change the special relative rights of each Fund designated hereby without any
action or consent of the Shareholders.
<PAGE>
-3-
IN WITNESS WHEREOF, the undersigned, being the sole Trustees of the
Trust, have executed this instrument as of this 20th day of August, 1998.
/s/Anthony T. Dean /s/Timothy R. Schwertfeger
- ------------------ --------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named persons who are known to me
to be Trustees of the Trust whose names and signatures are affixed to the
foregoing Designation of Series and who acknowledged the same to be their free
act and deed, before me this 20th day of August, 1998.
/s/ Karen L. Healy
--------------------------------
Notary Public
My Commission Expires: 12/30/99
----------
<PAGE>
BY-LAWS
OF
NUVEEN INVESTMENT TRUST IV
ARTICLE I
DECLARATION OF TRUST
AND
OFFICES
Section 1.1. Declaration of Trust. These By-Laws shall be subject to the
Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of Nuveen Investment Trust IV, the Massachusetts business trust
established by the Declaration of Trust (the "Trust").
Section 1.2. Other Offices. The Trust may have such other offices and
places of business within or without the Commonwealth of Massachusetts as the
Board of Trustees shall determine.
ARTICLE II
SHAREHOLDERS
Section 2.1. Place of Meetings. Meetings of the Shareholders may be held
at such place or places within or without the Commonwealth of Massachusetts as
shall be fixed by the Board of Trustees and stated in the notice of the meeting.
Section 2.2. Regular Meeting. Regular meetings of the Shareholders for
the election of Trustees and the transaction of such other business as may
properly come before the meeting shall be held on an annual or other less
frequent periodic basis at such date and time as the Board of Trustees by
resolution shall designate, except as otherwise required by applicable law.
Section 2.3. Special Meeting. Special meetings of the Shareholders for
any purpose or purposes may be called by the Chairman of the Board, the
President or two or more Trustees, and must be called at the written request
stating the purpose or purposes of the meeting, of Shareholders
<PAGE>
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entitled to cast at least 10 percent of all the votes entitled to be cast at the
meeting.
Section 2.4. Notice of Meetings. Notice stating the time and place of the
meeting and in the case of a special meeting the purpose or purposes thereof and
by whom called, shall be delivered to each Shareholder not less than ten nor
more than sixty days prior to the meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.
Section 2.5. Quorum and Action. (a) The holders of thirty percent (30%)
of the voting power of the shares of beneficial interest of the Trust (the
"Shares") entitled to vote at a meeting are a quorum for the transaction of
business. If a quorum is present when a duly called or held meeting is
convened, the Shareholders present may continue to transact business until
adjournment, even though the withdrawal of a number of Shareholders originally
present leaves less than the proportion or number otherwise required for a
quorum.
(b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the voting power of the Shares present and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by the Investment Company Act of 1940, as
amended (the "1940 Act"), or the Declaration of Trust.
Section 2.6. Voting. At each meeting of the Shareholders, every holder of
Shares then entitled to vote may vote in person or by proxy and shall have one
vote for each Share registered in his name.
Section 2.7. Proxy Representation. A Shareholder may cast or authorize
the casting of a vote by filing a written appointment of a proxy with an officer
of the Trust at or before the meeting at which the appointment is to be
effective. The appointment of a proxy is valid for eleven months, unless a
longer period is expressly provided in the appointment. No appointment is
irrevocable unless the appointment is coupled with an interest in the Shares or
in the Trust.
Section 2.8. Adjourned Meetings. Any meeting of Shareholders may be
adjourned to a designated time and place by the vote of the holders of a
majority of the Shares present and entitled to vote thereat even though less
than a quorum is so present without any further notice except by
<PAGE>
-3-
announcement at the meeting. An adjourned meeting may reconvene as designed, and
when a quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
ARTICLE III
TRUSTEES
Section 3.1. Qualifications and Number: Vacancies. Each Trustee shall be
a natural person. A Trustee need not be a Shareholder, a citizen of the United
States, or a resident of the Commonwealth of Massachusetts. The number of
Trustees of the Trust, their term and election and the filling of vacancies,
shall be as provided in the Declaration of Trust.
Section 3.2. Powers. The business and affairs of the Trust shall be
managed under the direction of the Board of Trustees. All powers of the Trust
may be exercised by or under the authority of the Board of Trustees, except
those conferred on or reserved to the Shareholders by statute, the Declaration
of Trust or these By-Laws.
Section 3.3. Investment Policies. It shall be the duty of the Board of
Trustees to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Trust are at all times
consistent with the investment objectives, policies and restrictions with
respect to securities investments and otherwise of the Trust filed from time to
time with the Securities and Exchange Commission and as required by the 1940
Act, unless such duty is delegated to an investment adviser pursuant to a
written contract, as provided in the Declaration of Trust. The Trustees,
however, may delegate the duty of management of the assets of the Trust to an
individual or corporate investment adviser or subadviser to act as investment
adviser or subadviser pursuant to a written contract.
Section 3.4. Meetings. Regular meetings of the Trustees may be held
without notice at such times as the Trustees shall fix. Special meetings of the
Trustees may be called by the Chairman of the Board or the President, and shall
be called at the written request of two or more Trustees. Unless waived by each
Trustee, three days' notice of special meetings shall be given to each Trustee
in person, by mail, by telephone, or by telegram or cable, or by any other means
that reasonably may be expected to provide similar notice. Notice of special
meetings need not state the purpose or purposes thereof. Meetings of the
Trustees may be
<PAGE>
-4-
held at any place within or outside the Commonwealth of Massachusetts. A
conference among Trustees by any means of communication through which the
Trustees may simultaneously hear each other during the conference constitutes a
meeting of the Trustees or of a committee of the Trustees, if the notice
requirements have been met (or waived) and if the number of Trustees
participating in the conference would be sufficient to constitute a quorum at
such meeting. Participation in such meeting by that means constitutes presence
in person at the meeting.
Section 3.5. Quorum and Action. A majority of the Trustees currently
holding office, or in the case of a meeting of a committee of the Trustees, a
majority of the members of such committee, shall constitute a quorum for the
transaction of business at any meeting. If a quorum is present when a duly
called or held meeting is convened, the Trustees present may continue to
transact business until adjournment, even though the withdrawal of a number of
Trustees originally present leaves less than the proportion or number otherwise
required for a quorum. At any duly held meeting at which a quorum is present,
the affirmative vote of the majority of the Trustees present shall be the act of
the Trustees or the committee, as the case may be, on any question, except where
the act of a greater number is required by these By-Laws or by the Declaration
of Trust.
Section 3.6. Action by Written Consent in Lieu of Meetings of Trustees. An
action which is required or permitted to be taken at a meeting of the Trustees
or a committee of the Trustees may be taken by written action signed by the
number of Trustees that would be required to take the same action at a meeting
of the Trustees or committee, as the case may be, at which all Trustees were
present. The written action is effective when signed by the required number of
Trustees, unless a different effective time is provided in the written action.
When written action is taken by less than all Trustees, all Trustees shall be
notified immediately of its text and effective date.
Section 3.7. Committees. The Trustees, by resolution adopted by the
affirmative vote of a majority of the Trustees, may designate from their members
an Executive Committee, an Audit Committee and any other committee or
committees, each such committee to consist of two or more Trustees and to have
such powers and authority (to the extent permitted by law) as may be provided in
such resolution. Any such committee may be terminated at any time by the
affirmative vote of a majority of the Trustees.
<PAGE>
-5-
ARTICLE IV
OFFICERS
Section 4.1. Number and Qualifications. The officers of the Trust shall
include a Chairman of the Board, a President, a Controller, one or more Vice
Presidents (one of whom may be designated an Executive Vice President), a
Treasurer, and a Secretary. Any two or more offices may be held by the same
person. Unless otherwise determined by the Trustees, each officer shall be
appointed by the Trustees for a term which shall continue until the meeting of
the Trustees following the next regular meeting of Shareholders and until his
successor shall have been duly elected and qualified, or until his death, or
until he shall have resigned or have been removed, as hereinafter provided in
these By-Laws. The Trustees may from time to time elect, or delegate to the
Chairman of the Board or the President, or both, the power to appoint, such
officers (including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and such agents as may be
necessary or desirable for the business of the Trust. Such other officers shall
hold office for such terms as may be prescribed by the Trustees or by the
appointing authority.
Section 4.2. Resignations. Any officer of the Trust may resign at any
time by giving written notice of his resignation to the Trustees, the Chairman
of the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 4.3. Removal. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority of
the Trustees present at a duly convened meeting of the Trustees.
Section 4.4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, may be filled for the
unexpired portion of the term by the Trustees, or in the manner determined by
the Trustees.
Section 4.5. The Chairman of the Board. The Chairman of the Board shall
be elected from among the Trustees. He shall be the chief executive officer of
the Trust and shall:
<PAGE>
-6-
(a) have general active management of the business of the Trust;
(b) when present, preside at all meetings of the Trustees and of the
Shareholders;
(c) see that all orders and resolutions of the Trustees are carried
into effect;
(d) sign and deliver in the name of the Trust any deeds, mortgages,
bonds, contracts or other instruments pertaining to the business of the
Trust, except in cases in which the authority to sign and deliver is
required by law to be exercised by another person or is expressly delegated
by the Declaration of Trust or By-Laws or by the Trustees to some other
officer or agent of the Trust; and
(e) maintain records of and, whenever necessary, certify all
proceedings of the Trustees and the Shareholders.
The Chairman of the Board shall be authorized to do or cause to be done all
things necessary or appropriate, including preparation, execution and filing of
any documents, to effectuate the registration from time to time of the Shares of
the Trust with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended. He shall perform all duties incident to the office of
Chairman of the Board and such other duties as from time to time may be assigned
to him by the Trustees or by these By-Laws.
Section 4.6. The President. The President shall be the chief operating
officer of the Trust and, subject to the Chairman of the Board, he shall have
general authority over and general management and control of the business and
affairs of the Trust. In general, he shall discharge all duties incident to the
office of the chief operating officer of the Trust and such other duties as may
be prescribed by the Trustees and the Chairman of the Board from time to time.
In the absence of the Chairman of the Board or in the event of his disability,
or inability to act or to continue to act, the President shall perform the
duties of the Chairman of the Board and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the Chairman of the Board.
Section 4.7. Executive Vice-President. In the case of the absence or
inability to act of the President and the Chairman of the Board, any
<PAGE>
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Executive Vice-President shall perform the duties of the President and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the President. Any Executive Vice-President shall perform all duties
incident to the office of Executive Vice-President and such other duties as from
time to time may be assigned to him by the Trustees, the President or these By-
Laws,
Section 4.8. Vice Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Trustees, the Chairman
of the Board or the President.
Section 4.9. Controller. The Controller shall:
(a) keep accurate financial records for the Trust;
(b) render to the Chairman of the Board, the President and the
Trustees, whenever requested, an account of all transactions by and of the
financial condition of the Trust; and
(c) in general, perform all the duties incident to the office of
Controller and such other duties as from time to time may be assigned to
him by the Trustees, the Chairman of the Board or the President.
Section 4.10. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Trust, except those which the Trust has placed in the
custody of a bank or trust company pursuant to a written agreement
designating such bank: or trust company as custodian of the property of the
Trust, as required by Section 6.5 of these By-Laws;
(b) deposit all money, drafts, and checks in the name of and to the
credit of the Trust in the banks and depositories designated by the
Trustees;
(c) endorse for deposit all notes, checks, and drafts received by the
Trust making proper vouchers therefor:
(d) disburse corporate funds and issue checks and drafts in the name
of the Trust, as ordered by the Trustees; and
<PAGE>
-8-
(e) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Trustees, the Chairman of the Board or the President.
Section 4.11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Trustees, the committees of the
Trustees and the Shareholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by statute;
(c) be custodian of the records of the Trust;
(d) see that the books, reports, statements, certificates and other
documents and records required by statute to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the Trustees, the Chairman of the Board or the President.
Section 4.12. Salaries. The salaries of all officers shall be fixed by
the Trustees.
ARTICLE V
SHARES
Section 5.1. Share Certificates. Each owner of Shares of the Trust shall
be entitled upon request to have a certificate, in such form as shall be
approved by the Trustees, representing the number of whole Shares of the Trust
owned by him. Certificates representing fractional Shares shall not be issued.
The certificates representing whole Shares shall be signed in the name of the
Trust by the Chairman of the Board, the President, the Executive Vice President
or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer
or an Assistant Treasurer (which signatures may be either manual or facsimile,
engraved or printed). In case any officer who shall have signed such certificate
shall have ceased to be such officer before such certificates shall be issued,
they may
<PAGE>
-9-
nevertheless be issued by the Trust with the same effect as if such officer were
still in office at the date of their issuance.
Section 5.2. Books and Records; Inspection. The Trust shall keep at its
principal executive office, or at another place or places within the United
States determined by the Trustees, a share register not more than one year old,
containing the names and addresses of the shareholders and the number of Shares
held by each Shareholder. The Trust shall also keep, at its principal executive
office, or at another place or places within the United States determined by the
Trustees, a record of the dates on which certificates representing Shares were
issued.
Section 5.3. Share Transfers. Upon compliance with any provisions
restricting the transferability of Shares that may be set forth in the
Declaration of Trust, these By-Laws, or any resolution or written agreement in
respect thereof, transfers of Shares of the Trust shall be made only on the
books of the Trust by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with an
officer of the Trust, or with a transfer agent or a registrar and on surrender
of any certificate or certificates for such Shares properly endorsed and the
payment of all taxes thereon. Except as may be otherwise provided by law or
these By-Laws, the person in whose name Shares stand on the books of the Trust
shall be deemed the owner thereof for all purposes as regards the Trust;
provided that whenever any transfer of Shares shall be made for collateral
security, and not absolutely, such fact, if known to an officer of the Trust,
shall be so expressed in the entry of transfer.
Section 5.4. Regulations. The Trustees may make such additional rules and
regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the issue, certification, transfer and registration of Shares of the
Trust. They may appoint, or authorize any officer or officers to appoint, one or
more transfer agents or one or more transfer clerks and one or more registrars
and may require all certificates for Shares to bear the signature or signatures
of any of them.
Section 5.5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing Shares of the Trust shall immediately notify the Trust
of any loss, destruction or mutilation of such certificate, and the Trust may
issue a new certificate in the place of any certificate theretofore issued by it
which the owner thereof shall allege to have been lost or destroyed or which
shall have been mutilated, and the Trustees may, in their discretion, require
such owner or his legal representatives to give to
<PAGE>
-10-
the Trust a bond in such sum, limited or unlimited, and in such form and with
such surety or sureties as the Trustees in their absolute discretion shall
determine, to indemnify the Trust against any claim that may be made against it
on account of the alleged loss or destruction of any such certificate, or the
issuance of a new certificate. Anything herein to the contrary notwithstanding,
the Trustees, in their absolute discretion, may refuse to issue any such new
certificate, except as otherwise required by law.
Section 5.6. Record Date: Certification of Beneficial Owner. (a) The
Trustees may fix a date not more than ninety days before the date of a meeting
of Shareholders as the date for the determination of the holders of Shares
entitled to notice of and entitled to vote at the meeting or any adjournment
thereof.
(b) The Trustees may fix a date for determining Shareholders entitled to
receive payment of any dividend or distribution or allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or exchange
of Shares.
(c) In the absence of such fixed record date, (i) the date for
determination of Shareholders entitled to notice of and entitled to vote at a
meeting of Shareholders shall be the later of the close of business on the day
on which notice of the meeting is mailed or the thirtieth day before the
meeting, and (ii) the date for determining Shareholders entitled to receive
payment of any dividend or distribution or an allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or exchange
of Shares shall be the close of business on the day on which the resolution of
the Trustees is adopted.
(c) A resolution approved by the affirmative vote of a majority of the
Trustees present may establish a procedure whereby a Shareholder may certify in
writing to the Trust that all or a portion of the Shares registered in the name
of the Shareholder are held for the account of one or more beneficial owners.
Upon receipt by the Trust of the writing, the persons specified as beneficial
owners, rather than the actual Shareholders, are deemed the Shareholders for the
purposes specified in the writing.
ARTICLE VI
MISCELLANEOUS
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Section 6.1. Fiscal Year. The fiscal year of the Trust shall be as fixed
by the Trustees of the Trust.
Section 6.2. Notice and Waiver of Notice. (a) Any notice of a meeting
required to be given under these By-Laws to Shareholders or Trustees, or both,
may be waived by any such person (i) orally or in writing signed by such person
before, at or after the meeting or (ii) by attendance at the meeting in person
or, in the case of a Shareholder, by proxy.
(b) Except as otherwise specifically provided herein, all notices required
by these By-Laws shall be printed or written, and shall be delivered either
personally, by telecopy, telegraph or cable, or by mail or courier or delivery
service, and, if mailed, shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the Shareholder or Trustee at
his address as it appears on the records of the Trust.
ARTICLE VII
AMENDMENTS
Section 7.1. These By-Laws may be amended or repealed, or new By-Laws may
be adopted, by the Trustees at any meeting thereof or by action of the Trustees
by written consent in lieu of a meeting.
<PAGE>
Number Class [ ] Shares
Nuveen Investment Trust IV
[Name of Series]
Organized Under the Laws of the Commonwealth of Massachusetts
This is to certify that See Reverse for
is the owner of Certain Definitions
CUSIP
Fully Paid and Non-Assessable Class [ ] Shares
- -------------------------------------------------------------------------------
of beneficial interest, with the par value of one-cent ($.01) each, of the [Name
of Series] series of the Nuveen Investment Trust IV (herein called the "Trust")
transferable on the books of the Trust by the holder hereof in person or by duly
authorized attorney upon surrender of this certificate properly endorsed. The
shares represented by this certificate are issued and held subject to all of the
provisions of the Declaration of Trust establishing the Trust as a Massachusetts
business trust and any amendments thereto and any designation of classes, and
the By-Laws of the Trust, and any amendments thereto, copies of which are on
file with the Transfer Agent, to all of which the holder by acceptance hereof
expressly assents. This certificate is executed on behalf of the Trust by the
officers as officers and not individually and the obligations hereof are not
binding upon any of the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Trust. This certificate is not
valid unless countersigned by the Transfer Agent.
WITNESS THE FACsimile signatures of its duly authorized officers.
Dated:
Nuveen Investment Trust IV
Secretary, President, Nuveen
Nuveen Investment Trust IV Investment Trust IV
<PAGE>
Nuveen Investment Trust IV
[Name of Series]
Nuveen Investment Trust IV (the "Trust") will furnish to any shareholder, upon
request and without charge, a full statement of the designations, preferences,
limitation as to dividends, qualifications and terms and conditions of
redemption and relative rights and preferences of the shares of each class or
series of the Trust authorized to be issued, so far as they have been
determined, and the authority of the Board of Trustees to determine the relative
rights and preferences of subsequent classes or series. Any such request should
be addressed to the Secretary of the Trust.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - ________ Custodian _______ under Uniform gifts
(Cust) (Minor)
to Minors Act _______
(State)
Additional abbreviations may also be used though not in the above list.
________________________________________________________________________________
For value received, ________ hereby sell, assign and transfer unto
__________________________________
Please insert social security or other identifying number of assignee
________________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
________________________________________________________________________________
______________________________________________________________________ Shares of
beneficial interest represented by the within certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
____________________________________________________________________ Attorney to
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transfer the said shares on the books of the within-named Trust with full power
of substitution in the premises.
Dated, _________________ NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the certificate in every particular, without
alteration or enlargement or any change whatever.
Owner __________________ The signature(s) must be guaranteed by one of the
following entities: U.S. bank, trust company,
credit union, savings association, or foreign bank
having a U.S. correspondent bank: a U.S. registered
securities dealer or broker, municipal securities
dealer or broker, or government securities dealer
or broker; or a national securities exchange,
registered securities association or clearing
agency.
Signature of Co-Owner, if any
_________________________________
Signature(s) guaranteed by:
________________________________________________________________________________
PLEASE NOTE: This document contains a watermark when viewed at an angle. It is
invalid without this watermark: NUVEEN
________________________________________________________________________________
This Space Must Not Be Covered In Any Way
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Management Agreement
Between
Nuveen Investment Trust IV
and
Nuveen Institutional Advisory Corp.
Nuveen Investment Trust IV, a Massachusetts business trust registered under
the Investment Company Act of 1940 ("1940 Act") as an open-end diversified
management series investment company ("Trust"), hereby appoints Nuveen
Institutional Advisory Corp., a Delaware corporation registered under the
Investment Advisers Act of 1940 as an investment adviser, of Chicago, Illinois
("Manager"), to furnish investment advisory and management services and certain
administrative services with respect to the portion of its assets represented by
the shares of beneficial interest issued in the series listed in Schedule A
hereto, as such schedule may be amended from time to time (each such series
hereinafter referred to as "Fund"). Trust and Manager hereby agree that:
1. Investment Management Services. Manager shall manage the investment
operations of Trust and each Fund, subject to the terms of this Agreement
and to the supervision and control of Trust's Board of Trustees
("Trustees"). Manager agrees to perform, or arrange for the performance of,
the following services with respect to each Fund:
(a) to obtain and evaluate such information relating to
economies, industries, businesses, securities and commodities markets,
and individual securities, commodities and indices as it may deem
necessary or useful in discharging its responsibilities hereunder;
(b) to formulate and maintain a continuous investment program in
a manner consistent with and subject to (i) Trust's agreement and
declaration of trust and by-laws; (ii) the Fund's investment
objectives, policies, and restrictions as set forth in written
documents furnished by the Trust to Manager; (iii) all securities,
commodities, and tax laws and regulations applicable to the Fund and
Trust; and (iv) any other written limits or directions furnished by
the Trustees to Manager;
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(c) unless otherwise directed by the Trustees, to determine from
time to time securities, commodities, interests or other investments
to be purchased, sold, retained or lent by the Fund, and to implement
those decisions, including the selection of entities with or through
which such purchases, sales or loans are to be effected;
(d) to use reasonable efforts to manage the Fund so that it will
qualify as a regulated investment company under subchapter M of the
Internal Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting
rights, rights to consent to Trust or Fund action, and any other
rights pertaining to Trust or the Fund shall be exercised;
(f) to make available to Trust promptly upon request all of the
Fund's records and ledgers and any reports or information reasonably
requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory
authorities any information or reports relating to the services
provided pursuant to this Agreement.
Except as otherwise instructed from time to time by the Trustees, with
respect to execution of transactions for Trust on behalf of a Fund, Manager
shall place, or arrange for the placement of, all orders for purchases,
sales, or loans with issuers, brokers, dealers or other counterparts or
agents selected by Manager. In connection with the selection of all such
parties for the placement of all such orders, Manager shall attempt to
obtain most favorable execution and price, but may nevertheless in its sole
discretion as a secondary factor, purchase and sell portfolio securities
from and to brokers and dealers who provide Manager with statistical,
research and other information, analysis, advice, and similar services. In
recognition of such services or brokerage services provided by a broker or
dealer, Manager is hereby authorized to pay such broker or dealer a
commission or spread in excess of that which might be charged by another
broker or dealer for the same transaction if the Manager determines in good
faith that the commission or spread is reasonable in relation to the value
of the services so provided.
Trust hereby authorizes any entity or person associated with Manager
that is a member of a national securities exchange to effect any
transaction on the exchange for the account of a Fund to the extent
permitted by and in accordance with Section 11(a)
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of the Securities Exchange Act or 1934 and Rule 11a2-2(T) thereunder. Trust
hereby consents to the retention by such entity or person of compensation
for such transactions in accordance with Rule 11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate orders for its
other customers together with any securities of the same type to be sold or
purchased for Trust or one or more Funds in order to obtain best execution
or lower brokerage commissions. In such event, Manager shall allocate the
shares so purchased or sold, as well as the expenses incurred in the
transaction, in a manner it considers to be equitable and fair and
consistent with its fiduciary obligations to Trust, the Funds, and
Manager's other customers.
Manager shall for all purposes be deemed to be an independent
contractor and not an agent of Trust and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent Trust in
any way.
2. Administrative Services. Subject to the terms of this Agreement and
to the supervision and control of the Trustees, Manager shall provide to
the Trust facilities, equipment, statistical and research data, clerical,
accounting and bookkeeping services, internal auditing and legal services,
and personnel to carry out all management services required for operation
of the business and affairs of the Funds other than those services to be
performed by the Trust's Distributor pursuant to the Distribution
Agreement, those services to be performed by the Trust's Custodian pursuant
to the Custody Agreement, those services to be performed by the Trust's
Transfer Agent pursuant to the Transfer Agency Agreement, those services to
be provided by the Trust's Custodian pursuant to the Accounting Agreement
and those services normally performed by the Trust's counsel and auditors.
3. Use of Affiliated Companies and Subcontractors. In connection with
the services to be provided by Manager under this Agreement, Manager may,
to the extent it deems appropriate, and subject to compliance with the
requirements of applicable laws and regulations, make use of (i) its
affiliated companies and their directors, trustees, officers, and employees
and (ii) subcontractors selected by Manager, provided that Manager shall
supervise and remain fully responsible for the services of all such third
parties in accordance with and to the extent provided by this Agreement.
All costs and expenses associated with services provided by any such third
parties shall be borne by Manager or such parties.
4. Expenses Borne by Trust. Except to the extent expressly assumed by
Manager herein or under a separate agreement between Trust and Manager and
except
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to the extent required by law to be paid by Manager, Manager shall not be
obligated to pay any costs or expenses incidental to the organization,
operations or business of the Trust. Without limitation, such costs and
expenses shall include but not be limited to:
(a) all charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities, and other
property;
(b) all charges for equipment or services used for obtaining
price quotations or for communication between Manager or Trust and the
custodian, transfer agent or any other agent selected by Trust;
(c) all charges for and accounting services provided to Trust by
Manager, or any other provider of such services;
(d) all charges for services of Trust's independent auditors and
for services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated
with Manager, all expenses incurred in connection with their services
to Trust, and all expenses of meetings of the Trustees or committees
thereof;
(f) all expenses incidental to holding meetings of holders of
units of interest in the Trust ("Shareholders"), including printing
and of supplying each record-date Shareholder with notice and proxy
solicitation material, and all other proxy solicitation expense;
(g) all expenses of printing of annual or more frequent revisions
of Trust prospectus(es) and of supplying each then-existing
Shareholder with a copy of a revised prospectus;
(h) all expenses related to preparing and transmitting
certificates representing Trust shares;
(i) all expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident to
the purchase, sale, or lending of portfolio securities;
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(k) all taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including all stamp
or other transfer taxes;
(l) all expenses of registering and maintaining the registration
of Trust under the 1940 Act and, to the extent no exemption is
available, expenses of registering Trust's shares under the 1933 Act,
of qualifying and maintaining qualification of Trust and of Trust's
shares for sale under securities laws of various states or other
jurisdictions and of registration and qualification of Trust under all
other laws applicable to Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a
Fund; and
(n) all fees, dues and other expenses incurred by Trust in
connection with membership of Trust in any trade association or other
investment company organization.
5. Allocation of Expenses Borne by Trust. Any expenses borne by Trust
that are attributable solely to the organization, operation or business of
a Fund shall be paid solely out of Fund assets. Any expense borne by Trust
which is not solely attributable to a Fund, nor solely to any other series
of shares of Trust, shall be apportioned in such manner as Manager
determines is fair and appropriate, or as otherwise specified by the Board
of Trustees.
6. Expenses Borne by Manager. Manager at its own expense shall furnish
all executive and other personnel, office space, and office facilities
required to render the investment management and administrative services
set forth in this Agreement.
In the event that Manager pays or assumes any expenses of Trust or a
Fund not required to be paid or assumed by Manager under this Agreement,
Manager shall not be obligated hereby to pay or assume the same or similar
expense in the future; provided that nothing contained herein shall be
deemed to relieve Manager of any obligation to Trust or a Fund under any
separate agreement or arrangement between the parties.
7. Management Fee. For the services rendered, facilities provided, and
charges assumed and paid by Manager hereunder, Trust shall pay to Manager
out of the assets of each Fund fees at the annual rate for such Fund as set
forth in Schedule B to this Agreement. For each Fund, the management fee
shall accrue on each calendar
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day, and shall be payable monthly on the first business day of the next
succeeding calendar month. The daily fee accrual shall be computed by
multiplying the fraction of one divided by the number of days in the
calendar year by the applicable annual rate of fee, and multiplying this
product by the net assets of the Fund, determined in the manner established
by the Board of Trustees, as of the close of business on the last preceding
business day on which the Fund's net asset value was determined.
8. State Expense Limitation. If for any fiscal year of a Fund, its
aggregate operating expenses ("Aggregate Operating Expenses") exceed the
applicable percentage expense limit imposed under the securities law and
regulations of any state in which Shares of the Fund are qualified for sale
(the "State Expense Limit"), the Manager shall pay such Fund the amount of
such excess. For purposes of this State Expense Limit, Aggregate Operating
Expenses shall (a) include (i) any fees or expenses reimbursements payable
to Manager pursuant to this Agreement and (ii) to the extent the Fund
invests all or a portion of its assets in another investment company
registered under the 1940 Act, the pro rata portion of that company's
operating expenses allocated to the Fund, and (iii) any compensation
payable to Manager pursuant to any separate agreement relating to the
Fund's administration, but (b) exclude any interest, taxes, brokerage
commissions, and other normal charges incident to the purchase, sale or
loan of securities, commodity interests or other investments held by the
Fund, litigation and indemnification expense, and other extraordinary
expenses not incurred in the ordinary course of business. Except as
otherwise agreed to by the parties or unless otherwise required by the law
or regulation of any state, any reimbursement by Manager to a Fund under
this section shall not exceed the management fee payable to Manager by the
Fund under this Agreement.
Any payment to a Fund by Manager hereunder shall be made monthly, by
annualizing the Aggregate Operating Expenses for each month as of the last
day of the month. An adjustment for payments made during any fiscal year of
the Fund shall be made on or before the last day of the first month
following such fiscal year of the Fund if the Annual Operating Expenses for
such fiscal year (i) do not exceed the State Expense Limitation or (ii) for
such fiscal year there is no applicable State Expense Limit.
9. Retention of Sub-Adviser. Subject to obtaining the initial and
periodic approvals required under Section 15 of the 1940 Act, Manager may
retain one or more sub-advisers at Manager's own cost and expense for the
purpose of furnishing one or more of the services described in Section 1
hereof with respect to Trust or one or more Funds. Retention of a sub-
adviser shall in no way reduce the responsibilities or obligations of
Manager under this Agreement, and Manager shall be responsible to
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Trust and its Funds for all acts or omissions of any sub-adviser in
connection with the performance or Manager's duties hereunder.
10. Non-Exclusivity. The services of Manager to Trust hereunder are
not to be deemed exclusive and Manager shall be free to render similar
services to others.
11. Standard of Care. The Manager shall not be liable for any loss
sustained by reason of the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon
the investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been selected with due care
and in good faith, except loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of the Manager in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
12. Amendment. This Agreement may not be amended as to the Trust or
any Fund without the affirmative votes (a) of a majority of the Board of
Trustees, including a majority of those Trustees who are not "interested
persons" of Trust or of Manager, voting in person at a meeting called for
the purpose of voting on such approval, and (b) of a "majority of the
outstanding shares" of Trust or, with respect to any amendment affecting an
individual Fund, a "majority of the outstanding shares" of that Fund. The
terms "interested persons" and "vote of a majority of the outstanding
shares" shall be construed in accordance with their respective definitions
in the 1940 Act and, with respect to the latter term, in accordance with
Rule 18f-2 under the 1940 Act.
13. Effective Date and Termination. This Agreement shall become
effective as to any Fund as of the effective date for that Fund specified
in Schedule A hereto. This Agreement may be terminated at any time, without
payment of any penalty, as to any Fund by the Board of Trustees of Trust,
or by a vote of a majority of the outstanding shares of that fund, upon at
least sixty (60) days' written notice to Manager. This Agreement may be
terminated by Manager at any time upon at least sixty (60) days' written
notice to Trust. This Agreement shall terminate automatically in the event
of its "assignment" (as defined in the 1940 Act). Unless terminated as
hereinbefore provided, this Agreement shall continue in effect with respect
to any Fund for an initial period of two (2) years from the effective date
applicable to that Fund specified in Schedule A and thereafter from year to
year only so long as such continuance is specifically approved with respect
to that Fund at least annually (a) by a majority of those Trustees who are
not interested persons of Trust or of Manager, voting in person at a
meeting called for the purpose of voting on such approval, and
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(b) by either the Board of Trustees of Trust or by a "vote of a majority of
the outstanding shares" of the Fund.
14. Ownership of Records; Interparty Reporting. All records required
to be maintained and preserved by Trust pursuant to the provisions of rules
or regulations of the Securities and Exchange Commission under Section
31(a) of the 1940 Act or other applicable laws or regulations which are
maintained and preserved by Manager on behalf of Trust and any other
records the parties mutually agree shall be maintained by Manager on behalf
of Trust are the property of Trust and shall be surrendered by Manager
promptly on request by Trust; provided that Manager may at its own expense
make and retain copies of any such records.
Trust shall furnish or otherwise make available to Manager such copies
of the financial statements, proxy statements, reports, and other
information relating to the business and affairs of each Shareholder in a
Fund as Manager may, at any time or from time to time, reasonably require
in order to discharge its obligations under this Agreement.
Manager shall prepare and furnish to Trust as to each Fund statistical
data and other information in such form and at such intervals as Trust may
reasonably request.
15. Non-Liability of Trustees and Shareholders. Any obligation of
Trust hereunder shall be binding only upon the assets of Trust (or the
applicable Fund thereof) and shall not be binding upon any Trustee,
officer, employee, agent or Shareholder of Trust. Neither the authorization
of any action by the Trustees or Shareholders of Trust nor the execution of
this Agreement on behalf of Trust shall impose any liability upon any
Trustee or any Shareholder.
16. Use of Manager's Name. Trust may use the name "Nuveen Investment
Trust IV" and the Fund names listed in Schedule A or any other name derived
from the name "Nuveen" only for so long as this Agreement or any extension,
renewal, or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the business
of Manager as investment adviser. At such time as this Agreement or any
extension, renewal or amendment hereof, or such other similar agreement
shall no longer be in effect, Trust will cease to use any name derived from
the name "Nuveen" or otherwise connected with Manager, or with any
organization which shall have succeeded to Manager's business as investment
adviser.
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17. References and Headings. In this Agreement and in any such
amendment, references to this Agreement and all expressions such as
"herein," "hereof," and "hereunder" shall be deemed to refer to this
Agreement as amended or affected by any such amendments. Headings are
placed herein for convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction, or effect of
this Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
Dated: August 26, 1998
Nuveen Investment Trust IV
Attest By /s/ Gifford R. Zimmerman
----------------------------------------
Vice President
/s/ Karen L. Healy
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Assistant Secretary
Nuveen Institutional Advisory Corp.
Attest By /s/ Alan G. Berkshire
----------------------------------------
Vice President
/s/ Larry Martin
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Assistant Secretary
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Nuveen Investment Trust IV
Management Agreement
Schedule A
The Funds of the Trust currently subject to this Agreement and the
effective date of each are as follows:
FUND EFFECTIVE DATE INITIAL TERM
Nuveen Dividend and Growth Fund ____________________ Until__________
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Nuveen Investment Trust IV
Management Agreement
Schedule B
Compensation pursuant to Section 7 of this Agreement shall be calculated
with respect to each Fund in accordance with the following schedule applicable
to the average daily net assets of the Fund:
Nuveen Dividend and Growth Fund
Average Daily Net Asset Value Fund Management Fee
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1%
For the next $250 million .7250 of 1%
For the next $500 million .7125 of 1%
For the next $1 billion .7000 of 1%
For assets over $2 billion .6750 of 1%
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DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made as of this 26th of August, l998 between NUVEEN INVESTMENT
TRUST IV, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund"), and JOHN NUVEEN & CO. INCORPORATED, a Delaware
corporation (the "Underwriter").
W I T N E S S E T H
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In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the distribution
of shares of beneficial interest, par value $.0l per share, including such
series or classes of shares as may now or hereafter be authorized, (the
"Shares") in jurisdictions wherein Shares may legally be offered for sale;
provided, however, that the Fund, in its absolute discretion, may: (a) issue or
sell Shares directly to holders of Shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; and (b) issue or
sell Shares at net asset value in connection with merger or consolidation with,
or acquisition of the assets of, other investment companies or similar
companies.
2. The Underwriter hereby accepts appointment as agent for the
distribution of the Shares and agrees that it will use its best efforts to sell
such part of the authorized Shares remaining unissued as from time to time shall
be effectively registered under the Securities Act of l933 ("Securities Act"),
at prices determined as hereinafter provided and on terms hereinafter set forth,
all subject to applicable Federal and State laws and regulations and to the
Declaration of Trust of the Fund.
3. The Fund agrees that it will use its best efforts to keep effectively
registered under the Securities Act for sale, as herein contemplated, such
Shares as the Underwriter shall reasonably request and as the Securities and
Exchange Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Fund may terminate,
suspend, or withdraw the offering of the Shares, or Shares of any series or
class, whenever, in its sole discretion, it deems such action to be desirable.
5. The Underwriter shall sell Shares to, or through, brokers, dealers,
banks or other qualified financial intermediaries (hereinafter referred to as
"dealers"), or others, in such manner not inconsistent with the provisions
hereof and the then effective Registration Statement of the Fund under the
Securities Act (and related Prospectus and Statement of Additional Information)
as the Underwriter may determine from time to time, provided that no dealer, or
other person, shall be appointed nor authorized to act as agent of the Fund
<PAGE>
without the prior consent of the Fund. The Underwriter shall have the right to
enter into agreements with brokers, dealers and banks (referred to herein as
"dealers") of its choice for the sale of Shares and fix therein the portion of
the sales charge which may be allocated to such dealers; provided that the Fund
shall approve the form of such agreements and shall evidence such approval by
filing said form and any amendments thereto as attachments to this Agreement,
which shall be filed as an exhibit to the Fund's currently effective
registration statement under the Securities Act. Shares sold to dealers shall be
for resale by such dealers only at the public offering price(s) set forth in the
Fund's then current Prospectus. The current forms of such agreements are
attached hereto as Exhibits 1, 2 and 3.
6. Shares offered for sale, or sold by the Underwriter, shall be so
offered or sold at a price per Share determined in accordance with the then
current Prospectus relating to the sale of Shares except as departure from such
prices shall be permitted by the rules and regulations of the Securities and
Exchange Commission. Any public offering price shall be the net asset value per
Share plus a sales charge of not more than 5.75% of such public offering price.
Shares may be sold at net asset value without a sales charge to such class or
classes of investors or in such class or classes of transactions as may be
permitted under applicable rules of the Securities and Exchange Commission and
as described in the then current Prospectus of the Fund. The net asset value per
Share of each series or class shall be calculated in accordance with the
Declaration of Trust of the Fund and shall be determined in the manner, and at
the time, set forth in the then current Prospectus of the Fund relating to such
Shares.
7. The price the Fund shall receive for all Shares purchased from the Fund
shall be the net asset value used in determining the public offering price
applicable to the sale of such Shares. The excess, if any, of the sales price
over the net asset value of Shares sold by the Underwriter as agent shall be
retained by the Underwriter as a commission for its services hereunder. Out of
such commission, the Underwriter may allow commissions or concessions to dealers
in such amounts as the Underwriter shall determine from time to time. Except as
may be otherwise determined by the Underwriter and the Fund from time to time,
such commissions or concessions shall be uniform to all dealers.
8. The Underwriter shall issue and deliver, or cause to be issued and
delivered, on behalf of the Fund such confirmations of sales made by it as
agent, pursuant to this Agreement, as may be required. At, or prior to, the
time of issuance of Shares, the Underwriter will pay, or cause to be paid, to
the Fund the amount due the Fund for the sale of such Shares. Certificates
shall be issued, or Shares registered on the transfer books of the Fund, in such
names and denominations as the Underwriter may specify.
9. The Fund will execute any and all documents, and furnish any and all
information, which may be reasonably necessary in connection with the
qualification of the Shares for sale (including the qualification of the Fund as
a dealer, where necessary or advisable) in such states as the Underwriter may
reasonably request (it being understood that the
2
<PAGE>
Fund shall not be required, without its consent, to comply with any requirement
which, in its opinion, is unduly burdensome).
10. The Fund will furnish to the Underwriter, from time to time, such
information with respect to the Fund and the Shares as the Underwriter may
reasonably request for use in connection with the sale of Shares. The
Underwriter agrees that it will not use or distribute, nor will it authorize
dealers or others to use, distribute or disseminate, in connection with the sale
of such Shares, any statements other than those contained in the Fund's current
Prospectus and Statement of Additional Information, except such supplemental
literature or advertising as shall be lawful under Federal and State securities
laws and regulations, and that it will furnish the Fund with copies of all such
material.
11. The Underwriter shall order Shares from the Fund only to the extent
that it shall have received purchase orders therefor. The Underwriter will not
make, nor authorize any dealers or others, to make: (a) any short sale of
Shares; or (b) any sale of Shares to any officer or trustee of the Fund, nor to
any officer or trustee of the Underwriter, or of any corporation or association
furnishing investment advisory, managerial, or supervisory services to the Fund,
nor to any such corporation or association, unless such sales are made in
accordance with the then current Prospectus relating to the sale of such Shares.
12. In selling Shares for the account of the Fund, the Underwriter will in
all respects conform to the requirements of all Federal and State laws and the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
relating to such sales, and will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by the Underwriter or any
employee, representative, or agent of the Underwriter. The Underwriter will
observe and be bound by all the provisions of the Declaration of Trust of the
Fund (and of any fundamental policies adopted by the Fund pursuant to the
Investment Company Act of l940, notice of which shall have been given by the
Fund to the Underwriter) which at the time in any way require, limit, restrict,
prohibit or otherwise regulate any action on the part of the Underwriter.
13. The Underwriter will require each dealer to conform to the provisions
hereof and of the Registration Statement (and related Prospectus) at the time in
effect under the Securities Act with respect to the public offering price of the
Shares, and neither the Underwriter nor any such dealer shall withhold the
placing of purchase orders so as to make a profit thereby.
14. The Fund will pay, or cause to be paid, expenses (including the fees
and disbursements of its own counsel) of any registration of Shares under the
Securities Act, expenses of qualifying or continuing the qualification of the
Shares for sale and, in connection therewith, of qualifying or continuing the
qualification of the Fund as a dealer or broker under the laws of such states as
may be designated by the Underwriter under the conditions herein specified, and
expenses incident to the issuance of the Shares such as the cost of Share
certificates, issue taxes, and fees of the transfer and shareholder service
agent. The Underwriter will pay, or cause to be paid, all expenses (other than
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<PAGE>
expenses which any dealer may bear pursuant to any agreement with the
Underwriter) incident to the sale and distribution of the Shares issued or sold
hereunder, including, without limiting the generality of the foregoing, all: (a)
expenses of printing and distributing any Prospectus and Statement of Additional
Information and of preparing, printing and distributing or disseminating any
other literature, advertising and selling aids in connection with such offering
of the Shares for sale (except that such expenses need not include expenses
incurred by the Fund in connection with the preparation, printing and
distribution of any report or other communication to holders of Shares in their
capacity as such), and (b) expenses of advertising in connection with such
offering. No transfer taxes, if any, which may be payable in connection with the
issue or delivery of Shares sold as herein contemplated, or of the certificates
for such Shares, shall be borne by the Fund, and the Underwriter will indemnify
and hold harmless the Fund against liability for all such transfer taxes.
15. This agreement shall continue in effect until August l, l999, unless
and until terminated by either party as hereinafter provided, and will continue
from year to year thereafter, but only so long as such continuance is
specifically approved, at least annually, in the manner required by the
Investment Company Act of l940. Either party hereto may terminate this agreement
on any date by giving the other party at least six months' prior written notice
of such termination, specifying the date fixed therefor. Without prejudice to
any other remedies of the Fund in any such event, the Fund may terminate this
agreement at any time immediately upon any failure of fulfillment of any of the
obligations of the Underwriter hereunder.
Without prejudice to any other remedies of the Fund in any such event, the Fund
may terminate this Agreement at any time immediately upon any failure of
fulfillment of any of the obligations of the Underwriter hereunder.
16. This agreement shall automatically terminate in the event of its
assignment.
17. Any notice under this agreement shall be in writing, addressed, and
delivered or mailed, postage pre-paid, to the other party at such address as
such other party may designate for the receipt of such notice.
18. The Declaration of Trust of the Fund on file with the Secretary of
State of the Commonwealth of Massachusetts was executed on behalf of the Fund by
the initial trustees of the Fund and not individually, and any obligation of the
Fund shall be binding only upon the assets of the Fund (or applicable series
thereof) and shall not be binding upon any trustee, officer or shareholder of
the Fund. Neither the authorization of any action by the trustees or
shareholders of the Fund nor the execution of this agreement on behalf of the
Fund shall impose any liability upon any Trustee, officer or shareholder of the
Fund.
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IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
agreement to be executed on its behalf as of the day and year first above
written.
NUVEEN INVESTMENT TRUST IV
By /s/ Gifford R. Zimmerman
-----------------------------
Vice President
Attest:
/s/ Karen L. Healy
- ---------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By /s/ Alan G. Berkshire
-----------------------------
Vice President
Attest:
/s/ Larry Martin
- ----------------
Assistant Secretary
<PAGE>
Exhibit 8
CUSTODY AGREEMENT
=================
THIS AGREEMENT is made this th day of , 1998 by and between NUVEEN
INVESTMENT TRUST IV (the "Fund"), and THE CHASE MANHATTAN BANK.
W I T N E S S E T H
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interest in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, Nuveen
Rittenhouse Growth Fund (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 33, being herein referred to as the "Fund(s)"):
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints The Chase Manhattan Bank to act
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as custodian of its portfolio securities, cash and other property on the terms
set forth in this Agreement. The Chase Manhattan Bank accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Section 23 of this Agreement.
2. Delivery of Documents. The Fund has furnished The Chase Manhattan Bank
---------------------
with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the appointment
of The Chase Manhattan Bank as Custodian of the portfolio securities, cash and
other property of the Fund and approving this Agreement;
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(b) Incumbency and signature certificates identifying and containing the
signatures of the Fund's officers and/or the persons authorized to sign Proper
Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Declaration of Trust filed with the Commonwealth of
Massachusetts and all amendments thereto (such Declaration of Trust as currently
in effect and from time to time, be amended, are herein called the
"Declaration");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws"),
(e) Resolutions of the Fund's Board of Trustees appointing the investment
advisor of the Fund and resolutions of the Fund's Board of Trustees and the
Fund's Shareholders approving the proposed Investment Advisory Agreement between
the Fund and the advisor (the "Advisory Agreement");
(f) The Advisory Agreement
(g) The Fund's Registration Statement on Form N-1A under the 1940 Act and
the Securities Act of 1933, as amended ("the 1933 Act") as filed with the SEC;
and
(h) The Fund's most recent prospectus and statement of additional
information including all amendments and supplements thereto (the "Prospectus").
Upon request the Fund will furnish The Chase Manhattan Bank with copies of
all amendments of or supplements to the foregoing, if any. The Fund will also
furnish The Chase Manhattan Bank upon request with a copy of the opinion of
counsel for the Fund with respect to the validity of the Shares and the status
of such Shares under the 1933 Act filed with the SEC, and any other applicable
federal law or regulation.
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<PAGE>
3. Definitions.
-----------
(a) "Authorized Person". As used in this Agreement, the term "Authorized
Person" means the Fund's President, Treasurer and any other person, whether or
not any such person is an officer or employee of the Fund, duly authorized by
the Board of Trustees of the Fund to give Proper Instructions on behalf of the
Fund as set forth in resolutions of the Fund's Board of Trustees.
(b) "Book-Entry System". As used in this Agreement, the term "Book-Entry
System" means a book-entry system authorized by the U.S. Department of Treasury,
its successor or successors and its nominee or nominees.
(c) "Proper Instructions". Proper Instructions as used herein means a
writing signed or initialled by two or more persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if The Chase Manhattan Bank reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
such oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and The Chase Manhattan Bank are
satisfied that such procedures afford adequate safeguards for the Fund's assets.
For purposes of this Section, Proper Instructions shall include instructions
received by The Chase Manhattan Bank pursuant to any three-party agreement which
requires a segregated asset account in accordance with Section 9.
(d) "Property". The term "Property", as used in this Agreement, means:
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(i) any and all securities and other property of the Fund which the Fund
may from time to time deposit, or cause to be deposited, with The Chase
Manhattan Bank or which The Chase Manhattan Bank may from time to time hold
for the Fund;
(ii) all income in respect of any such securities or other property;
(iii) all proceeds of the sales of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Fund, which are
received by The Chase Manhattan Bank from time to time from or on behalf of
the Fund.
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee or
nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Trustees approving deposits by The Chase
Manhattan Bank therein.
4. Delivery and Registration of the Property. The Fund will deliver or
-----------------------------------------
cause to be delivered to The Chase Manhattan Bank all securities and all moneys
owned by it, including payments of interest, principal and capital distributions
and cash received for the issuance of its Shares, at any time during the period
of this Agreement, except for securities and monies to be delivered to any
subcustodian appointed pursuant to Section 7 hereof. The Chase Manhattan Bank
will not be responsible for such securities and such monies until actually
received by it. All securities delivered to The Chase Manhattan Bank or to any
such subcustodian (other than in bearer form) shall be registered in the name of
the Fund or in the name of a nominee of the Fund or in the name of The Chase
Manhattan Bank or any nominee of The Chase Manhattan Bank (with or without
indication of fiduciary
4
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status) or in the name of any subcustodian or any nominee of such subcustodian
appointed pursuant to Paragraph 7 hereof or shall be properly endorsed and in
form for transfer satisfactory to The Chase Manhattan Bank.
5. Voting Rights. With respect to all securities, however registered, it
-------------
is understood that the voting and other rights and powers shall be exercised by
the Fund. The Chase Manhattan Bank's only duty shall be to mail for delivery on
the next business day to the Fund any documents received, including proxy
statements and offering circulars, with any proxies for securities registered in
a nominee name executed by such nominee. Where warrants, options, tenders or
other securities have fixed expiration dates, the Fund understands that in order
for The Chase Manhattan Bank to act, The Chase Manhattan Bank must receive the
Fund's instructions at its offices in New York, addressed as The Chase Manhattan
Bank may from time to time request, by no later than noon (NY City time) at
least one business day prior to the last scheduled date to act with respect
thereto (or such earlier date or time as The Chase Manhattan Bank may reasonably
notify the Fund). Absent The Chase Manhattan Bank's timely receipt of such
instructions, such instruments will expire without liability to The Chase
Manhattan Bank.
6. Receipt and Disbursement of Money.
---------------------------------
(a) The Chase Manhattan Bank shall open and maintain a custody account for
the Fund, subject only to draft or order by The Chase Manhattan Bank acting
pursuant to the terms of this Agreement, and shall hold in such account, subject
to the provisions hereof, all cash received by it from or for the Fund other
than cash maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the 1940 Act. Funds held by The Chase
Manhattan Bank for the Fund may be deposited by it to its credit at The Chase
Manhattan Bank in the Banking Department of The Chase Manhattan Bank or in such
other banks or trust companies as it may in its discretion deem necessary or
desirable; provided,
5
<PAGE>
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act, and that each such bank or trust company shall be
approved by vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by The Chase Manhattan Bank in its capacity as Custodian and
shall be withdrawable by The Chase Manhattan Bank only in that capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) The Chase Manhattan Bank
shall make payments of cash to, or for the account of, the Fund from such cash
only (i) for the purchase of securities, options, futures contracts or options
on futures contracts for the Fund as provided in Section 13 hereof; (ii) in the
case of a purchase of securities effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set forth in Section 8
hereof; (iii) in the case of repurchase agreements entered into between the Fund
and The Chase Manhattan Bank, or another bank, or a broker-dealer which is a
member of The National Association of Securities Dealers, Inc. ("NASD"), either
(a) against delivery of the securities either in certificate form or through an
entry crediting The Chase Manhattan Bank's account at the Federal Reserve Bank
with such securities or (b) against delivery of the receipt evidencing purchase
by the Fund of securities owned by The Chase Manhattan Bank along with written
evidence of the agreement by The Chase Manhattan Bank to repurchase such
securities from the Fund; (iv) for transfer to a time deposit account of the
Fund in any bank, whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund; (v) for the payment of dividends
or other distributions on shares declared pursuant to the governing documents of
the Fund, or for the payment of interest, taxes, administration, distribution or
advisory fees or expenses which are to be borne by the Fund under the terms of
this Agreement, any Advisory Agreement, or any
6
<PAGE>
administration agreement; (vi) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund and held
by or to be delivered to The Chase Manhattan Bank; (vii) to a subcustodian
pursuant to Section 7 hereof; (viii) for such common expenses incurred by the
Fund in the ordinary course of its business, including but not limited to
printing and mailing expenses, legal fees, accountants fees, exchange fees; or
(ix) for any other proper purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of Trustees
or of the Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
(c) The Chase Manhattan Bank is hereby authorized to endorse and collect
all checks, drafts or other orders for the payment of money received as
custodian for the Fund.
6A. Advances by Custodian. The Custodian may from time to time agree to
advance cash to the Fund, without interest, for the fund's other proper
corporate purposes. If the Custodian advances cash for any purpose, the Fund
shall and hereby does grant to the Custodian a security interest in Fund
securities equal in value to the amount of the cash advance but in no event
shall the value of securities in which a security interest has been granted
exceed 20% of the value of the Fund's total assets at the time of the pledge;
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to reasonably dispose of any securities
in which it has a security interest to the extent necessary to obtain
reimbursement.
7
<PAGE>
7. Receipt and Delivery of Securities.
----------------------------------
(a) Except as provided by Section 8 hereof, The Chase Manhattan Bank shall
hold and physically segregate all securities and noncash Property received by it
for the Fund. All such securities and non-cash Property are to be held or
disposed of by The Chase Manhattan Bank for the Fund pursuant to the terms of
this Agreement. In the absence of Proper Instructions accompanied by a certified
resolution authorizing the specific transaction by the Fund's Board, The Chase
Manhattan Bank shall have no power or authority to withdraw, deliver, assign,
hypothecate, pledge or otherwise dispose of any such securities and investments,
except in accordance with the express terms provided for in this Agreement. In
no case may any director, officer, employee or agent of the Fund withdraw any
securities. In connection with its duties under this Section 7, The Chase
Manhattan Bank may, at its own expense, enter into subcustodian agreements with
other banks or trust companies for the receipt of certain securities and cash to
be held by The Chase Manhattan Bank for the account of the Fund pursuant to this
Agreement; provided that each such bank or trust company has an aggregate
capital, surplus and undivided profits, as shown by its last published report,
of not less than twenty million dollars ($20,000,000) and that such bank or
trust company agrees with The Chase Manhattan Bank to comply with all relevant
provisions of the 1940 Act and applicable rules and regulations thereunder. The
Chase Manhattan Bank will be liable for acts or omissions of any subcustodian.
The Chase Manhattan Bank shall employ sub-custodians upon receipt of Proper
Instructions, but only in accordance with an applicable vote by the Board of
Trustees of the Fund.
(b) Promptly after the close of business on each day The Chase Manhattan
Bank shall furnish the Fund with confirmations and a summary of all transfers to
or from the account of the Fund during said day. Where securities are
transferred to the account of the Fund established at a Securities Depository or
Book Entry
8
<PAGE>
System pursuant to Section 8 hereof, The Chase Manhattan Bank shall also by
book-entry or otherwise identify as belonging to such Fund the quantity of
securities in a fungible bulk of securities registered in the name of The Chase
Manhattan Bank (or its nominee) or shown in The Chase Manhattan Bank's account
on the books of a Securities Depository or Book-Entry System. At least monthly
and from time to time, The Chase Manhattan Bank shall furnish the Fund with a
detailed statement of the Property held for the Fund under this Agreement.
8. Use of Securities Depository or Book-Entry System. The Fund shall
-------------------------------------------------
deliver to The Chase Manhattan Bank a certified resolution of the Board of
Trustees of the Fund approving, authorizing and instructing The Chase Manhattan
Bank on a continuous and ongoing basis until instructed to the contrary by
Proper Instructions actually received by The Chase Manhattan Bank (i) to deposit
in a Securities Depository or Book-Entry System all securities of the Fund
eligible for deposit therein and (ii) to utilize a Securities Depository or
Book-Entry System to the extent possible in connection with the performance of
its duties hereunder, including without limitation settlements of purchases and
sales of securities by the Fund, and deliveries and returns of securities
collateral in connection with borrowings. Without limiting the generality of
such use, it is agreed that the following provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will at all times (1) be represented in an
account of The Chase Manhattan Bank in the Securities Depository or Book Entry
System (the "Account") and (2) be segregated from any assets and cash controlled
by The Chase Manhattan Bank in other than a fiduciary or custodian capacity but
may be commingled with other assets held in such capacities. The Chase Manhattan
Bank will effect payment for securities and receive and deliver securities in
accordance with accepted industry practices as set forth in (b) below, unless
the Fund has given
9
<PAGE>
The Chase Manhattan Bank Proper Instructions to the contrary. The records of The
Chase Manhattan Bank with respect to securities of the Fund maintained in a
Securities Depository or Book Entry System shall identify by book entry those
securities belonging to the Fund.
(b) The Chase Manhattan Bank shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities Depository or
Book Entry System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of The Chase Manhattan Bank to
reflect such payment and transfer for the account of the Fund. Upon receipt of
Proper Instructions, The Chase Manhattan Bank shall transfer securities sold for
the account of the Fund upon (i) receipt of advice from the Securities
Depository or Book Entry System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the records of
The Chase Manhattan Bank to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities Depository or Book Entry
System of transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by The Chase Manhattan Bank and be provided to
the Fund at its request. Upon request, The Chase Manhattan Bank shall furnish
the Fund confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in a Securities Depository
or Book Entry System for the account of the Fund.
(c) The Chase Manhattan Bank shall provide the Fund with any report
obtained by The Chase Manhattan Bank on the Securities Depository or Book Entry
System's accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities Depository or Book Entry
System;
10
<PAGE>
(d) All Books and records maintained by The Chase Manhattan Bank which
relate to the Fund participation in a Securities Depository or Book-Entry System
will at all times during The Chase Manhattan Bank's regular business hours be
open to the inspection of the Fund's duly authorized employees or agents, and
the Fund will be furnished with all information in respect of the services
rendered to it as it may require.
(e) Anything to the contrary in this Agreement notwithstanding, The Chase
Manhattan Bank shall be liable to the Fund for any loss or damage to the Fund
resulting from any negligence, misfeasance or misconduct of The Chase Manhattan
Bank or any of its agents or of any of its or their employees in connection with
its or their use of the Securities Depository or Book Entry Systems or from
failure of The Chase Manhattan Bank or any such agent to enforce effectively
such rights as it may have against such Securities Depository or Book Entry
System; at the election of the Fund, it shall be entitled to be subrogated to
the rights of The Chase Manhattan Bank with respect to any claim against the
Securities Depository or Book Entry System or any other person which The Chase
Manhattan Bank may have as a consequence of any such loss or damage if and to
the extent that the Fund has not been made whole for any such loss or damage.
9. Segregated Account. The Chase Manhattan Bank shall upon receipt of
------------------
Proper Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by The
Chase Manhattan Bank pursuant to Section 8 hereof, (i) in accordance with the
provisions of any agreement among the Fund, The Chase Manhattan Bank and a
broker dealer registered under the Securities and Exchange Act of 1934 and a
member of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The Options
Clearing
11
<PAGE>
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
10. Instructions Consistent With The Declaration, etc.
--------------------------------------------------
(a) Unless otherwise provided in this Agreement, The Chase Manhattan Bank
shall act only upon Proper Instructions. The Chase Manhattan Bank may assume
that any Proper Instructions received hereunder are not in any way inconsistent
with any provision of the Declaration or By-Laws or any vote or resolution of
the Fund's Board of Trustees or any committee thereof. The Chase Manhattan Bank
shall be entitled to rely upon any Proper Instructions actually received by The
Chase Manhattan Bank pursuant to this Agreement. The Fund agrees that The Chase
Manhattan Bank shall incur no liability in acting in good faith upon Proper
Instructions given to The Chase Manhattan Bank, except to the extent such
liability was incurred as a result of The Chase Manhattan Bank's negligence or
willful misconduct. In accord with instructions from the Fund, as
12
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required by accepted industry practice or as The Chase Manhattan Bank may elect
in effecting the execution of Fund instructions, advances of cash or other
Property made by The Chase Manhattan Bank, arising from the purchase, sale,
redemption, transfer or other disposition of Property of the Fund, or in
connection with the disbursement of funds to any party, or in payment of fees,
expenses, claims or liabilities owed to The Chase Manhattan Bank by the Fund, or
to any other party which has secured judgment in a court of law against the Fund
which creates an overdraft in the accounts or over-delivery of Property, shall
be deemed a loan by The Chase Manhattan Bank to the Fund, payable on demand,
bearing interest at such rate customarily charged by The Chase Manhattan Bank
for similar loans.
(b) The Fund agrees that test arrangements, authentication methods or other
security devices to be used with respect to instructions which the Fund may give
by telephone, telex, TWX, facsimile transmission, bank wire or other
teleprocess, or through an electronic instruction system, shall be processed in
accordance with terms and conditions for the use of such arrangements, methods
or devices as The Chase Manhattan Bank may put into effect and modify from time
to time. The Fund shall safeguard any test keys, identification codes or other
security devices which The Chase Manhattan Bank makes available to the Fund and
agrees that the Fund shall be responsible for any loss, liability or damage
incurred by The Chase Manhattan Bank or by the Fund as a result of The Chase
Manhattan Bank's acting in accordance with instructions from any unauthorized
person using the proper security device except to the extent such loss,
liability or damage was incurred as a result of The Chase Manhattan Bank's
negligence or willful misconduct. The Chase Manhattan Bank may electronically
record, but shall not be obligated to so record, any instructions given by
telephone and any other telephone discussions with respect to the Fund. In the
event that the Fund uses The Chase Manhattan Bank's Asset Management system or
any successor electronic
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communications or information system, the Fund agrees that The Chase Manhattan
Bank is not responsible for the consequences of the failure of that system to
perform for any reason, beyond the reasonable control of The Chase Manhattan
Bank, or the failure of any communications carrier, utility, or communications
network. In the event that system is inoperable, the Fund agrees that it will
accept the communication of transaction instructions by telephone, facsimile
transmission on equipment compatible to The Chase Manhattan Bank's facsimile
receiving equipment or by letter, at no additional charge to the Fund.
(c) The Chase Manhattan Bank shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund and the maturity
of futures contracts purchased or sold by the Fund) received by The Chase
Manhattan Bank from issuers of the securities being held for the Fund. With
respect to tender or exchange offers, The Chase Manhattan Bank shall transmit
promptly by facsimile to the Fund all written information received by The Chase
Manhattan Bank from issuers of the securities whose tender or exchange is sought
and from the party (or his agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Fund shall notify The Chase Manhattan Bank at
least three business days prior to the date on which The Chase Manhattan Bank is
to take such action or upon the date such notification is first received by the
Fund, if later. If any Property registered in the name of a nominee of The Chase
Manhattan Bank is called for partial redemption by the issuer of such property,
The Chase Manhattan Bank is authorized to allot the called portion to the
respective beneficial holders of the Property in such manner deemed to be fair
and equitable by The Chase Manhattan Bank in its sole discretion.
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11. Transactions Not Requiring Instructions. The Chase Manhattan Bank is
---------------------------------------
authorized to take the following action without Proper Instructions:
(a) Collection of Income and Other Payments. The Chase Manhattan Bank
---------------------------------------
shall:
(i) collect and receive on a timely basis for the account of the
Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar
items, included or to be included in the Property of the Fund, and
promptly advise the Fund of such receipt and shall credit such income,
as collected, to the Fund. From time to time, The Chase Manhattan Bank
may elect, but shall not be obligated, to credit the account with
interest, dividends or principal payments on payable or contractual
settlement date, in anticipation of receiving same from a payor,
central depository, broker or other agent employed by the Fund or The
Chase Manhattan Bank. Any such crediting and posting shall be at the
Fund's sole risk, and The Chase Manhattan Bank shall be authorized to
reverse any such advance posting in the event it does not receive good
funds from any such payor, central depository, broker or agent of the
Customer. The Chase Manhattan Bank agrees to promptly notify the Fund
of the reversal of any such advance posting.
(ii) endorse and deposit for collection in the name of the Fund,
checks, drafts, or other orders for the payment of money on the same
day as received;
(iii) receive and hold for the account of the Fund all securities
received by the Fund as a result of a stock dividend, share split-up
or reorganization, merger, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities issued
15
<PAGE>
with respect to any portfolio securities of the Fund held by The Chase
Manhattan Bank hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or
otherwise become payable on the date such securities become payable;
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts and
other negotiable instruments;
(vi) to effect an exchange of the securities where the par value
is changed, and to surrender securities at maturity or upon an earlier
call for redemption, or when securities otherwise become payable,
against payment therefore in accordance with accepted industry
practice. If any Property registered in the name of a nominee of The
Chase Manhattan Bank is called for partial redemption by the issuer of
such property, The Chase Manhattan Bank is authorized to allot the
called portion to the respective beneficial holders of the Property in
such manner deemed to be fair and equitable by The Chase Manhattan
Bank in its sole discretion.
(b) Miscellaneous Transactions. The Chase Manhattan Bank is authorized to
--------------------------
deliver or cause to be delivered Property against payment or other consideration
or written receipt therefor for examination by a dealer selling for the account
of the Fund in accordance with street delivery custom.
12. Transactions Requiring Instructions. In addition to the actions
-----------------------------------
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, The Chase Manhattan Bank, directly or through
the use of a Securities Depository or Book-Entry System, shall:
16
<PAGE>
(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
issuer of securities or corporation, against receipt of such certificates of
deposit, interim receipts or other instruments or documents, and cash, if any,
as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust company
for the purpose of pledge or hypothecation to secure any loan incurred by the
Fund; provided, however, that securities shall be released only upon payment to
The Chase Manhattan Bank of the monies borrowed, or upon receipt of adequate
collateral as agreed upon by the Fund and The Chase Manhattan Bank which may be
in the form of cash or obligations issued by the U.S. government, its agencies
or instrumentalities, except that in cases where additional collateral is
required to secure a borrowing already made, subject to proper prior
authorization, further securities may be released for that purpose; and pay such
loan upon re-delivery to it
17
<PAGE>
of the securities pledged or hypothecated therefore and upon surrender of the
note or notes evidencing the loan; and
(f) Deliver securities in accordance with the provisions of any agreement
among the Fund, The Chase Manhattan Bank and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any agreement
among the Fund, The Chase Manhattan Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund; and
(h) Deliver securities against payment or other consideration or written
receipt therefore for transfer of securities into the name of the Fund or The
Chase Manhattan Bank or a nominee of either, or for exchange or securities for a
different number of bonds, certificates, or other evidence, representing the
same aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to The Chase Manhattan Bank;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to The Chase Manhattan Bank;
18
<PAGE>
(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund;
(l) Deliver securities pursuant to any other proper corporate purpose, but
only upon receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee signed by an
officer of the Funds and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made.
13. Purchase of Securities. Promptly after each purchase of securities,
----------------------
options, futures contracts or options on futures contracts by the investment
advisor, the Fund shall deliver to The Chase Manhattan Bank (as Custodian)
Proper Instructions specifying with respect to each such purchase: (a) the name
of the issuer and the title of the securities, (b) the number of shares of the
principal amount purchased and accrued interest, if any, (c) the dates of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, (f) the name of the person from whom or the broker
through whom the purchase was made and (g) the Fund name. The Chase Manhattan
Bank shall upon receipt of securities purchased by or for the Fund registered in
the name of the Fund or in the name of a nominee of The Chase Manhattan Bank or
of the Fund or in proper form for transfer or upon receipt of evidence of title
to options, futures contracts or options on futures contracts purchased by the
Fund, pay out of the moneys held for the account of the Fund the total amount
payable to the person from whom or the broker through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Proper Instructions. Except as specifically stated otherwise in this
Agreement, in any and every case where payment for purchase of securities for
the account of the Fund is made by
19
<PAGE>
The Chase Manhattan Bank in advance of receipt of the securities purchased in
the absence of specific written instructions from the Fund to so pay in advance,
The Chase Manhattan Bank shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by The
Chase Manhattan Bank.
14. Sale of Securities. Promptly after each sale of securities by the
------------------
Fund at the instruction of the investment advisor, the Fund shall deliver to The
Chase Manhattan Bank (as Custodian) Proper Instructions, specifying with respect
to each such sale; (a) the name of the issuer and the title of the security, (b)
the number of shares or principal amount sold, and accrued interest, if any, (c)
the date of sale, (d) the sale price per unit, (e) the total amount payable to
the Fund upon such sale, (f) the name of the broker through whom or the person
to whom the sale was made and (g) the Fund name. The Chase Manhattan Bank shall
deliver the securities upon receipt of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as set
forth in such Proper Instructions. Subject to the foregoing, The Chase Manhattan
Bank may accept payment in such form as shall be satisfactory to it, and may
deliver securities and arrange for payment in accordance with the customs
prevailing among dealers in securities.
15. Not In Use.
----------
16. Records. The books and records pertaining to the Fund which are in
-------
the possession of The Chase Manhattan Bank shall be the property of the Fund.
Such books and records shall be prepared and maintained as required by the 1940
Act, as amended, and other applicable securities laws and rules and regulations.
The Fund, or the Fund's authorized representative, shall have access to such
books and records at all times during The Chase Manhattan Bank's normal business
hours, and such books and records shall be surrendered to the Fund promptly upon
request. Upon reasonable request of the Fund, copies of any such books and
records
20
<PAGE>
shall be provided by The Chase Manhattan Bank to the Fund or the Fund's
authorized representative at the Fund's expense.
17. Cooperation with Accountants. The Chase Manhattan Bank shall
----------------------------
cooperate with the Fund's independent certified public accountants and shall
take all reasonable action in the performance of its obligations under this
Agreement to assure that the necessary information is made available to such
accountants for the expression of their unqualified opinion, including but not
limited to the opinion included in the Fund's Form N-1A, Form N-SAR and other
reports to the Securities and Exchange Commission and with respect to any other
requirement of such Commission.
18. Reports to Fund by Independent Public Accountants. The Chase
-------------------------------------------------
Manhattan Bank shall provide the Fund, at such times as the Fund may reasonably
require, with reports by independent public accountants on the accounting
system, internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities Depository or Book Entry System,
relating to the services provided by The Chase Manhattan Bank under this
Contract; such reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund to provide reasonable assurance that
any material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
19. Confidentiality. The Chase Manhattan Bank agrees on behalf of itself
---------------
and its employees to treat confidentially and as the proprietary information of
the Fund all records and other information relative to the Fund and its prior,
present or potential Shareholders and relative to the advisors and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after
21
<PAGE>
prior notification to and approval in writing by the Fund, which approval shall
not be unreasonably withheld and may not be withheld where The Chase Manhattan
Bank may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund. Nothing contained herein,
however, shall prohibit The Chase Manhattan Bank from advertising or soliciting
the public generally with respect to other products or services, regardless of
whether such advertisement or solicitation may include prior, present or
potential Shareholders of the Fund.
20. Equipment Failures. In the event of equipment failures beyond The
------------------
Chase Manhattan Bank's control, The Chase Manhattan Bank shall, at no additional
expense to the Fund, take reasonable steps to minimize service interruptions but
shall not have liability with respect thereto. The Chase Manhattan Bank shall
enter into and shall maintain in effect with appropriate parties one or more
agreements making reasonable provisions for back up emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
21. Right to Receive Advice.
-----------------------
(a) Advice of Fund. If The Chase Manhattan Bank shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive, from
the Fund clarification or advice.
(b) Advice of Counsel. If The Chase Manhattan Bank shall be in doubt as
to any question of law involved in any action to be taken or omitted by The
Chase Manhattan Bank, it may request advice at its own cost from counsel of its
own choosing (who may be counsel for the Fund or The Chase Manhattan Bank, at
the option of The Chase Manhattan Bank).
(c) Conflicting Advice. In case of conflict between directions or advice
received by The Chase Manhattan Bank pursuant to sub-paragraph (a) of this
22
<PAGE>
paragraph and advice received by The Chase Manhattan Bank pursuant to
subparagraph (b) of this paragraph, The Chase Manhattan Bank shall be entitled
to rely on and follow the advice received pursuant to the latter provision
alone.
(d) Protection of The Chase Manhattan Bank. The Chase Manhattan Bank
shall be protected in any action or inaction which it takes or omits to take in
reliance on any directions or advice received pursuant to subparagraphs (a) or
(b) of this section which The Chase Manhattan Bank, after receipt of any such
directions or advice, in good faith believes to be consistent with such
directions or advice. However, nothing in this paragraph shall be construed as
imposing upon The Chase Manhattan Bank any obligation (i) to seek such
directions or advice, or (ii) to act in accordance with such directions or
advice when received, unless, under the terms of another provision of this
Agreement, the same is a condition to The Chase Manhattan Bank's properly taking
or omitting to take such action. Nothing in this subsection shall excuse The
Chase Manhattan Bank when an action or omission on the part of The Chase
Manhattan Bank constitutes willful misfeasance, bad faith, negligence or
reckless disregard by The Chase Manhattan Bank of its duties under this
Agreement.
22. Compliance with Governmental Rules and Regulations. The Fund assumes
--------------------------------------------------
full responsibility for insuring that the contents of each Prospectus of the
Fund complies with all applicable requirements of the 1933 Act, the 1940 Act,
and any laws, rules and regulations of governmental authorities having
jurisdiction.
23. Compensation. As compensation for the services rendered by The Chase
------------
Manhattan Bank during the term of this Agreement, the Fund will pay to The Chase
Manhattan Bank, in addition to reimbursement of its out-of-pocket expenses,
monthly fees as outlined in Exhibit A.
24. Indemnification. The Fund, as sole owner of the Property, agrees to
---------------
indemnify and hold harmless The Chase Manhattan Bank and its nominees from all
23
<PAGE>
taxes, charges, expenses, assessments, claims, and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the Securities
Exchange Act of 1934, the 1940 Act, and any state and foreign securities and
blue sky laws, all as or to be amended from time to time) and expenses,
including (without limitation) attorney's fees and disbursements (hereafter
"liabilities and expenses"), arising directly or indirectly from any action or
thing which The Chase Manhattan Bank takes or does or omits to take or do (i) at
the request or on the direction of or in reliance on the advice of the Fund, or
(ii) upon Proper Instructions, provided, that neither The Chase Manhattan Bank
nor any of its nominees or sub-custodians shall be indemnified against any
liability to the Fund or to its Shareholders (or any expenses incident to such
liability) arising out of (x) The Chase Manhattan Bank's or such nominee's or
sub-custodian's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties under this Agreement or any agreement between The Chase
Manhattan Bank and any nominee or subcustodian or (y) The Chase Manhattan Bank's
own negligent failure to perform its duties under this Agreement. The Chase
Manhattan Bank similarly agrees to indemnify and hold harmless the Fund from all
liabilities and expenses arising directly or indirectly from The Chase Manhattan
Bank's or such nominee's or sub-custodian's willful misfeasance, bad faith,
negligence or reckless disregard in performing its duties under this agreement.
In the event of any advance of cash for any purpose made by The Chase Manhattan
Bank resulting from orders or Proper Instructions of the Fund, or in the event
that The Chase Manhattan Bank or its nominee or subcustodian shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's or sub-custodian's own negligent action, negligent failure
to act, willful misconduct, or reckless disregard, the Fund shall
24
<PAGE>
promptly reimburse The Chase Manhattan Bank for such advance of cash or such
taxes, charges, expenses, assessments claims or liabilities.
25. Responsibility of The Chase Manhattan Bank. In the performance of its
------------------------------------------
duties hereunder, The Chase Manhattan Bank shall be obligated to exercise care
and diligence and to act in good faith to insure the accuracy and completeness
of all services performed under this Agreement. The Chase Manhattan Bank shall
be responsible for its own negligent failure or that of any subcustodian it
shall appoint to perform its duties under this Agreement but to the extent that
duties, obligations and responsibilities are not expressly set forth in this
Agreement, The Chase Manhattan Bank shall not be liable for any act or omission
which does not constitute willful misfeasance, bad faith, or negligence on the
part of The Chase Manhattan Bank or such subcustodian or reckless disregard of
such duties, obligations and responsibilities. Without limiting the generality
of the foregoing or of any other provision of this Agreement, The Chase
Manhattan Bank in connection with its duties under this Agreement shall, so long
as and to the extent it is in the exercise of reasonable care, not be under any
duty or obligation to inquire into and shall not be liable for or in respect of
(a) the validity or invalidity or authority or lack thereof of any advice,
direction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which The Chase Manhattan Bank
believes to be genuine, (b) the validity of the issue of any securities
purchased or sold by the Fund, the legality of the purchase or sale thereof or
the propriety of the amount paid or received therefor, (c) the legality of the
issue or sale of any Shares, or the sufficiency of the amount to be received
therefore, (d) the legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor, (e) the legality of the declaration or payment
of any dividend or distribution on Shares, of (f) delays or errors or loss of
data occurring by reason of circumstances beyond The Chase Manhattan Bank's
control, including acts of civil
25
<PAGE>
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown (except as provided in Section 20), flood or catastrophe,
acts of God, insurrection, war, riots, or failure of the mail, transportation,
communication or power supply.
26. Collection of Income. The Chase Manhattan Bank shall collect on a
--------------------
timely basis all income and other payments with respect to registered securities
held hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by The Chase Manhattan Bank or
its agent thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing, The Chase
Manhattan Bank shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due the Fund on
securities loaned pursuant to the provisions of Section 9 shall be the
responsibility of the Fund. The Chase Manhattan Bank will have no duty or
responsibility in connection therewith, other than to provide the Fund with such
information or data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Fund is properly
entitled.
27. Ownership Certificates for Tax Purposes. The Chase Manhattan Bank
---------------------------------------
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to securities of the Fund held by it and in connection with
transfers of securities.
28. Effective Period; Termination and Amendment.
-------------------------------------------
26
<PAGE>
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that The Chase Manhattan Bank shall not act under Section 8 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities Depository or Book Entry System and the
receipt of an annual certificate of the Secretary or an Assistant Secretary that
the Board of Trustees has reviewed the use by the Fund of such Securities
Depository and/or Book Entry System, as required in each case by Rule 17f-4
under the Investment Company Act of 1940, as amended; provided further, however,
that the Fund shall not amend or terminate this Agreement in contravention of
any applicable federal or state regulations, or any provision of the Declaration
of Trust, and further provided, that the Fund may at any time by action of its
Board of Trustees (i) substitute another bank or trust company for The Chase
Manhattan Bank by giving notice as described above to The Chase Manhattan Bank,
or (ii) immediately terminate this Agreement in the event of the appointment of
a conservator or receiver for The Chase Manhattan Bank by the Comptroller of the
Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to The Chase
Manhattan Bank such compensation as may be due as of the date of such
termination and shall likewise reimburse The Chase Manhattan Bank for its costs,
expenses and disbursements.
29. Successor Custodian
-------------------
27
<PAGE>
If a successor custodian shall be appointed by the Board of Trustees of the
Fund, The Chase Manhattan Bank shall, upon termination, deliver to such
successor custodian at the office of the custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder and shall transfer
to an account of the successor custodian all of the Fund's securities held in a
Securities Depository or Book Entry System.
If no such successor custodian shall be appointed, The Chase Manhattan Bank
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
The Chase Manhattan Bank on or before the date when such termination shall
become effective, then The Chase Manhattan Bank shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing
business in New York, New York, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
The Chase Manhattan Bank and all instruments held by The Chase Manhattan Bank
relative thereto and all other property held by it under this Agreement and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities Depository or Book Entry System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of The Chase Manhattan Bank after the date of termination hereof
owing to failure of the Fund to procure the certified copy of the vote referred
to or of the Board of Trustees to appoint a successor custodian, The Chase
Manhattan Bank
28
<PAGE>
shall be entitled to fair compensation for its services during such period as
The Chase Manhattan Bank retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of The Chase Manhattan Bank shall remain in full force and effect.
30. Notices. All notices and other communications (collectively referred
-------
to as "Notice" or "Notices") in this section hereunder shall be in writing and
shall be first sent by telegram, cable, telex, or facsimile sending device and
thereafter by overnight mail for delivery on the next business day. Notices
shall be addressed (a) if to The Chase Manhattan Bank, at The Chase Manhattan
Bank's address, 4 New York Plaza, New York, New York, 10004, facsimile number
(212) 623-8997; (b) if to the Fund, at the address of the Fund Attention:
Controller, facsimile number (312) 917-8049; or (c) if to neither of the
foregoing, at such other address as shall have been notified to the sender of
any such Notice or other communication. Notices sent by overnight mail shall be
deemed to have been given the next business day. Notices sent by messenger shall
be deemed to have been given on the day delivered, and notices sent by
confirming telegram, cable, telex or facsimile sending device shall be deemed to
have been given immediately. All postage, cable, telegram, telex and facsimile
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
31. Further Actions. Each party agrees to perform such further acts and
---------------
execute such further documents as are necessary to effectuate the purposes
hereof.
32. Amendments. This Agreement or any part hereof may be changed or waived
----------
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
33. Additional Funds. In the event that the Fund establishes one or more
----------------
series of Shares in addition to Nuveen Rittenhouse Growth Fund with respect to
which it desires to have the Custodian render services as custodian under the
terms
29
<PAGE>
hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall become a
Fund hereunder.
34. Miscellaneous. This Agreement embodies the entire Agreement and
-------------
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall insure to the benefit of the parties hereto and their respective
successors.
35. The Fund's Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts. This Agreement is executed on behalf of the Fund
by the Fund's officers as officers and not individually and the obligations
imposed upon the Fund by this Agreement are not binding upon any of the Fund's
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Fund.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
THE CHASE MANHATTAN BANK
Attest: ___________________________ By: ___________________________
THOMAS V. DIBELLA
VICE PRESIDENT
NUVEEN INVESTMENT TRUST II
Attest: __________________________ By: ___________________________
GIFFORD R. ZIMMERMAN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT &
CONTROLLER
31
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
. Transfer Agency Services
NUVEEN FUNDS
August 24, 1998
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
Table of Contents
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Appointment......................................................... 1
2. Representations and Warranties...................................... 1
3. Delivery of Documents............................................... 3
4. Services Provided................................................... 3
5. Fees and Expenses................................................... 4
6. Limitation of Liability and Indemnification......................... 6
7. Term................................................................ 8
8. Notices............................................................. 9
9. Waiver.............................................................. 9
10. Force Majeure....................................................... 9
11. Additional Funds.................................................... 10
12. Amendments.......................................................... 10
13. Assignment.......................................................... 10
14. Severability........................................................ 10
15. Governing Law....................................................... 10
Signatures................................................................. 10
</TABLE>
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
Table of Contents (continued)
-----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Schedule A -- Fees and Expenses........................................ A-1
Schedule B -- List of Nuveen Funds and Jurisdictions under
which Funds are Organized................................ B-1
Schedule C -- Transfer Agency Services Description..................... C-1
</TABLE>
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
AGREEMENT made as of August 24, 1998 by and between the Nuveen Funds
(each, a "Fund" and collectively the "Funds"), for the Funds listed on Schedule
B, and organized under the jurisdictions set forth on Schedule B, and Chase
Global Funds Services Company ("Chase"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, each Fund wishes to contract with Chase to provide certain
services with respect to the Fund;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Funds hereby appoint Chase to provide services for
the Funds, as described hereinafter, subject to the supervision of the Board of
Directors or Trustees of the Funds (the "Board"), for the period and on the
terms set forth in this Agreement. Chase accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Section 5 of and Schedule A to this Agreement.
2. Representations and Warranties.
(a) Chase represents and warrants to the Funds that:
(i) Chase is a corporation, duly organized and existing under the
laws of the State of Delaware;
(ii) Chase is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(iii) Chase is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(iv) all requisite corporate proceedings have been taken to
authorize Chase to enter into and perform this Agreement;
(v) Chase has, and will continue to have, access to the
facilities, personnel and equipment required to fully perform its duties and
obligations hereunder;
1
<PAGE>
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair Chase's ability to perform its duties and
obligations under this Agreement; and
(vii) Chase's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of Chase or any law or regulation applicable to Chase;
(b) Each Fund represents and warrants to Chase that:
(i) the Fund is a duly organized and existing and in good standing
under the laws of the jurisdictions set forth above its name on Schedule B;
(ii) the Fund is empowered under applicable laws and by its
Charter Document and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the
Fund to enter into and perform this Agreement;
(iv) the Fund is an investment company properly registered under
the 1940 Act;
(v) a registration statement under the Securities Act of 1933, as
amended ("1933 Act") and the 1940 Act on Form N-1A has been filed and will be
effective and will remain effective during the term of this Agreement, and all
necessary filings under the laws of the states will have been made and will be
current during the term of this Agreement;
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair the Fund's ability to perform its duties and
obligations under this Agreement;
(vii) the Fund's registration statement complies in all material
respects with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and none of the Fund's prospectuses and/or statements of additional
information contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements therein not misleading; and
(viii) the Fund's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of the Fund or any law or regulation applicable to it.
2
<PAGE>
3. Delivery of Documents. Each Fund will promptly furnish to Chase such
copies, properly certified or authenticated, of contracts, documents and other
related information that Chase may request or requires to properly discharge its
duties. Such documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the appointment of Chase to
provide certain services to the Fund and approving this Agreement;
(b) The Fund's Charter Document;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission ("SEC");
(e) The Fund's registration statement including exhibits, as amended,
on Form N-1A (the "Registration Statement") under the 1933 Act and the 1940 Act,
as filed with the SEC;
(f) Copies of the Investment Advisory Agreement between the Fund and
its investment adviser (the "Advisory Agreement");
(g) Opinions of counsel and auditors' reports;
(h) The Fund's prospectus(es) and statement(s) of additional
information relating to all funds, series, portfolios and classes, as
applicable, and all amendments and supplements thereto (such Prospectus(es) and
Statement(s) of Additional Information and supplements thereto, as presently in
effect and as from time to time hereafter amended and supplemented, herein
called the "Prospectuses"); and
(i) Such other agreements as the Fund may enter into from time to time
including securities lending agreements, futures and commodities account
agreements, brokerage agreements and options agreements.
4. Services Provided.
(a) Chase will provide the following services subject to the control,
direction and supervision of the Board and its designated agents and in
compliance with the objectives, policies and limitations set forth in the Funds'
Registration Statement, Charter Document and By-Laws; applicable laws and
regulations; and all resolutions and policies implemented by the Board:
(i) Transfer Agency.
A description of the above service is contained in Schedule C to this Agreement.
(b) Chase will also:
3
<PAGE>
(i) provide office facilities with respect to the provision of the
services contemplated herein (which may be in the offices of Chase or a
corporate affiliate of Chase);
(ii) provide or otherwise obtain personnel sufficient for
provision of the services contemplated herein;
(iii) furnish equipment and other materials, which are necessary
or desirable for provision of the services contemplated herein; and
(iv) keep records relating to the services provided hereunder in
such form and manner as Chase may deem appropriate or advisable. To the extent
required by Section 31 of the 1940 Act and the rules thereunder, Chase agrees
that all such records prepared or maintained by Chase relating to the services
provided hereunder are the property of the Funds and will be preserved for the
periods prescribed under Rule 31a-2 under the 1940 Act, maintained at the Funds'
expense, and made available in accordance with such Section and rules.
5. Fees and Expenses.
(a) As compensation for the services rendered to the Funds pursuant to
this Agreement the Funds shall pay Chase monthly fees determined as set forth in
Schedule A to this Agreement. Such fees are to be billed monthly and shall be
due and payable upon receipt of the invoice. Upon any termination of the
provision of services under this Agreement before the end of any month, the fee
for the part of the month before such termination shall be prorated according to
the proportion which such part bears to the full monthly period and shall be
payable upon the date of such termination.
(b) For the purpose of determining fees calculated as a function of
each Fund's assets, the value of the Fund's assets and net assets shall be
computed as required by its currently effective Prospectus, generally accepted
accounting principles, and resolutions of the Board.
(c) The Funds may request additional services, additional processing,
or special reports, with such specifications, requirements and documentation as
may be reasonably required by Chase. If Chase elects to provide such services
or arrange for their provision, it shall be entitled to additional fees and
expenses at its customary rates and charges.
(d) Chase will bear its own expenses in connection with the performance
of the services under this Agreement except as provided herein or as agreed to
by the parties. Each Fund agrees to promptly reimburse Chase for any services,
equipment or supplies ordered by or for the Fund through Chase and for any other
expenses that Chase may incur on the Fund's behalf at the
4
<PAGE>
Fund's request or as consented to by the Fund. Such other expenses to be
incurred in the operation of the Fund and to be borne by the Funds, include, but
are not limited to: taxes; interest; brokerage fees and commissions; salaries
and fees of officers, directors, or trustees who are not officers, directors,
shareholders or employees of Chase, or the Fund's distributor; SEC and state
Blue Sky registration and qualification fees, levies, fines and other charges;
postage and mailing costs; costs of share certificates; advisory fees;
independent public accountants and custodians; insurance premiums including
fidelity bond premiums; legal expenses; consulting fees; customary bank charges
and fees; expenses of typesetting and printing of Prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund (the Fund's
distributor to bear the expense of all other printing, production, and
distribution of Prospectuses, and marketing materials); expenses of printing and
production costs of shareholders' reports and proxy statements and materials;
expenses of proxy solicitation and annual meetings; costs and expenses of Fund
stationery and forms; customer service telephone expenses, costs and expenses of
telephone and data lines and devices which are specially requested by the Fund;
costs associated with corporate or trust, shareholder, and Board meetings; trade
association dues and expenses; reprocessing costs to Chase caused by third party
errors; and any extraordinary expenses and other customary Fund expenses.
(e) All fees, out-of-pocket expenses, or additional charges of Chase
shall be billed on a monthly basis and shall be due and payable upon receipt of
the invoice.
(f) Chase will render, after the close of each month in which services
have been furnished, a statement reflecting all of the charges for such month.
Charges remaining unpaid after thirty (30) days shall bear interest in finance
charges equivalent to, in the aggregate, the Prime Rate (as reasonably
determined by Chase) plus two percent per year and all costs and expenses of
effecting collection of any such sums, including reasonable attorney's fees,
shall be paid by the Funds to Chase.
(g) In the event that the Funds are more than sixty (60) days
delinquent in payments of monthly billings in connection with this Agreement
(with the exception of specific amounts which may be contested in good faith by
the Funds), this Agreement may be terminated upon thirty (30) days' written
notice to the Funds by Chase. The Funds must notify Chase in writing of any
contested amounts within thirty (30) days of receipt of a billing for such
amounts. Disputed amounts are not due and payable while they are being
investigated.
5
<PAGE>
6. Limitation of Liability and Indemnification.
(a) Chase shall not be liable for any error of judgment or mistake of
law or for any loss or expense suffered by the Funds, in connection with the
matters to which this Agreement relates, except for a loss or expense solely
caused by or resulting from willful misfeasance, bad faith or negligence on
Chase's part in the performance of its duties or from reckless disregard by
Chase of its obligations and duties under this Agreement. In no event shall
Chase be liable for any indirect, incidental, special or consequential losses or
damages of any kind whatsoever, even if Chase has been advised of the likelihood
of such loss or damage and regardless of the form of action.
(b) Subject to Section 6(a) above, Chase shall not be responsible for,
and the Funds shall indemnify and hold Chase harmless from and against, any and
all losses, damages, costs, reasonable attorneys' fees and expenses, payments,
expenses and liabilities incurred by Chase, any of its agents, or the Funds'
agents in the performance of its/their duties hereunder, including but not
limited to those arising out of or attributable to:
(i) any and all actions of Chase or its officers or agents
required to be taken pursuant to this Agreement;
(ii) the reasonable reliance on or use by Chase or its officers or
agents of information, records, or documents which are received by Chase or its
officers or agents and furnished to it or them by or on behalf of the Funds, and
which have been prepared or maintained by the Funds or any third party on behalf
of the Funds;
(iii) the Funds' refusal or failure to comply with the terms of
this Agreement or the Funds' lack of good faith, or actions, or lack thereof,
involving negligence or willful misfeasance;
(iv) the breach of any representation or warranty of the Funds
hereunder;
(v) the taping or other form of recording of telephone
conversations or other forms of electronic communications with investors and
shareholders, or reasonable reliance by Chase on telephone or other electronic
instructions of any person acting on behalf of a shareholder or shareholder
account for which telephone or other electronic services have been authorized;
(vi) the reliance on or the carrying out by Chase or its officers
or agents of any proper instructions reasonably believed to be duly authorized,
or requests of the Funds or
6
<PAGE>
recognition by Chase of any share certificates which are reasonably believed to
bear the proper signatures of the officers of the Funds and the proper
countersignature of any transfer agent or registrar of the Funds;
(vii) any delays, inaccuracies, errors in or omissions from
information or data provided to Chase by data, corporate action, pricing
services or securities brokers and dealers;
(viii) the offer or sale of shares by any Fund in violation of any
requirement under the Federal securities laws or regulations or the securities
laws or regulations of any state, or in violation of any stop order or other
determination or ruling by any Federal agency or any state agency with respect
to the offer or sale of such shares in such state (1) resulting from activities,
actions, or omissions by the Funds or their other service providers and agents,
or (2) existing or arising out of activities, actions or omissions by or on
behalf of the Fund prior to the effective date of this Agreement;
(ix) any failure of a Fund's registration statement to comply with
the 1933 Act and the 1940 Act (including the rules and regulations thereunder)
and any other applicable laws, or any untrue statement of a material fact or
omission of a material fact necessary to make any statement therein not
misleading in a Fund's prospectus;
(x) the actions taken by the Funds, their investment adviser, and
their distributor in compliance with applicable securities, tax, commodities and
other laws, rules and regulations, or the failure to so comply; and
(xi) all actions, inactions, omissions, or errors caused by third
parties to whom Chase or the Funds has assigned any rights and/or delegated any
duties under this Agreement at the request of or as required by the Funds, their
investment advisers, distributor, administrator or sponsor.
(c) In performing its services hereunder, Chase shall be entitled to
reasonably rely on any oral or written instructions, notices or other
communications, including electronic transmissions, from the Funds and their
custodians, officers and directors, investors, agents and other service
providers and shareholders which Chase reasonably believes to be genuine, valid
and authorized, and shall be indemnified by the Funds for any loss or expense
caused by such reliance. Chase shall also be entitled to consult with and rely
on the advice and opinions of outside legal counsel retained by the Funds, as
necessary or appropriate.
7
<PAGE>
(d) Chase shall indemnify and hold the Funds harmless from and against
any and all losses, damages, costs, charges, payments, expenses and liability,
excluding attorneys' fees and costs, arising out of or attributable to Chase's
refusal or failure to comply with the material terms of this Agreement, or
Chase's lack of good faith, negligence or willful misconduct.
(e) Subject to the above Sections 6 (a) through 6 (d), any costs or
losses incurred by a Fund for the processing of any purchase, redemption,
exchange or other share transactions at a price per share other than the price
per share applicable to the effective date of the transaction (the foregoing
being generally referred to herein as "as of" transactions) will be handled in
the following manner:
(i) For each calendar year, if all "as of" transactions for the
year, taken in the aggregate, result in a net loss to a Fund ("net loss"), Chase
will reimburse the Fund for such net loss, except to the extent that such net
loss may be offset by application of a "net benefit" to the Fund carried over
from prior calendar years pursuant to sub-paragraph (ii) immediately below.
(ii) For each calendar year, if all "as of" transactions for the
year, taken in the aggregate, result in a net benefit to a Fund ("net benefit"),
the Fund shall not reimburse Chase for the amount of such net benefit; however,
any "net benefit" for any calendar year may be used to offset, in whole or in
part, any "net loss" suffered by the Fund in any future calendar year so as to
reduce the amount by which Chase shall be required to reimburse the Fund for
such "net loss" in such year pursuant to sub-paragraph (i) immediately above.
(iii) Any "net loss" for which Chase reimburses a Fund in any
calendar year shall not be carried over into future years so as to offset any
"net benefit" in such future years.
7. Term. This Agreement shall become effective on the date first
hereinabove written for an initial term of four years. The Agreement may be
modified or amended from time to time by mutual agreement between the parties
hereto. After the initial term, the Agreement shall continue in effect unless
terminated by either party on 6 months' prior written notice. Upon termination
of this Agreement, each Fund shall pay to Chase such compensation and any
reasonable out-of-pocket or other reimbursable expenses which may become due or
payable under the terms hereof as of the date of termination or after the date
that the provision of services ceases, whichever is later. If the Funds
terminate the Agreement for any reason during the first year of the initial
term, they will reimburse Chase in accordance with Schedule A.
8
<PAGE>
8. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed effective on the date of personal delivery (by
private messenger, courier service or otherwise) or upon confirmed receipt of
telex or facsimile, whichever occurs first, or upon receipt if by mail to the
parties at the following address (or such other address as a party may specify
by notice to the other):
If to the Funds:
John Nuveen & Co., Incorporated
333 West Wacker Drive
Chicago, IL 60606
Attention: Fund Controller
Fax: (312) 917-8049
If to Chase:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Attention: Karl O. Hartmann, Esq., General Counsel
Fax: (617) 557-8616
9. Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
10. Force Majeure. Chase shall not be responsible or liable for any harm,
loss or damage suffered by the Funds, their investors, or other third parties or
for any failure or delay in performance of Chase's obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond Chase's control. In the event of a force majeure, any resulting harm,
loss, damage, failure or delay by Chase will not give the Funds the right to
terminate this Agreement.
11. Additional Funds. In the event that John Nuveen & Company Incorporated
sponsors additional open-end management companies with respect to which it
desires Chase to provide services under the terms of this Agreement, it shall so
notify Chase in writing, and if Chase agrees in writing to provide such
services, such Fund or Funds shall be subject to the terms of this Agreement and
Schedule C shall be modified accordingly.
9
<PAGE>
12. Amendments. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
13. Assignment. Chase may assign and delegate this Agreement and its
rights and obligations hereunder without the consent of the other party.
14. Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
NUVEEN FUNDS
By: /s/ Stuart Rogers
-----------------------------
Name: Stuart Rogers
---------------------------
Title: Vice President
--------------------------
CHASE GLOBAL FUNDS
SERVICES COMPANY
By: /s/ Donald P. Hearn
-----------------------------
Name: Donald P. Hearn
---------------------------
Title: Chairman and CEO
--------------------------
10
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE A
FEES AND EXPENSES
Transfer Agency Fees
A. $18.50 per municipal fund account per annum
$18.25 per equity fund account per annum
$29.00 per money market fund account per annum
B. Out-of-pocket expenses, including but not limited to those in Section 5(d),
will be computed, billed and payable monthly Customized systems and
technology charges (excluding those projects covered under the conversion
agreement) will be negotiated individually and billed along with out-of-
pocket expenses.
C. If the Funds terminate this Agreement for any reason whatsoever between the
date of this Agreement and July 1, 1999, there will be immediately due and
owing to Chase by Nuveen a $6 million charge; if between the date of July
1, 1999 and June 30, 2000, a $4 million charge; and if between July 1, 2000
and June 30, 2001, a $2 million charge. In addition, the Funds will
reimburse Chase for all costs it incurs in connection with any conversion
to another transfer agent.
A-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE B
Flagship Admiral Funds Inc. (Maryland Corporation)
Flagship Utility Income Fund
Nuveen Investment Trust (Massachusetts Business Trust)
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen European Value Fund
Nuveen Investment Trust II (Massachusetts Business Trust)
Nuveen Rittenhouse Growth Fund
Nuveen Investment Trust III (Massachusetts Business Trust)
Nuveen Income Fund
Nuveen Flagship Municipal Trust (Massachusetts Business Trust)
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
Nuveen Flagship Multistate Trust I (Massachusetts Business Trust)
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
B-1
<PAGE>
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
Nuveen Flagship Multistate Trust II (Massachusetts Business Trust)
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship Multistate Trust III (Massachusetts Business Trust)
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
Nuveen Flagship Multistate Trust IV (Massachusetts Business Trust)
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
Nuveen Tax-Exempt Money Market Fund, Inc. (Maryland Corporation)
Nuveen Tax-Free Reserves, Inc. (Maryland Corporation)
Nuveen Tax-Free Money Market Fund, Inc. (Minnesota Corporation)
Nuveen Massachusetts Tax-Free Money Market Fund
B-2
<PAGE>
Nuveen New York Tax-Free Money Market Fund
Nuveen California Tax-Free Fund, Inc. (Maryland Corporation)
Nuveen California Tax-Free Money Market Fund
B-3
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE C
DESCRIPTION OF TRANSFER AGENCY SERVICES
The following is a general description of the transfer agency services Chase
shall provide to each Fund.
A. Shareholder Recordkeeping. Maintain records showing for each Fund
shareholder the following: (i) name, address, appropriate tax
certification and tax identifying number; (ii) number of shares of each
Fund, portfolio or class; (iii) historical information including, but not
limited to, dividends paid, date and price of all transactions including
individual purchases and redemptions, based upon appropriate supporting
documents; and (iv) any dividend reinvestment order, application,
specific address, payment and processing instructions and correspondence
relating to the current maintenance of the account.
B. Share Issuance. Record the issuance of shares of each Fund, portfolio or
class. Except as specifically agreed in writing between Chase and the
Fund, Chase shall have no obligation when countersigning and issuing
and/or crediting shares to take cognizance of any other laws relating to
the issue and sale of such shares except insofar as policies and
procedures of the Stock Transfer Association recognize such laws.
C. Transfer, Purchase, Exchange and Redemption Orders. Process all orders
for the transfer, purchase, exchange and redemption of shares of the Fund
in accordance with the Fund's current prospectus and customary transfer
agency policies and procedures, including electronic transmissions which
the Fund acknowledges it has authorized, or in accordance with any
instructions of the Fund or its agents which Chase reasonably believes to
be authorized.
D. Shareholder Communications. Transmit all communications by the Fund to
its shareholders promptly following the delivery by the Fund of the
material to be transmitted by mail, telephone, courier service or
electronically.
E. Proxy Materials. Assist with the mailing or transmission of proxy
materials, tabulating votes, and compiling and certifying voting results.
Services may include the provision of inspectors of election at any
meeting of shareholders.
F. Share Certificates. If permitted by Fund policies, and if a shareholder
of the Fund requests a certificate representing shares, Chase as Transfer
Agent, will countersign and mail a share certificate to the investor at
his/her address as it appears on the Fund's shareholder records.
C-1
<PAGE>
G. Returned Checks. In the event that any check or other negotiable
instrument for the payment of shares is returned unpaid for any reason,
Chase will take such steps, as Chase may, in its discretion, deem
appropriate and notify the Fund of such action. However, the Fund
remains ultimately liable for any returned checks or negotiable
instruments of its shareholders.
H. Shareholder & Broker-Dealer Correspondence. Acknowledge all
correspondence from shareholders and broker-dealers relating to share
accounts and undertake such other shareholder and broker-dealer
correspondence as may from time to time be mutually agreed upon.
I. Tax Reporting. Chase shall issue appropriate shareholder tax forms as
required.
J. Dividend Disbursing. Chase will prepare and mail checks, place wire
transfers or credit income and capital gain payments to shareholders.
The Fund will advise Chase of the declaration of any dividend or
distribution and the record and payable date thereof at least five (5)
days prior to the record date. Chase will, on or before the payment date
of any such dividend or distribution, notify the Fund's Custodian of the
estimated amount required to pay any portion of such dividend or
distribution payable in cash, and on or before the payment date of such
distribution, the Fund will instruct its Custodian to make available to
Chase sufficient funds for the cash amount to be paid out. If a
shareholder is entitled to receive additional shares by virtue of any
such distribution or dividend, appropriate credits will be made to each
shareholder's account.
K. Escheatment. Chase shall provide escheatment services only with respect
to the escheatment laws of the Commonwealth of Massachusetts, including
those which relate to reciprocal agreements with other states.
L. Telephone Services. Chase will provide staff coverage, training and
supervision in connection with the Fund's telephone line for shareholder
inquiries, and will respond to inquiries concerning shareholder records,
transactions processed by Chase, procedures to effect the shareholder
records and inquiries of a general nature relative to shareholder
services.
M. 12b-1. Chase will calculate and process all 12b-1 payments in accordance
with each Fund's current prospectus.
N. Commission Payments. Chase will calculate and process all commission
payments in accordance with each Fund's current prospectus.
O. Requests for Information. Chase will provide all required information in
a timely fashion in support of regulatory filings.
P. SAS 70. Chase will make available to the Funds' sponsor independent
auditor reports in compliance with SAS 70.
C-2
<PAGE>
Q. Regulatory Changes. Chase will provide assistance with the analysis and
implementation of any changes required by regulatory bodies.
C-3
<PAGE>
[LETTERHEAD OF BINGHAM DANA]
October 13, 1998
Nuveen Investment Trust IV
333 West Wacker Drive
Chicago, Illinois 60606-1286
Bell, Boyd of Lloyd
Three First National Plaza
70 West Madison Street
Suite 3300
Chicago, Illinois 60606-4207
Re: Registration Statement on Form N-1A under the Securities Act of 1933
Ladies and Gentlemen:
We have acted as special Massachusetts counsel to Nuveen Investment Trust
IV (the "Fund") on behalf of its series Nuveen Dividend and Growth Fund in
connection with the Fund's Registration Statement on Form N-1A to be filed on or
about October 13, 1998 with respect to certain of its Class A Common Shares, par
value $.01 per share (the "Class A Shares"), Class B Common Shares, par value
$.01 per share (the "Class B Shares"), Class C Common Shares, par value $.01 per
share (the "Class C Shares") and Class R Common Shares, par value $.01 per
share (the "Class R Shares", such Class A Shares, Class B Shares, Class C Shares
and Class R Shares referred to collectively herein as the "Shares"). You have
requested that we deliver this opinion to you in connection with the Fund's
filing of such Registration Statement.
In connection with the furnishing of this opinion, we have examined the
following documents:
(a) a certificate dated as of a recent date of the Secretary of the
Commonwealth of Massachusetts as to the existence of the Fund;
<PAGE>
BINGHAM DANA
Nuveen Investment Trust IV
Bell, Boyd & Lloyd
October 13, 1998
Page 2
(b) a copy, as filed with the Secretary of the Commonwealth of
Massachusetts on September 10, 1998, of the Fund's Declaration of Trust
dated August 20, 1998;
(c) a copy of the Fund's Certificate for the Establishment and
Designation of Classes designating the Class A Shares, Class B Shares,
Class C Shares and Class R Shares, as executed by the Trustees of the Fund
and filed with Secretary of the Commonwealth of Massachusetts (the
"Designation of Classes");
(d) a copy of the Fund's Certificate for the Establishment and
Designation of Series designating Nuveen Dividend and Growth Fund, as
executed by the Trustees of the Fund and filed with the Secretary of the
Commonwealth of Massachusetts (the "Designation of Series");
(e) a Certificate executed by an appropriate officer of the Fund,
certifying as to, and attaching copies of, the Fund's Declaration of Trust,
Designation of Classes, Designation of Series, By-Laws, and certain
resolutions adopted by the Trustees of the Fund;
(f) a printer's proof dated as of October 7, 1998 of the Registration
Statement.
In such examination, we have assumed the genuineness of all signatures, the
conformity to the originals of all of the documents reviewed by us as copies,
the authenticity and completeness of all original documents reviewed by us in
original or copy form and the legal competence of each individual executing any
document. We have assumed that the Registration Statement, as filed with the
Securities and Exchange Commission, will be in substantially the form of the
printer's proof referred to in paragraph (f) above.
This opinion is based entirely on our review of the documents listed above
and such investigation of law as we have deemed necessary or appropriate. We
have made no other review or investigation of any kind whatsoever, and we have
assumed, without independent inquiry, the accuracy of the information set forth
in such documents.
This opinion is limited solely to the internal substantive laws of the
Commonwealth of Massachusetts as applied by courts located in such
<PAGE>
[LETTERHEAD OF BINGHAM DANA]
Nuveen Investment Trust IV
Bell, Boyd & Lloyd
October 13, 1998
Page 3
Commonwealth, except that we express no opinion as to any Massachusetts
securities law.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that:
1. The Fund is duly organized and existing under the Fund's Declaration of
Trust and the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares of beneficial interest commonly referred to
as a "Massachusetts business trust."
2. The Shares, when issued and sold in accordance with the Fund's
Declaration of Trust, Designation of Classes, Designation of Series and By-Laws
and for the consideration described in the Registration Statement, will be
legally issued, fully paid and non-assessable, except that, as set forth in the
Registration Statement, shareholders of the Fund may under certain circumstances
be held personally liable for its obligations.
We hereby consent to your reliance on this opinion in connection with your
opinion to the Fund with respect to the Shares and to the filing of this opinion
as an exhibit to the Registration Statement.
Very truly yours,
/s/ Bingham Dana LLP
BINGHAM DANA LLP
<PAGE>
October 13, 1998
Nuveen Investment Trust IV
333 West Wacker Drive
Chicago, Illinois 60606
Ladies and Gentlemen:
Nuveen Investment Trust IV
We have acted as counsel for Nuveen Investment Trust IV (the "Trust") in
connection with the registration under the Securities Act of 1933 (the "Act") of
an indefinite number of shares of beneficial interest (the "Shares") of the
series of the Trust designated Nuveen Dividend and Growth Fund (the "Fund") in a
registration statement on form N-1A as filed with the Securities and Exchange
Commission on or about October 13, 1998 (the "Registration Statement").]
In this connection we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate and other
records, certificates and other papers as we deemed it necessary to examine for
the purpose of this opinion, including the agreement and declaration of trust
(the "Trust Agreement") and by-laws (the "By-laws") of the Trust, actions of the
board of trustees of the Trust authorizing the issuance of shares of the Fund
and the Registration Statement.
We assume that, upon sale of the Shares, the Trust will receive the
authorized consideration therefor, which will at least equal the net asset value
of the Shares.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that, when the Shares are
issued and sold after the post-effective amendment to the Registration Statement
has been declared effective and the authorized consideration therefor is
received by the Trust, they will be validly issued, fully paid and nonassessable
by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust or any
series of the Trust (a "Series"). However, the Agreement and Declaration of
Trust disclaims shareholder liability for acts or obligations of the Trust or
any Series and requires that notice of such disclaimer be given in every note,
bond, contract, instrument, certificate or other undertaking issued by or on
behalf of the Trust. The
<PAGE>
Nuveen Investment Trust IV
October 13, 1998
Page two
Agreement and Declaration of Trust provides for indemnification out of property
of a particular Series for all loss and expense of any shareholder of that
Series held personally liable for obligations of that Series. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the relevant Series would be unable to meet
its obligations.
In rendering the foregoing opinion, we have relied upon the opinion of
Bingham, Dana LLP expressed in their letter to us dated October 13, 1998.
We consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not admit that we are in the category
of persons whose consent is required under section 7 of the Act.
Very truly yours,
/s/ Bell, Boyd & Lloyd
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated August 17, 1998, and to all references to our Firm included in or made a
part of this registration statement of Nuveen Investment Trust IV (comprised of
the Nuveen Dividend and Growth Fund, formerly the Flagship Utility Income Fund,
a series of Flagship Admiral Funds Inc.)
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 8, 1998
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form N-1A under the
Securities Act of 1933 of our report dated August 20, 1997, relating to Nuveen
Dividend and Growth Fund (Flagship Utility Income Fund), incorporated by
reference in the Statement of Additional Information, which is part of such
Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Dayton, Ohio
October 8, 1998
<PAGE>
Nuveen Investment Trust
Nuveen Investment Trust II
Nuveen Investment Trust III
Nuveen Investment Trust IV
Plan of Distribution and Service
Pursuant to Rule 12b-1
Whereas, Nuveen Investment Trust, Nuveen Investment Trust II, Nuveen
Investment Trust III and Nuveen Investment Trust IV, each a Massachusetts
business trust (each, a "Trust"), engages in business as an open-end management
investment company and is registered under the Investment Company Act of 1940,
as amended (the "Act");
Whereas, each Trust is authorized to and may or does issue shares of
beneficial interest in separate series, with the shares of each such series
representing the interests in a separate portfolio of securities and other
assets (each Trust's series together with all other such series subsequently
established by a Trust being referred to herein individually as a "Fund" and
collectively as the "Funds");
Whereas, each Trust has outstanding the Funds set forth on Exhibit A;
Whereas, each Trust employs John Nuveen & Co. Incorporated (the
"Distributor") as distributor of the shares of each Fund (the "Shares") pursuant
to separate Distribution Agreements;
Whereas, each Fund is authorized to issue Shares in four different classes
("Classes"): Class A, Class B, Class C and Class R.
Whereas, each Trust has adopted, or desires to adopt, a Plan of
Distribution and Service pursuant to Rule 12b-1 under the Act ("Rule 12b-1"),
and the Board of Trustees of each Trust has determined that there is a
reasonable likelihood that adoption of this Plan of Distribution and Service
will benefit each Fund and its shareholders;
Whereas, each Trust, on behalf of its Funds has adopted a Multiple Class
Plan Pursuant to Rule 18f-3 (the "Rule 18f-3 Plan") to enable the various
Classes of Shares to be granted different rights and privileges and to bear
different expenses, and has an effective registration statement on file with the
SEC containing a Prospectus describing such Classes of Shares;
Whereas, as described in the Rule 18f-3 Plan, the purchase of Class A
Shares is generally subject to an up-front sales charge, as set forth in the
Trust's Prospectus and Statement
<PAGE>
of Additional Information, and the purchase of Class B and Class C Shares will
not be subject to an up-front sales charge, but in lieu thereof the Class B
Shares will be subject to an asset-based distribution fee (and a declining
contingent deferred sales charge) and Class C Shares will be subject to an
asset-based distribution fee (and a one-year contingent deferred sales charge),
as described in the Prospectus for the Shares; and
Whereas, Shares representing an investment in Class B will automatically
convert to Class A Shares 8 years after the investment, as described in the
Prospectus for the Shares;
Now, Therefore, each Fund hereby adopts, and the Distributor hereby agrees
to the terms of, this Plan of Distribution and Service (the "Plan") in
accordance with Rule 12b-1, on the following terms and conditions:
1. (a) The Fund is authorized to compensate the Distributor for services
performed and expenses incurred by the Distributor in connection
with the distribution of Shares of Class A, Class B and Class C
of the Fund and the servicing of accounts holding such Shares.
(b) The amount of such compensation paid during any one year shall
consist
(i) with respect to Class A Shares of a Service Fee not to
exceed .25% of average daily net assets of the Class A
Shares of the Fund;
(ii) with respect to Class B Shares of a Service Fee not to
exceed .25% of average daily net assets of the Class B
Shares of the Fund, plus a Distribution Fee not to exceed
.75% of average daily net assets of the Class B Shares of
the Fund; and
(iii) with respect to Class C Shares of a Service Fee not to
exceed .25% of average daily net assets of the Class C
Shares of the Fund, plus a Distribution Fee not to exceed
.75% of average daily net assets of the Class C Shares of
the Fund.
Such compensation shall be calculated and accrued daily and paid
monthly or at such other intervals as the Board of Trustees may
determine.
(c) With respect to Class A Shares, the Distributor shall pay any
Service Fees it receives under the Plan for which a particular
underwriter, dealer, broker, bank or selling entity having a
Dealer Agreement in effect ("Authorized Dealer", which may
include the Distributor) is the dealer of record to such
Authorized
<PAGE>
Dealers to compensate such organizations for providing services to
shareholders relating to their investment. The Distributor may retain
any Service Fees not so paid.
(d) With respect to the Class B Shares, the Distributor:
(i) shall retain the Distribution Fee to compensate it for costs
associated with the distribution of the Class B Shares, including
the payment of broker commissions to Authorized Dealers (which
may include the Distributor) who were the dealer of record with
respect to the purchase of those shares; and
(ii) shall pay any Service Fees it receives under the Plan for which a
particular Authorized Dealer is the dealer of record (which may
include the Distributor) to such Authorized Dealers to compensate
such organizations for providing services to shareholders
relating to their investment; provided, however, that the
Distributor shall be entitled to retain, for the first year after
purchase of the Class B Shares, the Service Fee to the extent
that it may have pre-paid the Service Fee for that period to the
Authorized Dealer of record.
The Distributor may retain any Distribution or Service Fees not so
paid.
(e) With respect to the Class C Shares, the Distributor:
(i) shall pay the Distribution Fee it receives under the Plan with
respect to Class C Shares for which a particular Authorized
Dealer is the dealer of record (which may include the
Distributor) to such Authorized Dealers to compensate such
organizations in connection with such share sales; provided,
however, that the Distributor shall be entitled to retain, for
the first year after purchase of the Class C Shares, the
Distribution Fee to the extent that it may have pre-paid the
Distribution Fee for that period to the Authorized Dealer of
record; and
(ii) shall pay any Service Fees it receives under the Plan for which a
particular Authorized Dealer is the dealer of record (which may
include the Distributor) to such Authorized Dealers to compensate
such organizations for providing services to shareholders
relating to their investment; provided, however, that the
Distributor shall be entitled to retain, for the first year after
purchase of the Class C Shares, the Service Fee to the
-3-
<PAGE>
extent that it may have pre-paid the Service Fee for that
period to the Authorized Dealer of record.
The Distributor may retain any Distribution or Service Fees not
so paid.
(f) Services for which such Authorized Dealers may receive Service
Fee payments include any or all of the following: maintaining account records
for shareholders who beneficially own Shares; answering inquiries relating to
the shareholders' accounts, the policies of the Fund and the performance of
their investment; providing assistance and handling transmission of funds in
connection with purchase, redemption and exchange orders for Shares; providing
assistance in connection with changing account setups and enrolling in various
optional fund services; producing and disseminating shareholder communications
or servicing materials; the ordinary or capital expenses, such as equipment,
rent, fixtures, salaries, bonuses, reporting and recordkeeping and third party
consultancy or similar expenses, relating to any activity for which payment is
authorized by the Board; and the financing of any other activity for which
payment is authorized by the Board.
(g) Payments of Distribution or Service Fees to any organization as
of any quarter-end will not exceed the appropriate amount based on the annual
percentages set forth in subparagraphs b(i), (ii) and (iii) above, based on
average net assets of accounts for which such organization appeared on the
records of the Fund and/or its transfer agent as the organization of record
during the preceding quarter.
2. This Plan shall not take effect until the Plan, together with any
related agreement(s), has been approved with respect to the affected Fund and
Class thereof by votes of a majority of both (a) the Board of Trustees of the
Trust, and (b) those Trustees of the Trust who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the "Rule
12b-1 Trustees") cast in person at a meeting (or meetings) called for the
purpose of voting on the Plan and such related Agreement(s).
3. This Plan shall remain in effect until August 1, 1999, and shall
continue in effect thereafter so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
paragraph 2.
4. The Distributor shall provide to the Board of Trustees of the Trust
and the Board shall review, at least quarterly, a written report of
distribution-and service-related activities, Distribution Fees, Service Fees,
and the purposes for which such activities were performed and expenses incurred.
-4-
<PAGE>
5. This Plan may be terminated as to a given Fund or as to a given Class
A, Class B or Class C of a Fund at any time by vote of a majority of the Rule
12b-1 Trustees or by vote of a majority (as defined in the Act) of the
outstanding voting Shares of the applicable Fund or Class.
6. This Plan may not be amended to increase materially the amount of
compensation payable by the Fund with respect to Class A, Class B or Class C
Shares under paragraph 1 hereof unless such amendment is approved by a vote of
at least a majority (as defined in the Act) of the outstanding voting Shares of
that Class of Shares of the respective Fund. No material amendment to the Plan
shall be made unless approved in the manner provided in paragraph 2 hereof.
7. While this Plan is in effect, the selection and nomination of the
Trustees who are not interested persons (as defined in the Act) of the Trust
shall be committed to the discretion of the Trustees who are not such interested
persons.
8. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 4 hereof, for a period of
not less than six years from the date of the Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
This Plan was adopted by: NIT on July 17, 1996 (amended on May 16, 1998)
NITII on July 24, 1997 (amended on May 16, 1998)
NIT III and NIT IV on August 26, 1998
-5-
<PAGE>
Exhibit A
to Plan of Distribution and Service Pursuant to Rule 12b-1
Nuveen Investment Trust:
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen European Value Fund
Nuveen Investment Trust II:
Nuveen Rittenhouse Growth Fund
Nuveen Investment Trust III:
Nuveen Income Fund
Nuveen Investment Trust IV:
Nuveen Dividend and Growth Fund
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> NUVEEN FLAGSHIP UTILITY INCOME FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 22657
<INVESTMENTS-AT-VALUE> 25085
<RECEIVABLES> 1226
<ASSETS-OTHER> 33
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26344
<PAYABLE-FOR-SECURITIES> 458
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 167
<TOTAL-LIABILITIES> 625
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26994
<SHARES-COMMON-STOCK> 1532
<SHARES-COMMON-PRIOR> 1751
<ACCUMULATED-NII-CURRENT> 13
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3716)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2428
<NET-ASSETS> 25719
<DIVIDEND-INCOME> 1509
<INTEREST-INCOME> 113
<OTHER-INCOME> 0
<EXPENSES-NET> 377
<NET-INVESTMENT-INCOME> 1245
<REALIZED-GAINS-CURRENT> 2297
<APPREC-INCREASE-CURRENT> 990
<NET-CHANGE-FROM-OPS> 4532
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1034
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99
<NUMBER-OF-SHARES-REDEEMED> 370
<SHARES-REINVESTED> 52
<NET-CHANGE-IN-ASSETS> 8
<ACCUMULATED-NII-PRIOR> 62
<ACCUMULATED-GAINS-PRIOR> (6010)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 129
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 380
<AVERAGE-NET-ASSETS> 20199
<PER-SHARE-NAV-BEGIN> 11.51
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> 1.57
<PER-SHARE-DIVIDEND> (.63)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.06
<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> NUVEEN FLAGSHIP UTILITY INCOME FUND - CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 22657
<INVESTMENTS-AT-VALUE> 25085
<RECEIVABLES> 1226
<ASSETS-OTHER> 33
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26344
<PAYABLE-FOR-SECURITIES> 458
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 167
<TOTAL-LIABILITIES> 625
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26994
<SHARES-COMMON-STOCK> 438
<SHARES-COMMON-PRIOR> 483
<ACCUMULATED-NII-CURRENT> 13
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3716)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2428
<NET-ASSETS> 25719
<DIVIDEND-INCOME> 1509
<INTEREST-INCOME> 113
<OTHER-INCOME> 0
<EXPENSES-NET> 377
<NET-INVESTMENT-INCOME> 1245
<REALIZED-GAINS-CURRENT> 2297
<APPREC-INCREASE-CURRENT> 990
<NET-CHANGE-FROM-OPS> 4532
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 260
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3
<NUMBER-OF-SHARES-REDEEMED> 64
<SHARES-REINVESTED> 16
<NET-CHANGE-IN-ASSETS> 8
<ACCUMULATED-NII-PRIOR> 62
<ACCUMULATED-GAINS-PRIOR> (6010)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 129
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 380
<AVERAGE-NET-ASSETS> 5669
<PER-SHARE-NAV-BEGIN> 11.49
<PER-SHARE-NII> .55
<PER-SHARE-GAIN-APPREC> 1.56
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.03
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
NUVEEN INVESTMENT TRUST
NUVEEN INVESTMENT TRUST II
NUVEEN INVESTMENT TRUST III
NUVEEN INVESTMENT TRUST IV
MULTIPLE CLASS PLAN
ADOPTED PURSUANT TO RULE 18f-3
Whereas, Nuveen Investment Trust, Nuveen Investment Trust II, Nuveen
Investment Trust III and Nuveen Investment Trust IV, each a Massachusetts
business trust (each, a "Trust"), engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
Whereas, the Trust is authorized to and does issue shares of beneficial
interest in separate series, with the shares of each such series representing
the interests in a separate portfolio of securities and other assets (the
Trust's series together with all other such series subsequently established by a
Trust being referred to herein individually as a "Fund" and collectively as the
"Funds");
Whereas, the Trust is authorized to and has divided the shares of each Fund
into four classes, designated as Class A Shares, Class B Shares, Class C Shares
and Class R Shares; and
Whereas, the Board of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) (the "Non-Interested
Members"), after having been furnished and having evaluated information
reasonably necessary to evaluate this Multiple Class Plan (the "Plan"), have
determined in the exercise of their reasonable business judgment that the Plan
is in the best interests of each class of each Fund individually, and each Fund
and the Trust as a whole.
Now, Therefore, the Trust hereby adopts this Plan, effective the date
listed on Exhibit A attached hereto, in accordance with Rule 18f-3 under the
Act:
Section 1. Class Differences. Each class of shares of a Fund shall
represent interests in the same portfolio of investments of that Fund and,
except as otherwise set forth in this Plan, shall differ solely with respect to:
(i) distribution, service and other charges and expenses as provided for in
Sections 2 and 3 of this Plan; (ii) the exclusive right of each class of shares
to vote on matters submitted to shareholders that relate solely to that class or
for which the interests of one class differ from the interests of another class
or classes; (iii) such differences relating to eligible investors as may be set
forth in the prospectus and statement of additional information of each Fund, as
the same may be amended or supplemented from time to time (each
<PAGE>
a "Prospectus" and "SAI" and collectively, the "Prospectus" and "SAI"); (iv) the
designation of each class of shares; and (v) conversion features.
Section 2. Distribution and Service Arrangements; Conversion Features.
Class A Shares, Class B Shares, Class C Shares and Class R Shares of each Fund
shall differ in the manner in which such shares are distributed and in the
services provided to shareholders of each such class as follows:
(a) Class A Shares:
(i) Class A Shares shall be sold at net asset value
subject to a front-end sales charge set forth in the Prospectus and
SAI;
(ii) Class A Shares shall be subject to an annual service
fee ("Service Fee") pursuant to a Plan of Distribution and Service
Pursuant to Rule 12b-1 (the "12b-1 Plan") not to exceed 0.25 of 1% of
the average daily net assets of the Fund allocable to Class A Shares,
which, as set forth in the Prospectus, SAI and the 12b-1 Plan, may be
used to compensate certain authorized dealers for providing ongoing
account services to shareholders; and
(iii) Class A Shares shall not be subject to a
Distribution Fee (as hereinafter defined);
(iv) As described in the Prospectus and SAI, certain
Class A shares redeemed within 18 months of purchase shall be subject
to a contingent deferred sales charge ("CDSC") of 1% of the lower of
(a) the net asset value of Class A Shares at the time of purchase or
(b) the net asset value of Class A Shares at the time of redemption,
as set forth in the Prospectus and SAI; and
(v) Class A Shares may be offered from time to time at
net asset value without a front-end sales load, the terms and
conditions of such offer will be described in the Trust's Prospectus
or supplement thereto. If the Class A Shares are sold on a load-waived
basis, such Class A Shares redeemed within 24 months of purchase shall
be subject to a CDSC of 2% of the lower of the purchase price or
redemption proceeds, as described in the Prospectus or supplement
thereto.
(b) Class B Shares:
(i) Class B Shares shall be sold at net asset value
without a front-end sales charge;
-2-
<PAGE>
(ii) Class B Shares shall be subject to a Service Fee
pursuant to the 12b-1 Plan not to exceed 0.25 of 1% of average daily
net assets of the Fund allocable to Class B Shares, which, as set
forth in the Prospectus, SAI and the 12b-1 Plan, may be used to
compensate certain authorized dealers for providing ongoing account
services to shareholders;
(iii) Class B Shares shall be subject to an annual
distribution fee ("Distribution Fee") pursuant to the 12b-1 Plan not
to exceed 0.75 of 1% of average daily net assets of the Fund allocable
to Class B Shares, which, as set forth in the Prospectus, SAI and the
12b-1 Plan, will be used to reimburse John Nuveen & Co. Incorporated,
the Trust's distributor, for certain expenses and for providing
compensation to certain authorized dealers;
(iv) Class B Shares redeemed within 6 years of purchase
shall be subject to a CDSC described below of the lower of (a) the net
asset value of Class B Shares at the time of purchase or (b) the net
asset value of Class B Shares at the time of redemption, as set forth
in the Prospectus and SAI; and
<TABLE>
<CAPTION>
Years Since Purchase
of Class B Shares CDSC
<S> <C>
0-1 5%
1-2 4%
2-3 4%
3-4 3%
4-5 2%
5-6 1%
6+ 0%
</TABLE>
(v) Class B Shares will automatically convert to Class A
Shares eight years after purchase, as set forth in the Prospectus and
SAI.
(c) Class C Shares:
(i) Class C Shares shall be sold at net asset value
without a front-end sales charge;
(ii) Class C Shares shall be subject to a Service Fee
pursuant to the 12b-1 Plan not to exceed 0.25 of 1% of average daily
net assets of the Fund allocable to Class C Shares, which, as set
forth in the Prospectus, SAI and the
-3-
<PAGE>
12b-1 Plan, may be used to compensate certain authorized dealers for
providing ongoing account services to shareholders;
(iii) Class C Shares shall be subject to a Distribution Fee
pursuant to the 12b-1 Plan not to exceed 0.75 of 1% of average daily
net assets of the Fund allocable to Class C Shares, which, as set
forth in the Prospectus, SAI and the 12b-1 Plan, will be used to
reimburse John Nuveen & Co. Incorporated, the Trust's distributor, for
certain expenses and for providing compensation to certain authorized
dealers; and
(iv) Class C Shares redeemed within 12 months of purchase shall
be subject to a CDSC of 1% of the lower of (a) the net asset value of
Class C Shares at the time of purchase or (b) the net asset value of
Class C Shares at the time of redemption, as set forth in the
Prospectus and SAI.
(d) Class R Shares:
(i) Class R Shares shall be sold at net asset value
without a front-end sales charge;
(ii) Class R Shares shall not be subject to a Service Fee;
and
(iii) Class R Shares shall not be subject to a Distribution
Fee.
Section 3. Allocation of Income, Expenses, Gains and Losses.
(a) Investment Income, and Realized and Unrealized Gains and Losses. The
daily investment income, and realized and unrealized gains and losses, of a Fund
will be allocated to each class of shares based on each class' relative
percentage of the total value of shares outstanding of the Funds at the
beginning of the day, after such net assets are adjusted for the prior day's
capital share transactions.
(b) Fund Level Expenses. Expenses that are attributable to a Fund, but
not a particular class thereof ("Fund level expenses"), will be allocated to
each class of shares based on each class' relative percentage of the total value
of shares outstanding of the Fund at the beginning of the day, after such net
assets are adjusted for the prior day's capital share transactions. Fund level
expenses include fees for services that are received equally by the classes
under the same fee arrangement. All expenses attributable to a Fund that are not
"class level expenses" (as defined below) shall be Fund level expenses,
including but not limited to
-4-
<PAGE>
transfer agency fees and expenses, share registration expenses, and shareholder
reporting expenses.
(c) Class Level Expenses. Expenses that are directly attributable to a
particular class of shares, including the expenses relating to the distribution
of a class' shares, or to services provided to the shareholders of a class, as
set forth in Section 2 of this Plan, will be incurred by that class of shares.
Class level expenses include expenses for services that are unique to a class of
shares in either form or amount. "Class level expenses" shall include, but not
be limited to, 12b-1 Service Fees, 12b-1 Distribution Fees, expenses associated
with the addition of share classes to a Trust (to the extent that the expenses
were not fully accrued prior to the issuance of the new classes of shares),
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a specific class of shares, directors' fees or expenses incurred as a result of
issues relating to a specific class of shares, and accounting expenses relating
to a specific class of shares.
(d) Fee Waivers and Expense Reimbursements. On a daily basis, if the
Fund level expenses and the class level expenses (not including 12b-1 plan
payments) exceed the daily expense cap for the Fund, an appropriate
waiver/reimbursement will be made to the Fund. The amount of such reimbursement
to each class will be in an amount such that the expenses of the class with the
highest expense ratio (excluding Service Fees and Distribution Fees) will be
equal to the daily expense cap after reimbursement. The expense reimbursement
will be allocated to each class of shares based on each class' relative
percentage of the total value of shares outstanding of the Fund at the beginning
of the day, after such net assets are adjusted for the prior day's capital share
transactions.
Section 4. Exchange Privilege. Shares of a class of a Fund may be
exchanged only for shares of the same class of another Fund, except as otherwise
set forth in the Prospectus and SAI.
Section 5. Term and Termination.
(a) The Funds. This Plan shall become effective with respect to each
Fund on the date hereof, and shall continue in effect with respect to such Class
A, Class B, Class C and Class R Shares of each such Fund until terminated in
accordance with the provisions of Section 5(c) hereof.
(b) Additional Funds or Classes. This Plan shall become effective with
respect to any class of shares of a Fund other than Class A, Class B, Class C or
Class R and with respect to each additional Fund or class thereof established by
a Trust after the date hereof and made subject to this Plan upon commencement of
the initial public offering thereof (provided that the
-5-
<PAGE>
Plan has previously been approved with respect to such additional Fund or class
by votes of a majority of both (i) the members of the Board of a Trust, as a
whole, and (ii) the Non-Interested Members, cast at a meeting held before the
initial public offering of such additional Fund or classes thereof), and shall
continue in effect with respect to each such additional Fund or class until
terminated in accordance with provisions of Section 5(c) hereof. An addendum
setting forth such specific and different terms of such additional series or
classes shall be attached to or made part of this Plan.
(c) Termination. This Plan may be terminated at any time with respect to
any Trust or any Fund or class thereof, as the case may be, by vote of a
majority of both the members of the Board of a Trust, as a whole, and the Non-
Interested Members. The Plan may remain in effect with respect to a particular
Trust or any Fund or class thereof even if it has been terminated in accordance
with this Section 5(c) with respect to any other Trust or Fund or class thereof.
Section 6. Subsequent Trusts. The parties hereto intend that any
open-end investment company established subsequent to the date set forth below
for which Nuveen Institutional Advisory Corp. acts as investment adviser (each a
"Future Trust"), will be covered by the terms and conditions of this Plan,
provided that the Board of such Future Trust as a whole, and the Non-Interested
Members of such Future Trust, after having been furnished and having evaluated
information reasonably necessary to evaluate the Plan, have determined in the
exercise of their reasonable business judgment that the Plan is in the best
interests of each class of each Fund of such Future Trust individually, and each
Fund of such Future Trust and such Future Trust as a whole.
Section 7. Amendments.
(a) General. Except as set forth below, any material amendment to this
Plan affecting a Trust or Fund or class thereof shall require the affirmative
vote of a majority of both the members of the Board of that Trust, as a whole,
and the Non-Interested Members that the amendment is in the best interests of
each class of each Trust individually and each Fund as a whole.
(b) Future Trusts. Any amendment to the Plan solely for the purpose of
adding a Future Trust as a party hereto in accordance with Section 6, will not
require any action by the Board of the Trust.
-6-
<PAGE>
Exhibit A
Effective Date of 18f-3 Plan
<TABLE>
<CAPTION>
NUVEEN INVESTMENT TRUST:
<S> <C>
Nuveen Growth and Income Stock Fund July 17, 1996
Nuveen Balanced Stock and Bond Fund July 17, 1996
Nuveen Balanced Municipal and Stock Fund July 17, 1996
Nuveen European Value Fund May 16, 1998
NUVEEN INVESTMENT TRUST II:
Nuveen Rittenhouse Growth Fund July 24, 1997
NUVEEN INVESTMENT TRUST III:
Nuveen Income Fund August 26, 1998
NUVEEN INVESTMENT TRUST IV:
Nuveen Dividend and Growth Fund August 26, 1998
</TABLE>
-7-
<PAGE>
NUVEEN INVESTMENT TRUST IV
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign and file one or more Registration
Statements on Form N-1A under the Securities Act of 1933 and the Investment
Company Act of 1940, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 26th day of August, 1998.
/s/ Anthony T. Dean
------------------------------
Anthony T. Dean
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 26th day of August, 1998, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- -----------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/27/01
- -----------------------------------
/s/ Virginia L. Corcoran
------------------------
My Commission Expires: 10/27/01
<PAGE>
NUVEEN INVESTMENT TRUST IV
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the
above-referenced organization, hereby constitutes and appoints ANTHONY T. DEAN,
TIMOTHY R. SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 26th day of August, 1998.
/s/ James E. Bacon
-------------------------
James E. Bacon
STATE OF ILLINOIS )
--------
)SS
COUNTY OF COOK )
----
On this 26th day of August, 1998, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/27/01
- --------------------------------
/s/ Virginia L. Corcoran
-------------------------------
My Commission Expires: 10/27/01
<PAGE>
NUVEEN INVESTMENT TRUST IV
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints ANTHONY T. DEAN,
TIMOTHY R. SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 26th day of August, 1998.
/s/ William L. Kissick
----------------------------------
William L. Kissick
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 26th day of August, 1998, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- ------------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/27/01
- ------------------------------------
/s/ Virginia L. Corcoran
------------------------------------
My Commission Expires: 10/27/01
<PAGE>
NUVEEN INVESTMENT TRUST IV
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints ANTHONY T. DEAN,
TIMOTHY R. SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 26th day of August, 1998.
/s/ Thomas E. Leafstrand
-------------------------------
Thomas E. Leafstrand
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 26th day of August, 1998, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- -----------------------------------
"OFFICIAL SEAL"
VIRGINA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/27/01
- -----------------------------------
/s/ Virginia L. Corcoran
-------------------------------
My Commission Expires: 10/27/01
<PAGE>
NUVEEN INVESTMENT TRUST IV
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints ANTHONY T. DEAN,
TIMOTHY R. SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) her
true and lawful attorney-in-fact and agent, for her on her behalf and in her
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as she
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
as hereunto set her hand this 26th day of August, 1998.
/s/ Sheila W. Wellington
--------------------------
Sheila W. Wellington
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 26th day of August, 1998, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- --------------------------------
"OFFICIAL SEAL"
VIRGINIA L. CORCORAN
Notary Public, State of Illinois
My Commission Expires 10/27/01
- --------------------------------
/s/ Virginia L. Corcoran
--------------------------
My Commission Expires: 10/27/01
<PAGE>
NUVEEN DEFINED PORTFOLIOS
NUVEEN MUTUAL FUNDS
NUVEEN EXCHANGE-TRADED FUNDS
NUVEEN ADVISORY CORP.
NUVEEN INSTITUTIONAL ADVISORY CORP.
NUVEEN ASSET MANAGEMENT INC.
JOHN NUVEEN & CO. INCORPORATED
______________________________
Standards and Procedures
Regarding
Conflicts of Interest
______________________________
Code of Ethics
And
Reporting Requirements
The Securities and Exchange Commission, in Investment Company Act Release No.
11421, has adopted Rule l7j-l "to provide guidance to investment companies as to
the minimum standards of conduct appropriate for persons who have access to
information regarding the purchase and sale of portfolio securities by
investment companies." The Rule requires registered investment companies, their
investment advisers and their principal underwriters to adopt codes of ethics
and reporting requirements to guard against violations of the standards set
forth in the Rule and the principles provided below and to establish guidelines
for the conduct of persons who (1) may obtain material non-public information
concerning securities held by or considered for purchase or sale by any series
of the Nuveen Defined Portfolios (the "Trusts") or by any of the Nuveen-
sponsored registered management investment companies (the "Funds") or non-
management investment company clients ("Clients") to which Nuveen Advisory
Corp., Nuveen Asset Management Inc. or Nuveen Institutional Advisory Corp. act
as investment advisers or (2) may make any recommendation or participate in the
determination of which recommendation shall be made concerning the purchase or
sale of any securities by a Trust, Fund or Client.
The equity Funds ("Sub-Advised Funds") advised pursuant to sub-advisory
agreements with Institutional Capital Corporation and Rittenhouse Financial
Services ("Sub-Advisers") acknowledge that, in lieu of being subject to this
Code of Ethics, all employees and other persons affiliated with such Sub-
Advisers shall be subject to the respective Sub-Adviser's Code of Ethics. In
addition, due to Nuveen personnel's limited access to information regarding the
Sub-Advisers' portfolio activities concerning equity securities, Nuveen
personnel who are Access Persons of the Sub-Advised Funds shall not be required
to preclear any transactions under this Code solely because they are Access
Persons of such Funds. Where appropriate, designated
<PAGE>
2
Nuveen employees who may be privy to a Sub-Adviser's portfolio deliberations
will be subject to the Sub-Adviser's Code of Ethics. This Code of Ethics (the
"Code") consists of six sections -- 1. Statement of General Principles; 2.
Definitions; 3. Exempted Transactions; 4. Prohibitions; 5. Reporting
Requirements; and 6. Sanctions.
I. Statement of General Principles
-------------------------------
The Code is based upon the principle that the officers, directors and
employees of a Fund, Nuveen Advisory Corp., Nuveen Institutional Advisory
Corp., Nuveen Asset Management Inc. and John Nuveen & Co. Incorporated owe
a fiduciary duty to, among others, the unitholders and shareholders of the
Trusts and Funds and the Clients, to conduct their personal securities
transactions in a manner which does not interfere with Trust, Fund or
Client portfolio transactions or otherwise take unfair advantage of their
relationship to the Trusts, Funds or Clients. In accordance with this
general principle, persons covered by the Code must: (1) place the
interests of unitholders and shareholders of the Trusts and Funds and the
Clients first; (2) execute personal securities transactions in compliance
with the Code; (3) avoid any actual or potential conflict of interest and
any abuse of their positions of trust and responsibility; and (4) not take
inappropriate advantage of their positions. For example, a person who
learns of a corporate opportunity due to their position shall not take
advantage of and profit from such opportunity. It bears emphasis that
technical compliance with the Code's procedures will not automatically
insulate from scrutiny trades which show a pattern of abuse of the
individual's fiduciary duties to the Trust, Fund or Client. In addition, a
violation of the general principles of the Code may constitute a punishable
violation.
II. Definitions
-----------
As used herein:
(l) "Access Person" shall mean:
(a) Any director, officer or advisory person of any Fund or Trust or
of Nuveen Advisory Corp., Nuveen Institutional Advisory Corp. or
Nuveen Asset Management Inc.
(b) Any director or officer of John Nuveen & Co. Incorporated who in
the ordinary course of his business makes, participates in or
obtains information regarding the purchase or sale of securities
for the Funds, Trusts or Clients or whose functions or duties as
part of the ordinary course of his business
<PAGE>
3
relate to the making of any recommendation to such Fund, Trust or
Client regarding the purchase or sale of securities.
Lists of persons deemed to be Access Persons of the various entities
subject to this Code are attached as Exhibits hereto.
For purposes of this section "advisory person" shall mean:
(a) Any employee of a Fund, of Nuveen Advisory Corp., of Nuveen
Institutional Advisory Corp., of Nuveen Asset Management Inc. or
of John Nuveen & Co. Incorporated who, in connection with his or
her regular functions or duties, makes, participates in, or
obtains information, regarding the purchase or sale of a security
by a Trust, Fund or Client or whose functions relate to the
making of any recommendations with respect to such purchases or
sales; and
(b) Any director or officer of John Nuveen & Co. Incorporated who
obtains information concerning recommendations made to such
Trust, Fund or Client with respect to the purchase or sale of a
security.
"Investment Personnel" and "Portfolio Managers" defined below are in
each case also "Access Persons."
(2) "Beneficial ownership" shall be interpreted in accordance with the
definition set forth in Rule 16a-1(a)(2) under the Securities Exchange
Act of 1934. Section 16a-1(a)(2) specifies that a person will be
deemed to be the "beneficial owner" of securities that such
individual, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares in the
opportunity to profit or share in any profit derived from a
transaction in the subject security. In addition, a person will be
deemed to be the beneficial owner of securities:
(a) held by members of such person's immediate family sharing the
same household;
(b) held by a general or limited partnership for which such person is
a general partner;
(c) held in a trust:
<PAGE>
4
(i) of which such person is trustee and the trustee or members
of his or her immediate family have a pecuniary interest in
the trust;
(ii) in which such person has a vested beneficial interest or
shares in investment control with the trustee;
(iii) of which such person is settlor and which the settlor has
the power to revoke the trust without consent of the
beneficiaries; or
(iv) certain other trusts as set forth in Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934.
A person will not be deemed to be the beneficial owner of
securities held in the portfolio of a registered investment
company solely by reason of his or her ownership of shares or
units of such registered investment company.
(3) "Control" shall have the same meaning as set forth in Section 2(a) (9)
of the Investment Company Act of 1940.
(4) "Investment Personnel" shall mean any employee of Nuveen Advisory
Corp., Nuveen Institutional Advisory Corp., Nuveen Asset Management
Inc. or John Nuveen and Co. Incorporated who acts as a portfolio
manager or as an analyst or trader who provides information or advice
to the portfolio manager or who helps execute the portfolio manager's
decisions. Lists of persons deemed to be Investment Personnel of the
various entities subject to this Code are attached as Exhibits hereto.
(5) "Portfolio Manager" shall mean any employee of Nuveen Advisory Corp.,
Nuveen Institutional Advisory Corp., Nuveen Asset Management Inc. or
John Nuveen & Co. Incorporated who is entrusted with the direct
responsibility and authority to make investment decisions affecting a
Trust, Fund or Client. Lists of persons deemed to be Portfolio
Managers of the various entities subject to this Code are attached as
Exhibits hereto. Portfolio Mangers are also Investment Personnel and
Access Persons by definition.
(6) "Purchase or sale of a security" shall include any transaction in
which a beneficial interest in a security is acquired or disposed of,
including but not limited to the writing of an option to purchase or
sell a security or the cancellation of a good-until-canceled order.
<PAGE>
5
(7) "Security" shall mean any stock, bond, debenture, evidence of
indebtedness or in general any other instrument defined to be a
security in Section 2(a)(36) of the Investment Company Act of l940
EXCEPT that it shall not include securities issued by the Government
of the United States, short term debt securities which are "government
securities" within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, bankers' acceptances, bank certificates of
deposit, commercial paper and shares of registered open-end investment
companies.
A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the
recommendation, when such person considers making such recommendation.
(8) "Strategic Income Fund Eligible Security" shall include income-
producing securities, including equity and fixed income securities
identified as eligible for purchase from time to time by the Portfolio
Manager for that Fund.
(9) "Taxable Defined Portfolio Eligible Security" shall include equity and
fixed income securities of companies which are current holdings of the
Defined Portfolios (formerly called "Unit Trusts") or identified as
eligible for purchase for such Portfolios.
(10) "Utility Fund Eligible Securities" shall include equity and fixed
income of companies in the public utilities industry, such as
companies principally engaged in the production, transmission or
distribution of electric energy, gas, water, or communications
services or in solid waste disposal.
III. Exempted Transactions
---------------------
The prohibitions of Section IV of this Code shall not apply to:
(1) Purchases or sales affecting any account over which the party involved
has no direct or indirect influence or control such as accounts
managed by independent managers who exercise investment discretion;
(2) Purchases or sales which are non-volitional on the part of either the
party involved or a Trust, Fund or Client;
(3) Purchases which are part of an automatic dividend reinvestment plan.
<PAGE>
6
(4) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
(5) Purchases or sales of Strategic Income Fund Eligible Securities,
Taxable Defined Portfolio Eligible Securities and Utility Fund
Eligible Securities in each case issued by companies with a public
equity market capitalization of at least $1 billion.
The fiduciary principles set forth in Section 1 shall nevertheless
apply to the above described transactions.
IV. Prohibitions
------------
(l) Transactions Requiring Pre-Clearance: Unless previously cleared in
the manner described in paragraph (8) below, no Access Person shall
purchase or sell the following securities for his or her own account
or for any account in which he or she has any beneficial ownership:
(a) securities offered in a private placement;
(b) securities of The John Nuveen Company;
(c) municipal securities (other than variable rate securities with
reset periods of 6 months or less);
(d) shares of a Nuveen-sponsored exchange-traded fund (excluding
preferred shares of those funds);
(e) Utility Fund Eligible Securities (for Utility Fund Access Persons
only);
(f) Strategic Income Fund Eligible Securities (for Strategic Income
Access Persons only); or
(g) Taxable Defined Portfolio Eligible Securities (for Taxable
Defined Portfolio Access Persons only).
"Non-interested" directors (as defined in the Investment Company Act
of 1940) of the Funds are not subject to the prohibitions of
subparagraph (a) and (g) above and are only subject to subparagraphs
(c), (e) and (f) to the extent such director purchases or sells a
security that he has actual knowledge is being considered for purchase
or sale by a Fund. (Regarding (b) above, non-interested directors are
not permitted to purchase securities of The John Nuveen Company.)
Individuals who are only non-interested directors of the Nuveen open-
end Funds shall not be subject to the prohibition of subparagraph (d)
above.
<PAGE>
7
(2) No Trades When Fund Has Pending "Buy" or "Sell": No Portfolio Manager
shall execute a securities transaction on a day during which a Trust,
Fund or Client that is managed or surveyed by the company he is
employed by has a pending "buy" or "sell" order in that same security
until that order is executed or withdrawn. No other Access Person
shall execute a securities transaction on a day during which a Trust,
Fund or Client has a pending "buy" or "sell" order in that same
security until that order is executed or withdrawn if that person
knows, or reasonably should have known, an order is pending. However,
the preceding two sentences shall not apply to securities transactions
involving a security held by a Fund and invested and managed under a
Sub-Advisory Agreement unless the Portfolio Manager or Access Person
has actual knowledge that the Fund has a pending "buy" or "sell" order
involving such security. In addition, only Utility Fund, Strategic
Income Fund and Taxable Defined Portfolio Access Persons shall be
subject to the restrictions imposed by this paragraph for Eligible
Securities held or considered for purchase by those entities. Trades
made in violation of this prohibition shall be unwound or, if that is
impractical, any profits realized must be disgorged to a charitable
organization.
(3) No Trades Within 7 Days of Fund Trades: No Portfolio Manager of a
Trust, Fund or Client shall purchase or sell any security within seven
calendar days before or after the Trust, Fund or Client he surveys or
manages trades or considers to purchase or sell such security. This
prohibition shall not apply to securities invested and managed under a
Sub-Advisory agreement. Trades made in violation of this prohibition
should be unwound or, if that is impractical, any profits realized
must be disgorged to a charitable organization.
(4) No Profits on Purchases and Sales Within 60 days: Investment
Personnel shall not profit in the purchase and sale, or sale and
purchase, of the same (or equivalent) security within 60 calendar days
if such security is a municipal security or shares issued by a Nuveen-
sponsored exchange-traded fund. In addition, Utility Fund, Strategic
Income Fund and Taxable Defined Portfolio Investment Personnel shall
not profit in such purchases or sales or sales and purchases of the
same (or equivalent) security within 60 calendar days if such security
is a Eligible Security for the appropriate entity. Trades made in
violation of this prohibition shall be unwound or, if that is
impractical, any profits realized must be disgorged to a charitable
organization.
(5) No IPOs: Investment Personnel shall not purchase any securities in an
initial public offering other than an offering of securities issued by
municipal or United States government entities.
<PAGE>
8
(6) Gifts: Investment Personnel shall not accept any thing of material
value (including gifts) from any person or entity that does business
with or on behalf of a Trust, Fund or Client. For purposes of this
prohibition the term "material value" shall have the same meaning
expressed in Rule 2830 of the National Association of Securities
Dealers, Inc.'s Conduct Rules.
(7) Service as Directors: Unless such service is previously cleared in
the manner described in paragraph (8) below and the criteria set forth
in that paragraph are followed, Investment Personnel shall not serve
as board members or other decision-makers for entities that issue
municipal securities. In addition, Utility Fund, Strategic Income
Fund and Taxable Defined Portfolio, Access Persons shall not serve as
a board member or decision-maker for a company that issues such
Eligible Securities without preclearance.
(8) Preclearance: (a) In General: An Access Person may request clearance
of a transaction otherwise prohibited by paragraph (1) above prior to
the placement of any order in connection therewith by submitting a
written or oral request for clearance to the General Counsel of John
Nuveen & Co. Incorporated or his designee. Unless specifically
exempted herein, no such transaction may be effected without the prior
clearance of the transaction. Clearance may be reflected in a written
or an electronic report. Clearance shall be valid for three business
days. Clearance shall not be granted for municipal security limit
orders.
(b) Private Placements: Requests from Investment Personnel for
approval to purchase securities offered in a private placement must be
submitted in writing to Nuveen's General Counsel or his designee prior
to placing an order to purchase the securities. Unless specifically
exempted herein, no such transaction may be effected without the prior
clearance of the transaction. Clearance may be reflected in a written
or an electronic report. Any approval shall be valid for three
business days. Transactions may be approved only if the party
clearing the transaction takes into account, among other factors,
whether the investment opportunity should be reserved for a Trust,
Fund or Client and whether the opportunity is being offered to an
individual by virtue of his or her position. In addition, Investment
Personnel who receive authorization to purchase securities in a
private placement have an affirmative duty to disclose that position
to the General Counsel or his designee if he or she plays a role in a
Trust's, Fund's or Client's subsequent investment decision regarding
the same issuer. Once such disclosure is made, the General Counsel or
his designee shall assemble a commission of
<PAGE>
9
investment personnel with no personal interest in the issuer involved
to independently review the Trust's, Fund's or Client's investment
decision.
(c) Service as Directors: Investment Personnel may request clearance
of service as outside directors otherwise prohibited by paragraph (7)
above, prior to acceptance of any such position, by submitting a
written request for clearance to the General Counsel of John Nuveen &
Co. Incorporated or his designee. Such request shall state the
position sought, the reason service is desired and any possible
conflicts of interest known at the time of the request. No such
position may be accepted without prior clearance. Clearance may be
reflected in a written or an electronic report. Service may be
cleared only if the party clearing the transaction determines that
service in that capacity would not be inconsistent with the interests
of the Trusts, Funds or Clients. In addition, investment personnel
who receive authorization to serve in such a capacity must be isolated
through "Chinese Wall" procedures from those making investment
decisions regarding securities issued by the entity involved.
V. Reporting Requirements
----------------------
(l) Every Access Person (other than directors of a Fund who are not
"interested persons" of such Fund) shall report to the Legal
Department of John Nuveen & Co. Incorporated details of each
transaction by reason of which he or she acquires any direct or
indirect beneficial ownership of any security (as defined in Section
II herein). Notwithstanding the foregoing, an Access Person need not
make a report pursuant hereto where such report would duplicate
information recorded pursuant to Rules 204-2(a)(l2) or 204-2(a)(l3)
under the Investment Advisers Act of l940. In addition to the
reporting requirement expressed above, Access Persons (other than
directors who are not "interested persons") shall authorize the Legal
Department to direct their broker or brokers to supply to the Legal
Department, on a timely basis, duplicate copies of confirmations of
all securities transactions and copies of periodic statements for all
securities accounts involving securities in which such Access Person
acquires or disposes of direct or indirect beneficial ownership. Such
duplicate confirmations and periodic statements received during the
prescribed period shall satisfy the reporting requirements set forth
in this paragraph. Also, trades executed through Nuveen or in an
account in which Nuveen is the broker of record shall be deemed to
have been reported for purposes of this paragraph. Notwithstanding
the provisions of this paragraph, a report shall not be required for
purchases and sales in any account over which the party involved does
not have direct or indirect influence or control such as a "wrap"
account managed by an independent manager.
<PAGE>
10
(2) Every director of a Fund who is not an "interested person" of such
Fund shall be required to report the details of each transaction with
respect to which such director knew or, in the ordinary course of
fulfilling his or her official duties as a director of the Fund,
should have known that during the 15 day period immediately preceding
or after the date of the transaction in a security by the director
such security is or was purchased or sold by the Fund or such purchase
or sale by the Fund is or was considered by the Fund or its investment
adviser.
(3) Every report required to be made pursuant to paragraphs 1 and 2 of
this Section (other than duplicate copies of confirmations and
periodic statements) shall be made not later than l0 days after the
end of the calendar quarter in which the transaction to which the
report relates was effected, and shall contain the following
information:
(a) the date of the transaction, the title and the number of shares,
or principal amount of each security involved;
(b) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through whom the
transaction was effected.
Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or
she has or disposed of any direct or indirect beneficial ownership in
the security to which the report relates.
(4) The reporting requirements established pursuant to paragraphs 1 and 2
of this Section (other than duplicate copies of confirmations and
periodic statements) shall apply only to transactions by an Access
Person in securities in which such Access Person has, or by reason of
such transaction acquires or disposes of, any direct or indirect
beneficial ownership in the security.
(5) Investment Personnel shall disclose to the General Counsel of John
Nuveen & Co. Incorporated all personal securities holdings within 10
days of commencement of employment as an investment person and shall
continue to disclose such holdings on an annual basis.
<PAGE>
11
VI. Sanctions
---------
Upon discovery of a violation of this Code, including either
violations of the enumerated provisions or the general principles
provided, any Fund, Nuveen Advisory Corp., Nuveen Institutional
Advisory Corp., Nuveen Asset Management Inc. or John Nuveen & Co.
Incorporated may impose such sanctions as it deems appropriate,
including, inter alia, a letter of censure or suspension or
termination of the employment of the violator. All material
violations of this Code and any sanctions imposed with respect thereto
shall be reported periodically to the board of directors of the
management investment company with respect to securities of which the
violation occurred, or to the Executive Committee of John Nuveen & Co.
Incorporated if the violation was with respect to securities of any
series of the Nuveen Defined Portfolios, or to the board of directors
of Nuveen Institutional Advisory Corp., Nuveen Asset Management Inc.
or Nuveen Advisory Corp. with respect to securities of non-management
investment company clients advised by these entities.
Last revised July 15, 1998
<PAGE>
12
EXHIBIT A
ACCESS PERSONS (AS OF JANUARY 1, 1998)
ACCESS PERSON ONLY
- ------------------
John P. Amboian
Philip T. Anglim
Bruce P. Bedford
Brian Bergere
Alan Berkshire
Julie Caddigan
John L. Creswell
Francesco Cristiano
Richard P. Davis
Anthony T. Dean
David C. Dunton
Lorna C. Ferguson
Kathleen M. Flanagan
Karen Healy
Marcia F. Johnson
Mindy Koehler
Ted R. Korczyk
Robert E. Krasnosky
Anna R. Kucinskis
Robert W. Kuppenheimer
Cheryl Jancaric
Stephen W. Leonhardt
Larry W. Martin
Thomas C. Muntz
William O'Brien
O. Walter Renfftlen
Stuart W. Rogers
Timothy R. Schwertfeger
Bradford W. Shaw
Jacqueline D. Smith
H. William Stabenow
William Swanson
Paul C. Williams
Jamie Stewart Young
<PAGE>
13
Gary Ziegler
Gifford R. Zimmerman
INVESTMENT PERSONNEL
- --------------------
Julia Antonatos
Katherine Bateman
Mark J. Bulinski
David H. Burgess
David I. Cohen
Jerome S. Contro
Gary S. Davis
Gary R. Downie
Martin J. Doyle
Brian P. Ehlers
Christopher P. Fama
Peter J. Fugiel
David Grad
Gayle Guzzardo
Richard Harper
Cadmus M. Hicks
John P. Hoeting
Susan B. Hudson
Evan Kallberg
Jeffrey D. Keele
David E. Kuenzi
John M. Lawver
Jerome Lepinski
Barbara D. Lindholm
Jill Mason
John V. Miller
Michael S. Rosenthal
Michael Sheyker
Ben H. Stairs
Cathryn Steeves
Shannon Swank
Terry D. Trim
Heather Tucker
Martha Strom
<PAGE>
14
PORTFOLIO MANAGERS
- ------------------
Glen R. Anderson
Verla Holeman Boyle
Paul L. Brennan
Susan E. Carr
Karen Davern
Michael S. Davern
William M. Fitzgerald
J. Thomas Futrell
John W. Gambla
Richard A. Huber
Lucy D. Kasson
Steven J. Krupa
James W. Lumberg
Edward F. Neild, IV
Thomas J. O'Shaughnessy
Walter K. Parker
Stephen S. Peterson
Daniel S. Solender
Thomas C. Spalding, Jr.
Shirley A. Stewart
Jan E. Terbrueggen
Ronald E. Toupin
Outside Directors/Trustees of Funds Managed by Nuveen Advisory Corp.
- --------------------------------------------------------------------
Robert P. Bremner
Lawrence Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Judith M. Stockdale
Trustees of Funds Managed by Nuveen Institutional Advisory Corp.
- ----------------------------------------------------------------
James E. Bacon
William L. Kissick
Thomas E. Leafstrand
Robert H. Lyon
Sheila Wellington
<PAGE>
15
EXHIBIT B
UTILITY FUND ACCESS PERSONS (as of January 1, 1998)
ACCESS PERSONS ONLY
- -------------------
Verla Holeman Boyle
Anthony T. Dean
William M. Fitzgerald
Kathleen M. Flanagan
J. Thomas Futrell
Karen Healy
Steven J. Krupa
Anna R. Kucinskis
Stephen W. Leonhardt
Larry W. Martin
Edward F. Neild, IV
Stephen S. Peterson
O. Walter Renfftlen
Timothy R. Schwertfeger
Thomas C. Spalding, Jr.
H. William Stabenow
Gifford R. Zimmerman
OUTSIDE DIRECTORS
- -----------------
Robert P. Bremner
Lawrence Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Judith M. Stockdale
<PAGE>
16
INVESTMENT PERSONNEL
- --------------------
John Hoeting
Evan Kallberg
David E. Kuenzi
JeromE. Lepinski
John V. Miller
Terry D. Trim
PORTFOLIO MANAGER
- -----------------
Richard A. Huber
