<PAGE>
As filed with the Securities and Exchange Commission on December 28, 2000.
1933 Act Registration No. 333-
1940 Act Registration No. 811-10237
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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. [_]
(Check appropriate box or boxes)
--------------
Nuveen Exchange-Traded Index Trust
(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
Gifford R. Zimmerman, Esq.--Vice President With a copy to:
and Secretary Thomas S. Harman
333 West Wacker Drive Morgan Lewis & Bockius LLP
Chicago, Illinois 60606 1800 M Street, N.W.
(Name and Address of Agent for Service) Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant [_] on (date) pursuant to paragraph
to paragraph (b) (a)(1)
[_] on , pursuant to [_] 75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
[_] on (date) pursuant to paragraph
(a)(2) of Rule 485.
If appropriate, check the following box:
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
NUVEEN EXCHANGE-TRADED INDEX TRUST
Nuveen America's Fastest Growing Companies Index Fund
Prospectus
The Nuveen Exchange-Traded Index Trust (the "Trust") presently consists of one
investment portfolio called the Nuveen America's Fastest Growing Companies Index
Fund (the "Fund"). The Fund seeks investment results that correspond generally
to the price and yield performance, before fees and expenses, of a particular
equity market index (the America's Fastest Growing Companies/TM/ Index) compiled
by Individual Investor Group, Inc. (the "Index Provider"). Nuveen Advisory Corp.
(the "Adviser") is the investment adviser to the Fund.
The shares of the Fund, called "Shares" throughout this prospectus, are listed
for trading on the American Stock Exchange LLC (the "AMEX"). Shares will trade
on the AMEX at market prices throughout the trading day. Market prices for
Shares may be different from their net asset value ("NAV").
The Fund issues and redeems Shares at NAV daily, but only in large blocks of
50,000 Fund Shares or multiples thereof. These "Creation Unit" transactions are
usually effected in exchange for a basket of stocks and an amount of cash. As a
practical matter, only securities dealers, institutions or other large investors
purchase or redeem Creation Units. Except when aggregated in Creation Units,
Shares are not redeemable securities.
An investment in the Fund is not a bank deposit nor is it insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
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.
December xx, 2000
<PAGE>
Table of Contents
Overview..................................................................
Introduction.............................................................
Investment Objective.....................................................
Principal Investment Strategies..........................................
Principal Risk Factors...................................................
Market Risk.............................................................
Asset Class Risk........................................................
Tracking Error Risk.....................................................
Industry
Concentration.............................................................
Lack of Diversification
Market Trading Risks....................................................
Absence of Prior Active Market.........................................
Lack of Market Liquidity...............................................
Shares May Trade at Prices Other than NAV..............................
Passive Investing
Lending of Securities
Descriptions of the Fund.................................................
Nuveen America's Fastest Growing Companies Index
Fund.....................................................................
Management and Operations ..............................................
Investment Adviser .....................................................
Administrator, Custodian, Transfer Agent and Securities
Lending Agent...........................................................
Shareholder Information ................................................
Buying and Selling Shares ...............................................
Book Entry .............................................................
Share Trading Prices ...................................................
Determining NAV ........................................................
Dividends and Distributions .............................................
Taxes....................................................................
Creations and Redemptions ...............................................
Distribution of Creation
Units....................................................................
Index Provider ..........................................................
Disclaimers .............................................................
Additional Information .................................................
--------------------------------------------------------------------------------
2
<PAGE>
Overview
Introduction
------------
This Prospectus provides information you need to make an informed decision about
investing in Shares of the Fund. It contains important facts about the Trust as
a whole and the Fund.
The Fund is an "index fund" which seeks investment results that correspond
generally to the price and yield performance, before the Fund's fees and
expenses, of an equity index called the America's Fastest Growing Companies/TM/
Index (the "Underlying Index"). An equity index is a group of stocks that an
Index Provider selects as representative of a market, a market segment or a
specific industry sector. The Index Provider determines the relative weightings
of the stocks in the index in accordance with its rules and procedures for the
index (which may change from time to time), and publishes information regarding
the composition, characteristics and market value of the index.
The Fund is designed for investors who seek a relatively low-cost "index-based"
approach to investing in a portfolio of equity securities. Shares of the Fund
may also be used as an asset allocation component or as a speculative trading
instrument.
Unlike many conventional mutual funds which are only bought and sold at closing
net asset values, the Fund's Shares have been designed to be tradable in the
secondary market on the AMEX on an intra-day basis, and to be created and
redeemed principally in-kind in Creation Units of 50,000 Shares at each day's
next calculated net asset value. These arrangements are designed to protect
ongoing shareholders from adverse effects on the portfolio of the Fund that
could arise from frequent cash creation and redemption transactions. Moreover,
in contrast to conventional mutual funds where redemptions can have an adverse
tax impact on taxable shareholders because of the need to sell portfolio
securities, which sales may generate taxable gains, the in-kind redemption
mechanism of the Fund generally will not lead to a tax event for the Fund or its
ongoing shareholders.
Nuveen Advisory Corp. (the "Adviser"), the adviser to the Fund, is a subsidiary
of Nuveen Investments ("Nuveen"). The Adviser and its affiliates are not
affiliated with the Index Provider.
The Principal Investment Strategies and the Principal Risk Factors sections of
this Prospectus discuss the principal strategies and risks applicable to the
Fund, while the Description of the Fund section provides other important
information about the Fund, including a brief description of its Underlying
Index.
Investment Objective
--------------------
The Fund seeks investment results that correspond generally to the total return,
before fees and expenses, of the Individual Investor America's Fastest Growing
Companies Index.
Principal Investment Strategies
-------------------------------
The Adviser uses an indexing approach to try to achieve the Fund's investment
objective. Unlike many investment companies, the Fund does not try to "beat" the
markets it tracks and does not seek temporary defensive positions when markets
decline or appear overvalued by some
3
<PAGE>
standards. The Adviser does not make any judgments about the investment merit of
a particular stock, nor does it attempt to apply any economic, financial or
market analysis in setting investment policy.
Indexing may eliminate some of the risks of active management, such as poor
stock selection. Indexing may also help increase after-tax performance by
keeping portfolio turnover low in comparison to many actively managed funds.
The Fund will invest at least 90% of its total assets in the stocks of its
Underlying Index, and generally will hold all of the securities which comprise
its Underlying Index. The Fund may hold up to 10% of its total assets in stocks
not included in its Underlying Index. For example, the Adviser may invest in
stocks not included in the Underlying Index in order to reflect various
corporate actions (such as mergers) and other changes in the Underlying Index
(such as reconstitutions, additions and deletions). There may, however, be
instances where the Adviser may choose to overweight another stock in the
Underlying Index, purchase securities not included within the Underlying Index
which the Adviser believes are appropriate to substitute for the Underlying
Index securities or utilize various combinations of other available investment
techniques in seeking to track the Underlying Index accurately.
As long as the Fund invests at least 90% of its total assets in the stocks of
its Underlying Index, it may also invest its other assets in futures contracts,
options on futures contracts, options, convertible securities, structured notes
(notes on which the amount of principal repayment and/or interest payments are
based on the movement of one or more specified factors such as the movement of a
particular stock or stock index) and swaps and other derivative instruments
related to its Underlying Index or its component stocks, in seeking performance
that corresponds to its Underlying Index and in managing cash flows.
The Fund may also invest up to 10% of its total assets in money market
instruments including repurchase agreements or funds which invest exclusively in
money market instruments. The Fund will not invest in money market instruments
as part of a temporary defensive strategy to protect against potential stock
market declines.
Industry concentration. The Fund will concentrate its investments (i.e. hold
25% or more of its total assets in the stocks of a particular industry or group
of industries) only to approximately the same extent that its Underlying Index
concentrates in the stocks of such particular industry or group of industries.
For purposes of this limitation, securities of the U.S. Government (including
its agencies and instrumentalities), repurchase agreements collateralized by
U.S. Government securities, and securities of state or municipal governments and
their political subdivisions are not considered to be issued by members of any
industry.
Lending Securities. The Fund may lend securities from its holdings to brokers,
dealers and other financial institutions desiring to borrow securities to
complete transactions and for other purposes. These loans cannot exceed 33 1/3%
of the Fund's total assets.
Correlation. "Correlation" measures the degree to which the total return of
one investment resembles that of another investment. An index is a theoretical
financial calculation while a Fund is an actual investment portfolio. The
performance of a Fund and its Underlying Index will vary somewhat due to
transaction costs, market impact, corporate actions (such as mergers and spin-
offs) and timing variances. The Adviser expects that, over time, the
correlation between the Fund's total return and that of its Underlying Index,
before fees and expenses, will be 95% or better. A figure of 100% would indicate
perfect correlation.
4
<PAGE>
Principal Risk Factors
----------------------
The Fund is subject to the principal risks described below. Some or all of
these risks may adversely affect the Fund's net asset value ("NAV"), trading
price, yield, total return and/or its ability to meet its objectives.
Market Risk. The Fund's NAV and trading prices will react to securities markets
movements. You could lose money over short periods due to fluctuation in the
Fund's NAV and trading price in response to market movements, and over longer
periods during market downturns.
Asset Class Risk. The Fund may be affected by a general decline in the market
segments incorporated in its Underlying Index. The returns from the types of
securities in which the Fund invests may be less than the returns from various
general securities markets or different asset classes. Different types of
securities tend to go through cycles of out-performance and underperformance
relative to the general securities markets.
Tracking Error Risk. Factors such as fees and expenses of the Fund, imperfect
correlation between the Fund's stocks and those in its Underlying Index,
rounding of share quantities, changes to the Underlying Indices and regulatory
policies may affect the Adviser's ability to achieve close correlation with the
Underlying Index of the Fund. The Fund's returns may therefore deviate from
those of its Underlying Index.
Industry Concentration. If the Underlying Index of the Fund concentrates in a
particular industry or group of industries, the Fund may be adversely affected
by the performance of those stocks and be subject to price volatility.
Lack of Diversification. The Fund is classified as "non-diversified", and may
invest more of its assets in a single issuer or a small number of issuers than a
"diversified" fund. As a result, the Fund may be more susceptible to the risks
associated with these particular companies, or to a single economic, political
or regulatory occurrence. The Fund intends to maintain the required level of
diversification so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code, in order to avoid liability for federal
income tax to the extent that its earnings are distributed to shareholders.
Market Trading Risks
--------------------
Absence of Prior Active Market. Although the Shares described in this
Prospectus are listed for trading on the AMEX, there can be no assurance that an
active trading market will develop or be maintained.
Lack of Market Liquidity. Trading in Shares on the AMEX may be halted because
of market conditions or for reasons that, in the view of the AMEX, make trading
in Shares inadvisable. In addition, trading in Shares is subject to trading
halts caused by extraordinary market volatility pursuant to AMEX "circuit
breaker" rules. There can be no assurance that the requirements of the AMEX
necessary to maintain the listing of the Shares of any Fund will continue to be
met or will remain unchanged.
Shares May Trade at Prices Other than NAV. Shares may trade below, at, or
above their NAV. The NAV of Shares will fluctuate with changes in the market
value of the Fund's holdings. The trading prices of Shares will fluctuate in
accordance with changes in their NAVs as well as
5
<PAGE>
market supply and demand on the AMEX. However, given that Shares can be created
and redeemed in Creation Units at NAV, the Adviser believes that large discounts
or premiums to the NAVs of Shares should not be sustained, unlike shares of many
closed-end equity funds, which frequently trade in the secondary market at
appreciable discounts from, and sometimes at premiums to, their NAVs.
Index Investing. Unlike many investment companies, the Fund is not actively
"managed." Therefore, the Fund would not sell a stock because the stock's
issuer was in financial trouble, unless that stock is removed from the Fund's
Underlying Index.
Lending of Securities. The Fund may lend its portfolio securities. Although
the Fund will receive collateral in connection with all loans of its securities,
the Fund would be exposed to a risk of loss should a borrower default on its
obligation to return the borrowed securities (e.g., the loaned securities may
have appreciated beyond the value of the collateral held by the Fund). In
addition, the Fund will bear the risk of loss of any cash collateral that it
invests.
Additional principal risks associated with investing in Shares of the Fund are
discussed in the "Description of the Fund" section of this Prospectus,
immediately below.
Description of the Fund
Nuveen America's Fastest Growing Companies Index Fund
-----------------------------------------------------
Cusip: [ ]
AMEX Trading Symbol: [ ]
Underlying Index: Individual Investor America's Fastest Growing Companies(TM)
Index*
Investment Objective
--------------------
The Nuveen America's Fastest Growing Companies Index Fund seeks investment
results that correspond generally to the total return, before fees and expenses,
of the Individual Investor America's Fastest Growing Companies Index (the
"Index").
Principal Investment Strategy
-----------------------------
The Index measures the performance of the 500 small-capitalization (at the time
of their selection to the Index) U.S. market stocks selected by the proprietary
method used by Individual Investor Group, Inc. ("Individual Investor Group").
Individual Investor Group selects the stocks in the Index from among the
companies whose stocks are traded on the NYSE, AMEX and the Nasdaq-NMS that have
a market capitalization (at the time of original selection) of between $100
million and $2 billion, based on a set of criteria that seeks to identify
companies that are experiencing rapid earnings growth. The weight that each
company represents in the Index is proportional to its market capitalization.
Companies stay in the Index as long as their quarterly earnings growth continues
to meet the specified criteria even if their market capitalization has grown to
exceed $2 billion; consequently, one or more stocks in the Index and the Fund
may be much larger than companies considered "small-capitalization."
6
<PAGE>
As of November 30, 2000, the Index consisted of 500 stocks. Its three largest
stocks were [Veritas Software Co., , Network Appliance Inc., and Best Buy Co.
(which comprised [8.52]%, [3.90]% and [2.98]].%, respectively, of its total
market capitalization).
--------------------------------------------------------------------------------
* "America's Fastest Growing Companies/TM/" is a trademark of Individual
Investor Group, Inc. and has been licensed for use for certain purposes by
Nuveen Investments, the parent of the Adviser. The Nuveen America's Fastest
Growing Companies Index Fund is based on the Individual Investor America's
Fastest Growing Companies Index but is not sponsored, endorsed, sold or promoted
by Individual Investor Group, Inc., and Individual Investor Group, Inc. makes no
representation regarding the advisability of investing in Shares of this Fund.
Principal Risks Specific to the Fund.
-------------------------------------
. Small-capitalization companies may be less financially secure than
larger, more established companies.
. Small-capitalization stocks and stocks with higher earnings growth
rates and price-earnings multiples may experience greater price
volatility than large-cap stocks and less growth-oriented stocks, and
may be more susceptible to reduced earnings and losses of market value
during economic downturns.
. Small-capitalization companies may depend on a small number of
essential personnel and thus are more vulnerable to a reduction in the
companies' management capability arising from key personnel loss than
larger companies.
. Small-capitalization companies normally have less diverse product
lines than larger capitalization companies and thus developments
negatively affecting some of their products may be more adverse to
them than to larger capitalization companies.
. Small-capitalization stocks may be thinly traded and thus may be
difficult for the Fund to buy and sell when the composition of the
Index changes, or for large investors to buy and sell when creating or
redeeming shares via in-kind transfers of portfolio stocks (as
described later in this prospectus).
. Because the Index and therefore the Fund may include a relatively
small number of larger companies whose stock price and market
capitalization have greatly increased, causing those companies to
represent a disproportionately large proportion of the (market-cap
weighted) Index and Fund, the Fund may be particularly vulnerable to
events affecting the market price of those particular companies.
. The stocks in the Index may underperform fixed-income investments and
stock market indices that track other markets, segments and sectors.
Performance Information
-----------------------
As of the date of this Prospectus, the Fund has been in operation for less than
one full calendar year and therefore does not report its annual total returns in
a bar chart and average annual total returns in a table.
7
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Fees and Expenses
-----------------
Most investors will buy and sell shares of the Fund in secondary market
transactions through brokers. Shares are listed on the AMEX.
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*
Shareholder Fees (fees paid directly from your investment, but see Creation
Transaction Fees and Redemption Transaction Fees discussion below)
None
Annual Fund Operating Expenses (expenses that are deducted from the Fund's
assets)**
Management Fees 0.45%
Distribution and Service (12b-1) Fees*** 0.00%
Other Expenses*** 0.15
-------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
------------------------------------------------------------------
* You will incur customary brokerage commissions when buying or selling Shares
of the Fund.
** Expressed as a percentage of average net assets.
*** The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to
which the Fund may bear an annual 12b-1 fee of up to 0.25%; however, no such
fee is currently charged to the Fund, there are no plans in place to impose such
a fee, and no such fees will be charged for the first 12 months of operation.
The Adviser has agreed to waive such portion of the fees and to reimburse
expenses which might cause the operating expenses of the Fund (excluding
interest expense, brokerage commissions and other trading expenses, taxes
(expected to be de minimis), and extraordinary expenses) to exceed 0.50% of
average net assets per year. The Adviser may modify or remove that expense cap
at any time, without notice, after February 28, 2002.
Example
-------
This Example is intended to help you compare the cost of investing in Shares
with the cost of investing in other funds. This example does not take into
account brokerage commissions that you may pay when purchasing or selling Shares
of the Fund.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, your costs, based on these assumptions, would be:
1 Year 3 Years
$xx $xx
8
<PAGE>
Creation Transaction Fees and Redemption Transaction Fees
---------------------------------------------------------
The Fund issues and redeems shares at NAV only in large blocks of 50,000 shares
(called "Creation Units") or multiples thereof. As a practical matter, only
institutions or large investors purchase or redeem these Creation Units.
Purchasers of Creation Units at NAV must pay the Fund a standard Creation
Transaction Fee of $3,000 per transaction (regardless of the number of Creation
Units involved). The approximate value of a Creation Unit as of November 30,
2000 was $[5,000,000]. An investor who holds Creation Units and wishes to redeem
at NAV would also pay a standard Redemption Fee of $3,000 for each redemption
transaction.* Investors who hold Creation Units will also pay the Annual Fund
Operating Expenses described in the table above. Assuming an investment in a
Creation Unit of $[5,000,000] and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $xx,xxx if
the Creation Unit is redeemed after one year, and $xx,xxx if the Creation Unit
is redeemed after three years.
--------
* See "Creations and Redemptions", later in this Prospectus. If a Creation
Unit is purchased or redeemed outside the usual process through the National
Securities Clearing Corporation or for cash, a variable fee of up to four times
the standard Creation or Redemption Transaction Fee will be charged.
Management and Operations
Investment Adviser
------------------
Nuveen Advisory Corp. has overall responsibility as the Fund's investment
adviser for the selection and ongoing monitoring of the Fund's investments,
managing the Fund's business affairs, paying for any necessary licensing fees
related to the Index, and providing certain clerical, bookkeeping and other
administrative services. In managing the Fund's investments, the principal
portfolio manager is Ranga Nathan. Mr. Nathan has been a Vice President at
Nuveen Investments since July 2000. Prior to that he was a Senior Vice
President at Sakura Dellsher from 1998 to July 2000; a Principal at Naper
Financial Services from 1996 to 1998 and a Principal at Waldner & Company from
1979 to 1996.
The Adviser also arranges for transfer agency, custody, fund administration and
all other services necessary for the Fund's operations, at the Fund's expense,
and oversees such operations.
The Adviser will receive fees from the Fund equal to 0.45% of the Fund's average
daily net assets.
The Fund is responsible for all its expenses, including the investment advisory
fees, costs of transfer agency, custody, fund administration, legal, audit and
other services, interest, taxes, brokerage commissions and other expenses
connected with executions of portfolio transactions, any distribution fees or
expenses and extraordinary expenses. The Adviser has agreed to waive such
portion of the operating fees and to reimburse expenses which might cause the
operating expenses of the Fund (excluding interest expense, brokerage
commissions and other trading expenses, taxes, and extraordinary expenses), to
exceed 0.50% of average daily net assets. The Adviser may modify or remove that
expense cap at any time, without notice, after February 28, 2002.
9
<PAGE>
The Adviser is located at 333 West Wacker Drive, Chicago, Illinois 60606. It is
a wholly-owned subsidiary of Nuveen Investments ("Nuveen"). Founded in 1898,
Nuveen and its affiliates have over $71 billion of assets under management or
surveillance as of November 30, 2000. Nuveen is a wholly-owned subsidiary of
The John Nuveen Company which, in turn, is a majority-owned subsidiary of The
St. Paul Companies, Inc., a publicly-traded company which is principally engaged
in providing property-liability insurance through subsidiaries.
Administrator, Custodian, Transfer Agent and Securities Lending Agent
----------------------------------------------------------------------
State Street Bank & Trust Company ("State Street Bank") is the administrator,
custodian, transfer agent and securities lending agent for the Fund.
Shareholder Information
-----------------------
Additional shareholder information is available free of charge by calling toll-
free: 1-800-xxx-xxxx.
Buying and Selling Fund Shares
Shares of the Fund are listed for trading on the secondary market on the AMEX.
Shares can be bought and sold throughout the trading day like other publicly
traded shares. There is no minimum investment. Although Shares are generally
purchased and sold in "round lots" of 100 Shares, brokerage firms typically
permit investors to purchase or sell Shares in smaller "odd-lots," at no per-
share price differential. When buying or selling Shares through a broker, you
will incur customary brokerage commissions and charges, and you may pay some or
all of the spread between the bid and the offered price in the secondary market
on each leg of a round trip (purchase and sale) transaction. Shares trade under
the ticker symbol listed in this Prospectus. Share prices are reported in
dollars and fractions (or cents) per Share.
Investors may acquire Shares directly from the Fund, and shareholders may tender
their Shares for redemption directly to the Fund, only in Creation Units of
----
50,000 Shares, as discussed in the "Creations and Redemptions" section, below.
Book Entry
----------
Shares are held in book-entry form, which means that no stock certificates are
issued. Depository Trust Company ("DTC") or its nominee, is the record owner of
all outstanding Shares of the Fund and is recognized as the owner of all Shares
for all purposes.
Investors owning Shares are beneficial owners as shown on the records of DTC or
its participants. DTC serves as the securities depository for all Shares.
Participants in DTC include, securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that you hold in
book entry or "street name" form.
10
<PAGE>
Fund Share Trading Prices
-------------------------
The trading prices of Shares on the AMEX may differ in varying degrees from
their daily net asset values (NAVs) and can be affected by market forces such as
supply and demand, economic conditions and other factors.
The AMEX intends to disseminate the approximate value of Shares of the Fund
every fifteen seconds. This approximate value should not be viewed as a "real-
time" update of the NAV per Share of the Fund, because the approximate value may
not be calculated in the same manner as the NAV, which is computed once a day,
generally at the end of the business day. The Fund is not involved in, or
responsible for, the calculation or dissemination of such value and makes no
warranty as to its accuracy.
Determining NAV
---------------
State Street Bank calculates each Fund's NAV at the close of regular trading
(normally 4 p.m. Eastern time) every day the New York Stock Exchange is open.
NAV is calculated by deducting all of the Fund's liabilities from the total
value of its assets and dividing the result by the number of shares outstanding,
rounding to the nearest cent. All valuations are subject to review by the
Trust's Board of Trustees or its delegate.
In determining NAV, expenses are accrued and applied daily and securities and
other assets for which market quotations are available are valued at market
value. Common stocks and other equity securities are valued at the last sales
price that day. When price quotes are not readily available, the Fund will
establish a fair value.
Dividends and Distributions
---------------------------
The Fund pays out income dividends to shareholders at least annually and may pay
them on a more frequent basis. The Fund distributes its net realized capital
gains, if any, to shareholders annually.
Taxes
-----
As with any investment, you should consider how your investment in Shares will
be taxed. The tax information in this prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in Shares.
Unless your investment in Shares is made through a tax-exempt entity or tax-
deferred retirement account, such as an IRA plan, you need to be aware of the
possible tax consequences when:
. Your Fund makes distributions, and
. You sell your Shares on the AMEX.
Dividends from net investment income, if any, are declared and paid at least
annually by the Fund. In general, your distributions are subject to federal
income tax for the year when they are paid. Certain dividends paid in January,
however, may be treated as paid in the prior year. A distribution may be taxable
to you as ordinary income or as capital gain.
11
<PAGE>
Dividends paid out of the Fund's net investment income and net short-term
capital gains, if any, are taxable as ordinary income. Distributions of net
long-term capital gains are taxable as long-term capital gains, regardless of
how long you have held the Shares.
Tax Aware Management. Taxable investors (that is, those not investing through a
tax-deferred account such as an IRA) benefit if the funds in which they invest
operate in a tax efficient manner by minimizing capital gains distributions. A
fund that avoids paying capital gains distributions permits shareholders to
defer payment of taxes on capital gains until they sell their fund shares. The
Adviser will attempt to minimize the Fund's capital gains distributions to the
extent such a tax strategy does not reduce the Fund's pre-tax return, although
there is no assurance that the Fund will be able to avoid paying capital gains
distributions.
If you are neither a lawful permanent resident nor a citizen of the United
States or if you are a foreign entity, the Fund's ordinary income dividends
(which include distributions of net short-term capital gains) will generally be
subject to a 30% U.S. withholding tax, unless a lower treaty rate applies.
Shareholders who do not provide a correct taxpayer identification number or
social security number in the manner required by law will be subject to
withholding of 31% of their distributions and proceeds.
Any capital gain or loss realized upon a sale of Shares is generally treated as
long-term capital gain or loss if Shares have been held for more than one year
and as short-term capital gain or loss if Shares have been held for one year or
less.
Taxes on Creations and Redemptions of Creation Units. (See "Creations and
Redemptions" below.) A person who purchases a Creation Unit by exchanging
stocks in-kind generally will recognize a gain or loss equal to the difference
between the market value of the Creation Units at the time, and the purchaser's
aggregate basis in the stocks surrendered and any net cash paid. A person who
redeems Creation Units and receives stocks in-kind from the Fund will generally
recognize a gain or loss equal to the difference between the redeemer's basis in
the Creation Units, and the aggregate market value of the stocks received and
any net cash received. The Internal Revenue Service, however, may assert that
a loss realized upon an in-kind exchange of stocks for Creation Units or the
exchange of Creation Units for stocks cannot be deducted currently under the
rules governing "wash sales," or on the basis that there has been no significant
change in economic position. Persons effecting in-kind creations or redemptions
should consult their own tax advisor with respect to these matters.
The foregoing discussion summarizes some of the consequences under current
federal tax law of an investment in a Fund. It is not a substitute for personal
tax advice. You may also be subject to state and local taxation on Fund
distributions, and sales of Fund Shares. Consult your personal tax advisor about
the potential tax consequences of an investment in Fund Shares under all
applicable tax laws.
Creations and Redemptions
The Fund Shares that trade on the AMEX are "created" at their NAV by market
makers, large investors and institutions only in block-size "Creation Units". A
"creator" deposits into the Fund a portfolio of stocks, as designated by the
Fund, closely approximating the holdings of the Fund and a specified amount of
cash in exchange for 50,000 Fund Shares.
12
<PAGE>
Similarly, Fund Shares can only be redeemed in Creation Units of 50,000 Shares,
principally in-kind, for a portfolio of stocks held by the Fund and a specified
amount of cash. Except when aggregated in Creation Units, Shares are not
redeemable. The prices at which creations and redemptions occur are based on the
next calculation of NAV after an order is placed.
Creations and redemptions must be made through a firm that is either a member of
the Continuous Net Settlement System of the National Securities Clearing
Corporation or a DTC Participant. Information about the procedures regarding
creation and redemption of Creation Units is included in the Statement of
Additional Information.
Transaction Fees
The Fund will impose a creation transaction fee and a redemption transaction fee
to offset transfer and other transaction costs associated with the issuance and
redemption of Creation Units of Shares. Creators and redeemers of Creation
Units of Shares for cash are required to pay an additional variable charge to
compensate for brokerage and market impact expenses. The creation and redemption
transaction fees for creations and redemptions in-kind for the Fund are listed
below. The creation and redemption transaction fees for creations and
redemptions (i) made through DTC and (ii) made for cash (when cash creations and
redemptions are available or specified) will also be subject to an additional
variable charge of up to a maximum of four times the amount shown below for the
Fund. In addition, purchasers of Shares in Creation Units are responsible for
payment of the costs of transferring the Deposit Securities to the Trust.
Redeemers of Shares in Creation Units are responsible for the costs of
transferring the Fund Securities from the Trust to their accounts or on their
order. Investors who use the services of a broker or other such intermediary may
pay fees for such services. The following table also shows the anticipated
approximate cost of one Creation Unit of the Fund, as of the date the Fund is
offered to the public, including the Creation Transaction Fee.
<TABLE>
<CAPTION>
Approximate
Value of a Standard Maximum
Creation Unit Creation/ Creation/
as of Redemption Redemption
November 30, Transaction Transaction
Name of Fund 2000 Fee Fee
<S> <C> <C> <C>
America's Fastest Growing Companies Index Fund [$5,000,000] $ 3,000 $12,000
</TABLE>
Distribution of Creation Units
Nuveen serves as the Distributor of Creation Units for the Fund on an agency
basis. The Distributor does not maintain a secondary market in Shares. The
Distributor may enter into selected dealer agreements with other broker-dealers
or other qualified financial institutions for the sale of Creation Units of
Shares.
The Board of Trustees of the Trust has adopted a distribution plan pursuant to
Rule 12b-1 under the 1940 Act. In accordance with its Rule 12b-1 plan, the Fund
is authorized to pay an amount up to 0.25% of its average daily net assets per
annum for certain distribution-related activities.
13
<PAGE>
Because these fees are paid out of the Fund's assets, over time these fees will
increase the cost of your investment and may cost you more than certain other
types of sales charges. No 12b-1 fees are currently charged to the Fund, and
there are no plans to impose such fees.
Index Provider
Individual Investor Group, Inc. (the "Individual Investor Group") is the Index
Provider for the America's Fastest Growing Companies/TM/ Index (the "Index").
The Index Provider is not affiliated with the Trust, the Adviser, Nuveen, or the
AMEX. Nuveen has entered into a license agreement with the Index Provider to use
the Index. Nuveen in turn is granting sub-license rights at no charge to the
Trust to use the Index.
Individual Investor Group is a financial media company that publishes Individual
Investor, a monthly magazine that provides stock, mutual fund and sector
analysis and articles designed for the individual investor, and
www.individualinvestor.com, an online financial site. Individual Investor Group
---------------------------
also maintains, calculates and publishes the Individual Investor America's
Fastest Growing Companies Index.
Disclaimers
Individual Investor. The Fund is not sponsored, endorsed, sold or promoted by
Individual Investor Group. Individual Investor Group makes no representation or
warranty, express or implied, to the owners of Fund Shares ("Shares") or any
member of the public regarding the advisability of investing in securities
generally or in Shares particularly. Individual Investor Group's only
relationship to Nuveen, the Adviser or the Trust is the licensing of certain
trademarks and trade names of Individual Investor Group and of the America's
Fastest Growing Companies/TM/ Index (the "Index"). The Index is selected and
calculated without regard to Nuveen, the Adviser, the Trust or any holders of
Shares. Individual Investor Group has no obligation to take the needs of Nuveen,
the Adviser, the Trust or the owners of Shares into consideration in
determining, composing or calculating the Index. Individual Investor Group is
not responsible for and has not participated in the determination of the prices
and amount of Shares or the timing of the issuance or sale of Shares or in the
determination of any financial calculations relating thereto. Individual
Investor Group has no obligation or liability in connection with the
administration of the Trust, marketing, or trading of the Shares. Individual
Investor Group does not guarantee the accuracy and/or the completeness of the
Index or any data included therein, and Individual Investor Group shall have no
liability for any errors, omissions, or interruptions therein. Individual
Investor Group makes no warranty, express or implied, as to results to be
obtained by Nuveen, the Adviser, the Trust or owners of Shares, or any other
person or entity from the use of the Index or any data included therein.
Individual Investor Group makes no express or implied warranties, and expressly
disclaims all warranties of merchantability or fitness for a particular purpose
or use with respect to the Index or any data included therein, the Fund, the
Trust or the Shares. Without limiting any of the foregoing, in no event shall
Individual Investor Group have any liability for any special, punitive,
indirect, or consequential damages (including lost profits) resulting from the
use of the Index or any data included therein, the Fund, the Trust or the
Shares, even if notified of the possibility of such damages.
AMEX. The Fund is not sponsored, endorsed or promoted by the AMEX. The AMEX
makes no representation or warranty, express or implied, to the owners of the
Shares of the Fund or any member of the public regarding the ability of the fund
to track the total return performance of the Underlying Index or the ability of
the Underlying Index identified herein to track stock market performance. The
Underlying Index identified herein is determined and composed by Individual
Investor Group without regard to the Shares of the Fund. The AMEX is not
responsible for, nor
14
<PAGE>
has it participated in, the determination of the compilation of the Underlying
Index, nor in the determination of the timing of, prices of, or quantities of
the Shares of the Fund to be issued, nor in the determination or calculation of
the equation by which the Shares are redeemable. The AMEX has no obligation or
liability to owners of the Shares of the Fund in connection with the
administration, marketing or trading of the Shares of the Fund.
The AMEX does not guarantee the accuracy and/or the completeness of the
Underlying Index or any data included therein. The AMEX makes no warranty,
express or implied, as to results to be obtained by the Trust on behalf of the
Fund as licensee, licensee's customers and counterparties, owners of the Shares,
or any other person or entity from the use of the Underlying Index or any data
included therein in connection with the rights licensed as described herein or
for any other use. The AMEX makes no express or implied warranties, and hereby
expressly disclaims all warranties of merchantability or fitness for a
particular purpose with respect to the indices or any data included therein.
Without limiting any of the foregoing, in no event shall the AMEX have any
liability for any direct, indirect, special, punitive, consequential or any
other damages (including lost profits) even if notified of the possibility of
such damages.
The Adviser. The Adviser does not guarantee the accuracy and/or the
completeness of the Underlying Index or any data included therein, and the
Adviser shall have no liability for any errors, omissions, or interruptions
therein. The Adviser makes no warranty, express or implied, as to results to be
obtained by the Fund, owners of the Shares of the Fund, or any other person or
entity from the use of the Underlying Index or any data included therein. The
Adviser makes no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the Underlying Index or any data included therein. Without limiting
any of the foregoing, in no event shall the Adviser have any liability for any
special, punitive, direct, indirect, or consequential damages (including lost
profits), even if notified of the possibility of such damages.
Additional Information
For more detailed information on the Trust, the Fund and Shares, you may request
a copy of the Trust's Statement of Additional Information ("SAI"). The SAI
provides detailed information about the Fund, and is incorporated by reference
into this Prospectus. This means that the SAI, for legal purposes, is a part of
this Prospectus. If you have questions about the Fund or Shares or you wish to
obtain the SAI free of charge, please:
Call: 1-800-xxx-xxxx
Monday through Friday
8:00 a.m. to 8:00 p.m. (EST)
Write: Nuveen Exchange-Traded Index Trust
c/o Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
Visit: www.nuveen.com
----------
Information about the Fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.,
and information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-
15
<PAGE>
942-8090. Reports and other information about the Fund are available on the
EDGAR Database on the Commission's Internet site at www.sec.gov, and copies of
this information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address:
[email protected]
or by writing the Commission's Public Reference Section, Washington, D.C. 20549-
0102. The Trust's registration number under the Investment Company Act of 1940
is 811-xxxxx.
No person is authorized to give any information or to make any representations
about the Fund and its Shares not contained in this Prospectus and you should
not rely on any other information. Read and keep the Prospectus for future
reference.
DEALERS EFFECTING TRANSACTIONS IN THE FUND'S SHARES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, ARE GENERALLY REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS.
16
<PAGE>
Investment Company Act File No. 811-_______
Nuveen Exchange-Traded Index Trust
Statement of Additional Information
Dated ______________, 2001
This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the Prospectus dated _______ xx, 2001 (the "Prospectus")
for the Nuveen America's Fastest Growing Companies Index Fund (the "Fund") which
is a series of the Nuveen Exchange-Traded Trust (the "Trust"), as it may be
revised from time to time. Capitalized terms used herein that are not defined
have the same meaning as in the Prospectus, unless otherwise noted. A copy of
the Prospectus may be obtained without charge by writing to the Trust's
Distributor, Nuveen Investments, at 333 West Wacker Drive, Chicago, Illinois
60606.
Table of Contents
<TABLE>
<S> <C>
General Description of the Trust and the Fund..................................... 1
Exchange Listing and Trading...................................................... 3
Investment Restrictions and Policies.............................................. 5
Investment Restrictions
Investment Policies and Risks
Lack of Diversification of Certain Funds.......................................... 6
Loans of Portfolio Securities..................................................... 7
Repurchase Agreements............................................................. 7
Reverse Repurchase Agreements..................................................... 8
Currency Transactions............................................................. 8
Money Market Instruments.......................................................... 9
Foreign Securities................................................................ 9
Investment Companies, REITs....................................................... 9
Illiquid Securities............................................................... 10
Futures and Options............................................................... 10
Restrictions on the Use of Futures Contracts and Options on Futures Contracts..... 10
Swap Agreements................................................................... 11
Future Developments............................................................... 11
General Considerations and Risks.................................................. 11
Risks of Futures and Options Transactions......................................... 12
Risks of Swap Agreements.......................................................... 13
Construction and Maintenance Standards for the Underlying Indices................. 14
Index Dissemination............................................................... 14
Investment Limitations............................................................ 30
Management........................................................................ 33
Trustees and Officers............................................................. 33
Remuneration of Trustees and Officers............................................. 34
Investment Advisor................................................................ 34
Administrator, Custodian, Transfer Agent and Securities Lending Agent............. 36
Distributor....................................................................... 36
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
Index Providers.............................................................. 37
Continuous Offering.......................................................... 32
Brokerage Transactions....................................................... 38
Additional Information Concerning the Trust.................................. 39
Capital Stock................................................................ 39
Book Entry Only System....................................................... 39
DTC Acts as Securities Depository Fund Shares................................ 39
Creation and Redemption of Creation Unit Aggregations........................ 41
Creation..................................................................... 41
Fund Deposit................................................................. 41
Procedures for Creation of Creation Unit Aggregations........................ 42
Placement of Creation Orders for Domestic Funds Using Clearing Process....... 43
Placement of Creation Orders for Domestic Funds Outside Clearing Process..... 43
Placement of Creation Orders for Foreign Funds............................... 44
Acceptance of Orders for Creation Unit Aggregations.......................... 45
Creation Transaction Fee..................................................... 46
Redemption of Fund Shares in Creation Unit Aggregations...................... 47
Redemption Transaction Fee................................................... 47
Placement of Redemption Orders for Domestic Funds Using Clearing Process..... 48
Placement of Redemption Orders for Domestic Funds Outside Clearing Process... 48
Placement of Redemption Orders for Foreign Funds............................. 49
Foreign Market Hours......................................................... 51
Regular Holidays............................................................. 53
Settlement Periods Greater than Seven Days in 2000........................... 56
Taxes........................................................................ 57
Federal Tax Treatment of Futures and Options Contracts....................... 58
Determination of NAV......................................................... 59
Dividends and Distributions.................................................. 60
General Policies............................................................. 60
Dividend Reinvestment Service................................................ 60
Performance and Other Information............................................ 61
Miscellaneous Information.................................................... 63
Counsel...................................................................... 63
Independent Auditors......................................................... 63
Financial Statements......................................................... 64
Report of Independent Accountants............................................ 64
</TABLE>
General Description of the Trust and the Fund
The Trust currently consists of one investment portfolio, the Nuveen America's
Fastest Growing Companies Index Fund (the "Fund"). The Trust was organized as a
Massachusetts business trust on June 12, 2000 and is authorized to have multiple
series, or portfolios. The Fund is an open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The shares of the Fund are referred to herein as "Shares".
The investment objective of the Fund is to provide investment results that
correspond generally to the total return, before fees and expenses, of the
America's Fastest Growing Companies Index (the "Underlying Index"). The Fund is
managed by Nuveen Advisory Corp. (the "Adviser").
B-2
<PAGE>
The Fund offers and issues Shares at net asset value ("NAV") only in
aggregations of a specified number of Shares (each a "Creation Unit" or a
"Creation Unit Aggregation"), generally in exchange for a basket of equity
securities included in the Underlying Index (the "Deposit Securities"), together
with the deposit of a specified cash payment (the "Cash Component"). The Fund
Shares described in this Prospectus have been approved for listing and secondary
trading on the American Stock Exchange LLC (the "AMEX"), subject to notice of
issuance. Fund Shares will trade on the AMEX at market prices that may be below,
at, or above NAV. Shares are redeemable only in Creation Unit Aggregations, and,
generally, in exchange for portfolio securities and a specified cash payment.
Creation Units are aggregations of 50,000 Shares. In the event of the
liquidation of the Fund, the Trust may lower the number of Shares in a Creation
Unit.
The Trust reserves the right to offer a "cash" option for creations and
redemptions of Fund Shares, although it has no current intention of doing so.
Fund Shares may be issued in advance of receipt of Deposit Securities subject to
various conditions including a requirement to maintain on deposit with the Trust
cash at least equal to 125% of the market value of the missing Deposit
Securities. See the "Creation and Redemption of Creation Unit Aggregations"
section. In each instance of such cash creations or redemptions, transaction
fees may be imposed that will be higher than the transaction fees associated
with in-kind creations or redemptions. In all cases, such fees will be limited
in accordance with the requirements of the Securities and Exchange Commission
(the "SEC") applicable to management investment companies offering redeemable
securities.
Exchange Listing and Trading
A discussion of exchange listing and trading matters associated with an
investment in the Fund is contained in the Prospectus in the Overview and the
Shareholder Information sections. The discussion below supplements, and should
be read in conjunction with, such sections of the Prospectus.
There can be no assurance that the requirements of the AMEX necessary to
maintain the listing of Shares of the Fund will continue to be met. The AMEX
may, but is not required to, remove the Shares of the Fund from listing if (i)
following the initial 12-month period beginning at the commencement of trading
of the Fund, there are fewer than 50 beneficial owners of the Shares of the Fund
for 30 or more consecutive trading days; (ii) the value of the Underlying Index
is no longer calculated or available; or (iii) such other event shall occur or
condition exist that, in the opinion of the AMEX, makes further dealings on the
AMEX inadvisable. The AMEX will remove the Shares of the Fund from listing and
trading upon termination of such Fund.
As in the case of other stocks traded on the AMEX, broker's commissions on
transactions will be based on negotiated commission rates at customary levels.
The Trust reserves the right to adjust the price levels of Shares in the future
to help maintain convenient trading ranges for investors. Any adjustments would
be accomplished through stock splits or reverse stock splits, which would have
no effect on the net assets of the Fund. However, the ratio of a Fund's NAV to
its Underlying Index would change in such instance.
INVESTMENT RESTRICTIONS AND POLICIES
Investment Restrictions
-----------------------
B-3
<PAGE>
The investment objective of the Fund is to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the America's Fastest Growing Companies Index.
The Board has adopted as fundamental policies the Fund's investment objectives
and investment restrictions, numbered (1) through (8) below. The Fund, as a
fundamental policy, may not, without the approval of the holders of a majority
of the shares of the Fund:
(1) With respect to 75% of its total assets, purchase the securities of
any issuer (except securities issued or guaranteed by the United States
government or any agency or instrumentality thereof) if, as a result, (i) more
than 5% of the Fund's total assets would be invested in securities of that
issuer, or (ii) the Fund would hold more than 10% of the outstanding voting
securities of that issuer.
(2) Borrow money, except that the Fund may (i) borrow money from banks for
temporary or emergency purposes (but not for leverage or the purchase of
investments) and (ii) make other investments or engage in other transactions
permissible under the Investment Company Act of 1940 that may involve a
borrowing, provided that the combination of (i) and (ii) shall not exceed 33
1/3% of the value of the Fund's total assets (including the amount borrowed),
less the Fund's liabilities (other than borrowings).
(3) Act as an underwriter of another issuer's securities, except to the
extent that the Fund may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 in connection with the purchase and sale of portfolio
securities.
(4) Make loans to other persons, except through (i) the purchase of debt
securities permissible under the Fund's investment policies, (ii) repurchase
agreements, or (iii) the lending of portfolio securities, provided that no such
loan of portfolio securities may be made by the Fund if, as a result, the
aggregate of such loans would exceed 33 1/3% of the value of the Fund's total
assets.
(5) Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund (i) from purchasing or selling options, futures contracts, or other
derivative instruments, or (ii) from investing in securities or other
instruments backed by physical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prohibit the Fund from
purchasing or selling securities or other instruments backed by real estate or
of issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the Investment
Company Act of 1940.
(8) Purchase the securities of any issuer if, as a result, 25% or more of
the Fund's total assets would be invested in the securities of issuers whose
principal business activities are in the same industry (except that this
restriction shall not be applicable to securities issued or guaranteed by the
U.S. government or any agency or instrumentality thereof).
Except for restriction (2), if a percentage restriction is adhered to at the
time of investment, a later increase in percentage resulting from a change in
market value of the investment or the total
B-4
<PAGE>
assets, or the sale of a security out of the portfolio, will not constitute a
violation of that restriction.
The foregoing fundamental investment policies 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.
The investment objective of the Fund is also a fundamental policy that cannot be
changed without approval by shareholders as described in the preceding
paragraph; except that, with the approval of the Board of Trustees of the Fund
and without shareholder approval, the Fund can amend its investment objective to
seek investment results that correspond generally to the price and yield
performance, before fees and expenses, of an index provided and maintained by a
different Index Provider so long as that replacement index is otherwise
substantially identical to the original Underlying Index.
In addition to the foregoing fundamental investment policies, the Fund is also
subject to the following non-fundamental restrictions and policies, which may be
changed by the Board of Trustees. The Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short at no
added cost, and provided that transactions in options, futures contracts,
options on futures contracts, or other derivative instruments are not deemed to
constitute selling securities short.
(2) Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions; and
provided that margin deposits in connection with futures contracts, options on
futures contracts, or other derivative instruments shall not constitute
purchasing securities on margin.
(3) Purchase securities of open-end or closed-end investment companies
except in compliance with the Investment Company Act of 1940.
(4) Enter into futures contracts or related options if more than 30% of
the Fund's net assets would be represented by such instruments or more than 5%
of the Fund's net assets would be committed to initial margin deposits and
premiums on futures contracts and related options.
(5) Invest in direct interests in oil, gas or other mineral exploration
programs or leases; however, the Fund may invest in the securities of issuers
that engage in these activities.
(6) Purchase securities when borrowings exceed 5% of its total assets. If
due to market fluctuations or other reasons, the value of the Fund's assets
falls below 300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so.
(7) Invest in illiquid securities if, as a result of such investment, more
than 15% of the Fund's net assets would be invested in illiquid securities.
Investment Policies and Risks
B-5
<PAGE>
The Fund seeks to achieve its objective by investing in common stocks included
in the Underlying Index. The Fund operates as an index fund and will not be
actively managed. Adverse performance of a security in the Fund's portfolio will
ordinarily not result in the elimination of the security from the Fund's
portfolio.
The Fund will use a replication strategy, under which it will hold substantially
all of the securities of the Underlying Index in approximately the same
proportions as reflected in the Underlying Index.
At least 90% of the Fund's total assets will be invested in stocks in its
Underlying Index. The Fund may also invest up to 10% of its total assets in
futures, options and swap contracts (in each case related to the Underlying
Index and its component stocks), cash and cash equivalents, as well as in stocks
not included in its Underlying Index if Nuveen Advisory Corp. determines this to
be appropriate in light of the Fund's investment objective and relevant
investment constraints. The following examples illustrate the circumstances in
which the Fund might hold stocks not included in its Underlying Index. First, in
order to reflect various corporate actions (such as mergers) and other changes
in the Fund's Underlying Index (reconstitutions), the Fund may hold stocks that
are announced as additions to the Underlying Index prior to their actual date of
inclusion in such index. Second, the Fund may continue to hold stocks that have
been recently deleted from its Underlying Index due to various corporate actions
and reconstitutions. Third, the Fund may invest in stocks outside the Underlying
Index when necessary to meet the diversification requirements of a regulated
investment company under the Internal Revenue Code (the "Code"). In such cases,
the stocks outside the Underlying Index will be stocks in the relevant market,
market segment, market sector or group of industries tracked by such Index.
Lack of Diversification. The Fund will be classified as "non-diversified" under
-----------------------
the 1940 Act. A "non-diversified" classification means that the Fund is not
limited by the 1940 Act with regard to the percentage of its assets that may be
invested in the securities of a single issuer, or in securities of multiple
issuers representing greater than 5% of the Fund's assets. A non-diversified
Fund may also concentrate its investments in a particular industry or group of
industries. From time to time, the stocks of a particular issuer, or of issuers
in particular industries, may dominate the Underlying Index of the Fund and,
consequently, its investment portfolio. This may adversely affect their
performance or subject the Fund's Shares to greater price volatility than that
experienced by more diversified funds.
The Fund, however, intends to maintain the required level of diversification and
otherwise conduct its operations so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code, and to relieve the Fund of
any liability for federal income tax to the extent that its earnings are
distributed to shareholders. Compliance with the diversification requirements of
the Code may severely limit the investment flexibility of the Fund and reduce
the likelihood that the Fund will meet its investment objective and provide
returns that correspond generally to the performance of the Underlying Index.
Loans of Portfolio Securities. The Fund may lend its investment securities to
-----------------------------
approved borrowers. State Street Bank and Trust Company serves as the lending
agent for the Fund and, as such, shares in any net income earned by a Fund. Any
gain or loss on the market price of the securities loaned that might occur
during the term of the loan would be for the account of the Fund. These loans
cannot exceed 33 1/3% of the Fund's total assets.
Approved borrowers are brokers, dealers, domestic and foreign banks, or other
financial institutions that meet credit or other requirements as established by,
and subject to the review of,
B-6
<PAGE>
the Trust's Board of Trustees (the "Board" or the "Trustees"), so long as the
terms, the structure and the aggregate amount of such loans are not inconsistent
with the 1940 Act and the rules and regulations thereunder or interpretations of
the SEC, which require that (a) the borrowers pledge and maintain with the Fund
collateral consisting of cash, an irrevocable letter of credit issued by a bank,
or securities issued or guaranteed by the U.S. Government having a value at all
times of not less than 100% of the value of the securities loaned (on a
"mark-to-market" basis); (b) the loan be made subject to termination by the Fund
at any time; and (c) the Fund receives reasonable interest on the loan.
Securities lending procedures approved by the Board will meet or exceed the
requirements stated above and promulgated under the 1940 Act. From time to time,
the Fund may return a part of the interest earned from the investment of
collateral received from securities loaned to the borrower and/or a third party
that is unaffiliated with the Fund and that is acting as a finder.
Repurchase Agreements. The Fund may enter into repurchase agreements, which are
---------------------
agreements pursuant to which securities are acquired by the Fund from a third
party with the understanding that they will be repurchased by the seller at a
fixed price on an agreed date. These agreements may be made with respect to any
of the portfolio securities in which the Fund is authorized to invest.
Repurchase agreements may be characterized as loans secured by the underlying
securities. The Fund may enter into repurchase agreements with (i) member banks
of the Federal Reserve System having total assets in excess of $500 million and
(ii) securities dealers, provided that such banks or dealers meet the
creditworthiness standards established by the Fund's board of trustees
("Qualified Institutions"). The Adviser will monitor the continued
creditworthiness of Qualified Institutions, subject to the oversight of the
Fund's board of trustees.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the custodian at all times
in an amount at least equal to the repurchase price, including accrued interest.
If the seller fails to repurchase the securities, the Fund may suffer a loss to
the extent proceeds from the sale of the underlying securities are less than the
repurchase price.
The resale price reflects the purchase price plus an agreed upon market rate of
interest. The collateral is marked to market daily.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
-----------------------------
agreements, which involve the sale of securities with an agreement to repurchase
the securities at an agreed-upon price, date and interest payment and have the
characteristics of borrowing. The securities purchased with the funds obtained
from the agreement and securities collateralizing the agreement will have
maturity dates no later than the repayment date. Generally the effect of such
transactions is that the Fund can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases the Fund is able to keep some of the interest
income associated with those securities. Such transactions are only advantageous
if the Fund has an opportunity to earn a greater rate of return on the cash
derived from these transactions than the interest cost of obtaining the same
amount of cash. Opportunities to realize earnings from the use of the proceeds
equal to or greater than the interest required to be paid may not always be
available and the Fund intends to use the reverse
B-7
<PAGE>
repurchase technique only when Nuveen Advisory Corp. believes it will be
advantageous to the Fund. The use of reverse repurchase agreements may
exaggerate any interim increase or decrease in the value of the Fund's assets.
The custodian bank will maintain a separate account for the Fund with securities
having a value equal to or greater than such commitments. Under the 1940 Act,
reverse repurchase agreements are considered loans.
Money Market Instruments. The Fund may invest a portion of its assets in high-
------------------------
quality money market instruments on an ongoing basis to provide liquidity. The
instruments in which the Fund may invest include: (i) short-term obligations
issued by the U.S. Government; (ii) negotiable certificates of deposit ("CDs"),
fixed time deposits and bankers' acceptances of U.S. and foreign banks and
similar institutions; (iii) commercial paper rated at the date of
purchase"Prime-1" by Moody's or "A-1+" or "A-1" by S&P or, if unrated, of
comparable quality as determined by Nuveen Advisory Corp.; (iv) repurchase
agreements, and (v) money market mutual funds. CDs are short-term negotiable
obligations of commercial banks. Time deposits are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates. Banker's acceptances are time drafts drawn on commercial banks
by borrowers, usually in connection with international transactions.
Foreign Securities. The Fund may purchase publicly traded common stocks of
------------------
foreign corporations represented in the Underlying Index. The Fund's investment
in common stock of foreign corporations represented in the Underlying Index will
generally be in the form of American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs"). ADRs and GDRs are receipts, typically issued by a
bank or trust company, which evidence ownership of underlying securities issued
by a foreign corporation.
Investment Companies, REITs. The Fund may invest in the securities of other
---------------------------
investment companies (including money market funds) and real estate investment
trusts to the extent allowed by law. Under the 1940 Act, the Fund's investment
in investment companies is limited to, subject to certain exceptions, (i) 3% of
the total outstanding voting stock of any one investment company, (ii) 5% of the
Fund's total assets with respect to any one investment company and (iii) 10% of
the Fund's total assets of investment companies in the aggregate.
Illiquid Securities. The Fund may invest up to an aggregate amount of 15% of its
-------------------
net assets in illiquid securities. Illiquid securities include securities
subject to contractual or other restrictions on resale and other instruments
that lack readily available markets.
Futures and Options. The Fund may enter into U.S. or foreign futures contracts,
-------------------
options and options on futures contracts. These futures contracts and options
will be used to simulate full investment in the Underlying Index, to facilitate
trading or to reduce transaction costs. The Fund will only enter into futures
contracts and options on futures contracts that are traded on a U.S. exchange.
The Fund will not use futures or options for speculative purposes.
A call option gives a holder the right to purchase a specific security at a
specified price ("exercise price") within a specified period of time. A put
option gives a holder the right to sell a specific security at a specified price
within a specified period of time. The initial purchaser of a call option pays
the "writer" a premium, which is paid at the time of purchase and is retained by
the writer whether or not such option is exercised. The Fund may purchase put
options to hedge its portfolio against the risk of a decline in the market value
of securities held and may purchase call options to hedge against an increase in
the price of securities it is committed to purchase. The Fund may write put and
call options along with a long position in options to increase its ability to
hedge against a change in the market value of the securities it holds or is
committed to purchase.
B-8
<PAGE>
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific instrument or index at a
specified future time and at a specified price. Stock index contracts are based
on indices that reflect the market value of common stock of the firms included
in the indices. The Fund may enter into futures contracts to purchase security
indices when Nuveen Advisory Corp. anticipates purchasing the underlying
securities and believes prices will rise before the purchase will be made.
Assets committed to futures contracts will be segregated by the custodian to the
extent required by law.
An option on a futures contract, as contrasted with the direct investment in
such a contract, gives the purchaser the right, in return for the premium paid,
to assume a position in the underlying futures contract at a specified exercise
price at any time prior to the expiration date of the option. Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account that represents the amount by
which the market price of the futures contract exceeds (in the case of a call)
or is less than (in the case of a put) the exercise price of the option on the
futures contract. The potential for loss related to the purchase of an option on
a futures contract is limited to the premium paid for the option plus
transaction costs. Because the value of the option is fixed at the point of
purchase, there are no daily cash payments by the purchaser to reflect changes
in the value of the underlying contract; however, the value of the option
changes daily and that change would be reflected in the NAV of the Fund. The
potential for loss related to writing call options is unlimited. The potential
for loss related to writing put options is limited only by the aggregate strike
price of the put option less the premium received.
The Fund may purchase and write put and call options on futures contracts that
are traded on a U.S. or foreign exchange as a hedge against changes in value of
its portfolio securities, or in anticipation of the purchase of securities, and
may enter into closing transactions with respect to such options to terminate
existing positions. There is no guarantee that such closing transactions can be
effected.
Restrictions on the Use of Futures Contracts and Options on Futures Contracts.
-----------------------------------------------------------------------------
In view of the above considerations, the Fund will comply with the following
restriction when purchasing or selling futures. Aggregate initial margin and
premiums that are required to establish positions other than those considered to
be "bona fide hedging" by the Commodity Futures Trading Commission (the "CFTC")
will not exceed 5% of the Fund's total market value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. In addition, the Fund will not purchase options to the extent that more
than 5% of the value of its total assets would be invested in premiums on open
option positions.
Upon entering into a futures contract, the Fund will be required to deposit with
the broker an amount of cash or cash equivalents in the range of approximately
5% to 7% of the contract amount (this amount is subject to change by the
exchange on which the contract is traded). This amount, known as "initial
margin", is in the nature of a performance bond or good faith deposit on the
contract and is returned to the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied. Subsequent payments,
known as "variation margin", to and from the broker will be made daily as the
price of the index underlying the futures contract fluctuates, making the long
and short positions in the futures contract more or less valuable, a process
known as "marking-to-market." At any time prior to expiration of a futures
contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
B-9
<PAGE>
Swap Agreements. Swap agreements are contracts between parties in which one
---------------
party agrees to make periodic payments to the other party based on the change in
market value or level of a specified rate, index or asset. In return, the other
party agrees to make periodic payments to the first party based on the return of
a different specified rate, index or asset. Swap agreements will usually be done
on a net basis, the Fund receiving or paying only the net amount of the two
payments. The net amount of the excess, if any, of the Fund's obligations over
its entitlements with respect to each swap is accrued on a daily basis and an
amount of cash or high liquid securities having an aggregate value at least
equal to the accrued excess is maintained in an account at the Trust's custodian
bank.
The use of interest-rate and index swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio security transactions. These transactions generally do not
involve the delivery of securities or other underlying assets or principal.
General Considerations and Risks
A discussion of the risks associated with an investment in the Fund is contained
in the Prospectus in the Principal Risk Factors and the Shareholder Information
sections. The discussion below supplements, and should be read in conjunction
with, these sections of the Prospectus.
An investment in the Fund should be made with an understanding that the value of
the Fund's portfolio securities may fluctuate in accordance with changes in the
financial condition of the issuers of the portfolio securities, the value of
common stocks in general and other factors that affect the market.
An investment in the Fund should also be made with an understanding of the risks
inherent in an investment in equity securities, including the risk that the
financial condition of issuers may become impaired or that the general condition
of the stock market may deteriorate (either of which may cause a decrease in the
value of the portfolio securities and thus in the value of Fund Shares). Common
stocks are susceptible to general stock market fluctuations and to volatile
increases and decreases in value as market confidence and perceptions of their
issuers change. These investor perceptions are based on various and
unpredictable factors, including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, and global or regional political, economic or banking crises.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the issuer, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors, or holders of debt obligations or preferred stocks.
Further, unlike debt securities which typically have a stated principal amount
payable at maturity (whose value, however, is subject to market fluctuations
prior thereto), or preferred stocks, which typically have a liquidation
preference and which may have stated optional or mandatory redemption
provisions, common stocks have neither a fixed principal amount nor a maturity.
The existence of a liquid trading market for certain securities may depend on
whether dealers will make a market in such securities. There can be no assurance
that a market will be made or maintained or that any such market will be or
remain liquid. The price at which securities may be sold and the value of the
Fund's Shares will be adversely affected if trading markets for the Fund's
portfolio securities are limited or absent, or if bid/ask spreads are wide.
B-10
<PAGE>
Risks of Futures and Options Transactions. There are several risks accompanying
-----------------------------------------
the utilization of futures contracts and options on futures contracts. First,
while the Fund plans to utilize futures contracts only if an active market
exists for such contracts, there is no guarantee that a liquid market will exist
for the contract at a specified time.
Furthermore, because, by definition, futures contracts project price levels in
the future and not current levels of valuation, market circumstances may result
in a discrepancy between the price of the stock index future and the movement in
the Underlying Index. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Fund may be required to
deliver the instruments underlying future contracts it has sold.
The risk of loss in trading futures contracts or uncovered call options in some
strategies (e.g., selling uncovered stock index futures contracts) is
potentially unlimited. The Fund does not plan to use futures and options
contracts in this way. The risk of a futures position may still be large as
traditionally measured due to the low margin deposits required. In many cases, a
relatively small price movement in a futures contract may result in immediate
and substantial loss or gain to the investor relative to the size of a required
margin deposit. The Fund, however, intends to utilize futures and options
contracts in a manner designed to limit its risk exposure to levels comparable
to direct investment in stocks.
Utilization of futures and options on futures by the Fund involves the risk of
imperfect or even negative correlation to the Underlying Index if the index
underlying the futures contract differs from the Underlying Index. There is also
the risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in the futures contract or
option. The purchase of put or call options will be based upon predictions by
the Adviser as to anticipated trends, which predictions could prove to be
incorrect.
Because the futures market imposes less burdensome margin requirements than the
securities market, an increased amount of participation by speculators in the
futures market could result in price fluctuations. Certain financial futures
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum amount by
which 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 contract, no trades may be made
on that day at a price beyond that limit. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting the Fund to substantial losses. In the event of adverse price
movements, the Fund would be required to make daily cash payments of variation
margin.
Although the Fund intends to enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time.
Risks of Swap Agreements. The risk of loss with respect to swaps generally is
------------------------
limited to the net amount of payments that the Fund is contractually obligated
to make. Swap agreements are also subject to the risk that the swap counterparty
will default on its obligations. If such a default were to occur, the Fund will
have contractual remedies pursuant to the agreements related to the
B-11
<PAGE>
transaction. However, such remedies may be subject to bankruptcy and insolvency
laws which could affect the Fund's rights as a creditor -- e.g. the Fund may not
receive the net amount of payments that it contractually is entitled to receive.
The Fund, however, intends to utilize swaps in a manner designed to limit its
risk exposure to levels comparable to direct investments in stocks.
Index Dissemination. The AMEX intends to disseminate every fifteen seconds the
-------------------
approximate value of the Fund Shares. This approximate value should not be
viewed as a "real-time" update of the NAV per Share of the Fund, because it may
not be calculated in the same manner as the NAV, which is computed once a day.
The Fund is not involved in, or responsible for, the calculation or
dissemination of such amount and makes no warranty as to its accuracy.
Brief descriptions of the Underlying Index and the equity markets in which the
Fund is invested are provided below.
America's Fastest Growing Companies /TM/ Index
Number of Components: approximately 500
--------------------
Index Description. The Individual Investor Group's America's Fastest Growing
-----------------
Companies/TM/ Index (the "Index") is a unique benchmark for the small cap growth
stock universe: the Index attempts to find and include companies that are
experiencing rapid earnings growth and show signs of being in the early stages
of a strong growth cycle. While many indices group companies by industry and
size, the Index focuses on earnings growth record within an initial size range.
The Index is calculated using a market capitalization weighting methodology like
most widely used benchmark indices. The Index measures price performance only,
dividends are not reinvested.
Component Selection Criteria. The initial universe from which Index companies
----------------------------
were drawn consisted of NYSE-listed, AMEX-listed, or Nasdaq/NMS companies in all
industries, with market capitalizations ranging from $100 million to $2 billion.
Companies that did not report an increase in sales in the most recent quarter
(as compared to the prior-year period) were eliminated in this first screen of
the small cap universe. The top 500 companies from that group, ranked on the
basis of year-over-year earnings growth for the quarter (so long as earnings
were no less than $0.05 per share that quarter), were selected as the initial
population of the Index. Earnings growth was calculated using fully diluted
earnings per share from operations, excluding extraordinary items.
Issue Changes. The Index constituents are adjusted quarterly, based on a
-------------
quantitative earnings growth screen developed by Individual Investor Group, Inc.
to ensure that the Index remains an indicator of certain of the fastest growing
companies in the small cap universe. On a quarterly basis, the bottom ten
percent of companies in the Index, in terms of quarterly earnings growth (as
compared to the prior year period), as well as any companies that have not
reported earnings within 90 days of the prior quarterly review, are replaced by
NYSE-listed, AMEX-listed or Nasdaq/NMS companies not already in the Index with
market capitalizations ranging from $100 million to $2 billion, sales growth (as
compared to the prior year period), earnings of at least $0.05 per share and an
average daily trading volume over the prior 60 trading days of at least
$100,000. As in the original selection, earnings growth is calculated using
fully diluted earnings per share from operations, excluding extraordinary items.
From that universe of candidates, the top companies in terms of earnings growth
(as compared to the prior year period) will be selected to join the Index. If
insufficient candidates are available, then the number of stocks in the Index
B-12
<PAGE>
may fall below 500. Companies stay in the Index as long as they do not drop
below the quarterly earnings growth cutoff even if their market capitalization
has grown to exceed $2 billion, an important distinction from other small cap
indices, which lose many of their best companies when the companies'
capitalizations grow.
Another notable characteristic of the companies in the Index is that options
exist on 267 of the stocks, accounting for over 68% of the value of the Index,
and that 392 of the index components, accounting for 84% of its weight, met the
capitalization, share price, and trading volume requirements for options
eligibility as of September 29, 2000.
The average market value of the Index companies was $1.2 billion and the median
value was $526.7 million, while the lowest capitalization was $16 million and
the highest capitalization was $56.6 billion as of September 29, 2000.
Index Maintenance. Every quarter in January, April, July, and October the bottom
-----------------
ten percent of the companies in the Index, in terms of earnings growth, are
replaced by new companies as described above. Individual Investor Group, Inc.
provides the AMEX with a list of Index replacements, developed by the objective
criteria described above, by the first Friday of each quarterly review month.
Once replacements are determined by Individual Investor Group, Inc. and the list
is provided to the AMEX, new values for shares outstanding are determined for
each of the Index components (i.e., the entire basket is reviewed and "updated"
quarterly). The shares outstanding are the most recent shares provided by
FactSet Research Systems, Inc. The Index replacements and updated shares go into
effect after the close of trading on the third Friday of the quarterly review
month.
The shares outstanding for each component stock in the Index remain fixed
between quarterly reviews except in the event of certain types of corporate
actions such as stock splits, reverse stock splits, recapitalizations, or
similar events with respect to the component stocks. Also, should any company
achieve a weighting equal to 25% of the Index capitalization, its weighting will
be reduced to 20% as soon as possible, and all other components of the Index
will be rebalanced. In the event that two companies which are both in the Index
merge, the shares outstanding for the surviving entity are increased to reflect
shares issued in the transaction. Shares are not adjusted between quarterly
reviews in the case of a share issuance or stock repurchase. In the case of a
spin-off, the company spun-off will be included in the Index until the next
quarterly review.
In the event that an Index constituent is acquired or is not the surviving
entity following a merger or similar corporate action, a replacement constituent
will be selected from the replacement list provided by Individual Investor
Group, Inc. at the time of the most recent quarterly review. The company that is
added to the Index will be included in the Index at the weight of the company it
replaces until the next quarterly review. Individual Investor Group, Inc. may
add more than one company or rebalance the Index between quarterly reviews if
the company being replaced had a very large market capitalization.
Individual Investor Group has the right to change the composition of the Index
or the methodology used in its computation, provided however that Individual
Investor Group, Inc. uses its best efforts to maintain the continuity and
consistency of the Index as a measure of small-capitalization companies
experiencing earnings growth. Individual Investor Group, Inc. will make a prompt
public announcement of any changes it makes in the stocks included in the Index
and any changes it makes in the method of calculating the Index.
B-13
<PAGE>
As of November 30, 2000, the ten largest companies in the Index were:
Management
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled Management.
The management of the Trust, including general supervision of the duties
performed for the Fund under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has seven trustees,
one of whom is an "interested person" (as the term "interested person" is
defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
<CAPTION>
[NOTE: Do we need to add Ranga as an officer?]
---------------------------------------------------------------------------------------------------------
Date of Positions and Principal Occupations
Name and Address Birth Offices with Fund During Past Five Years
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 3/28/49 Chairman of the Board Chairman since July 1,
333 West Wacker Drive and President 1996 of The John Nuveen
Chicago, IL 60606 Trustee Company, Nuveen
Investments, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.,
prior thereto Executive Vice President
and Director of The John Nuveen Company
and Nuveen Investments; Director of
Nuveen Advisory Corp. (since 1992) and
Nuveen Institutional Advisory Corp.;
Chairman and Director (since January
1997) of Nuveen Asset Management, Inc.;
Director (since 1996) of Institutional
Capital Corporation; Chairman and
Director of Rittenhouse Financial
Services Inc. (since 1999); Chief
Executive Officer (since September 1999)
of Nuveen Senior Loan Asset Management
Inc.
---------------------------------------------------------------------------------------------------------
Robert P. Bremner 8/22/40 Trustee Private Investor and Management
3725 Huntington Street, N.W. Consultant.
Washington, D.C. 20015
---------------------------------------------------------------------------------------------------------
Lawrence H. Brown 7/29/34 Trustee Retired (August 1989) as Senior Vice
201 Michigan Avenue President of The Northern Trust
Highwood, IL 60040 Company
---------------------------------------------------------------------------------------------------------
Anne E. Impellizzeri 1/26/33 Trustee President and Chief
</TABLE>
B-14
<PAGE>
<TABLE>
<S> <C> <C> <C>
3 West 29th Street Executive Officer of Blanton-Peale
New York, NY 10001 Institutes of Religion and Health
(since December 1990).
---------------------------------------------------------------------------------------------------------
Peter R. Sawers 4/3/33 Trustee Adjunct Professor of Business and
22 The Landmark Economics, University of Dubuque,
Northfield, IL 60093 Iowa; Adjunct Professor, Lake Forest
Graduate School of Management, Lake
Forest, Illinois.
---------------------------------------------------------------------------------------------------------
William J. Schneider 9/24/44 Trustee Senior Partner and Chief Operating
4000 Miller-Valentine Ct. Officer, Miller-Valentine Partners; Vice
P.O. Box 744 President, Miller- Valentine Group, a
Dayton, OH 45401 development and contract company; Member
Community Advisory Board, National City
Bank, Dayton, Ohio.
---------------------------------------------------------------------------------------------------------
<CAPTION>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Fund During Past Five Years
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Judith M. Stockdale 12/29/47 Trustee Executive Director, Gaylord and Dorothy
35 E. Wacker Drive Donnelley Foundation (since 1994); prior
Suite 2600 thereto, Executive Director, Great Lakes
Chicago, IL 60601 Protection Fund (from 1990 to 1994).
---------------------------------------------------------------------------------------------------------
Alan G. Berkshire 12/28/60 Vice President and Senior Vice President and General
333 West Wacker Drive Assistant Secretary Counsel (since September 1997) and
Chicago, IL 60606 Secretary (since May 1998) of The John
Nuveen Company, Nuveen
</TABLE>
B-15
<PAGE>
<TABLE>
<S> <C> <C> <C>
Investments, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.,
Senior Vice President and Secretary
(since Nuveen Senior Loan Asset
Management Inc.; prior thereto, Partner
in the law firm of Kirkland & Ellis.
---------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo 11/28/67 Vice President and Vice President of Nuveen Investments
333 West Wacker Drive Treasurer (since January 1999), prior thereto,
Chicago, IL 60606 Assistant Vice President (from January
1997); formerly, Associate of Nuveen
Investments; Vice President and
Treasurer (since September 1999) of
Nuveen Senior Loan Asset Management
Inc.; Chartered Financial Analyst.
---------------------------------------------------------------------------------------------------------
Michael S. Davern 6/26/57 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive (since January 1997); prior thereto,
Chicago, IL 60606 Vice President and Portfolio Manager of
Flagship Financial.
---------------------------------------------------------------------------------------------------------
Lorna C. Ferguson 10/24/45 Vice President Vice President of Nuveen Investments;
333 West Wacker Drive Vice President (since January 1998) of
Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
---------------------------------------------------------------------------------------------------------
William M. Fitzgerald 3/2/64 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive (since December 1995); Assistant Vice
Chicago, IL 60606 President
</TABLE>
B-16
<PAGE>
<TABLE>
<S> <C> <C> <C>
of Nuveen Advisory Corp. (from September
1992 to December 1995), prior thereto,
Assistant Portfolio Manager of Nuveen
Advisory Corp.; Chartered Financial
Analyst.
---------------------------------------------------------------------------------------------------------
Stephen D. Foy 5/31/54 Vice President and Vice President of Nuveen Investments
333 West Wacker Drive and (since May 1998) The John Nuveen
Chicago, IL 60606 Company, Vice President (since September
1999) of Nuveen Senior Loan Asset
Management Inc.; Certified Public
Accountant.
---------------------------------------------------------------------------------------------------------
J. Thomas Futrell 7/5/55 Vice President Vice President of Nuveen Advisory Corp.;
333 West Wacker Drive Chartered Financial Analyst.
Chicago, IL 60606
---------------------------------------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------------------------------------
Date of Positions and Principal Occupations
Name and Address Birth Offices with Fund During Past Five Years
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard A. Huber 3/26/63 Vice President Vice President of Nuveen Institutional
333 West Wacker Drive Advisory Corp. (since March 1998) and
Chicago, IL 60606 Nuveen Advisory Corp. (since January
1997); prior thereto, Vice President and
Portfolio Manager of Flagship Financial,
Inc.
---------------------------------------------------------------------------------------------------------
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
</TABLE>
B-17
<PAGE>
<TABLE>
<S> <S> <C> <C>
Chicago, IL 60606
---------------------------------------------------------------------------------------------------------
Larry W. Martin 7/27/51 Vice President and Vice President, Assistant General
333 West Wacker Drive Secretary and Assistant Counsel of Nuveen Investments; Vice
Chicago, IL 60606 President and Assistant Secretary of
Nuveen Advisory Corp.; Vice President
and Assistant Secretary of Nuveen
Institutional Advisory Corp.; Assistant
Secretary of The John Nuveen Company and
(since January 1997) Nuveen Asset
Management Inc.; Vice President and
Assistant Secretary (since September
1999) of Nuveen Senior Loan Asset
Management Inc.
---------------------------------------------------------------------------------------------------------
Edward F. Neild, IV 7/7/65 Vice President Vice President (since September 1996),
333 West Wacker Drive previously Assistant Vice President
Chicago, IL 60606 (since December 1993) of Nuveen Advisory
Corp., Portfolio Manager prior thereto;
Vice President (since September 1996),
previously Assistant Vice President
(since May 1995) of Nuveen Institutional
Advisory Corp., Portfolio Manager prior
thereto; Chartered Financial Analyst.
---------------------------------------------------------------------------------------------------------
Stephen S. Peterson 9/20/57 Vice President Vice President (since September 1997),
333 West Wacker Drive previously Assistant Vice President
Chicago, IL 60606 (since September 1996), Portfolio
Manager prior thereto of Nuveen Advisory
Corp.; Chartered Financial Analyst.
---------------------------------------------------------------------------------------------------------
</TABLE>
B-18
<PAGE>
<TABLE>
<S> <S> <C> <C>
Thomas C. Spalding, Jr. 7/31/51 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive and Nuveen Institutional Advisory Corp.;
Chicago, IL 60606 Chartered Financial Analyst.
---------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman 9/9/56 Vice President and Vice President, Assistant General
333 West Wacker Drive Secretary and Associate Counsel formerly Assistant General
Chicago, IL 60606 Counsel of Nuveen Investments; Vice
President and Assistant Secretary of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Vice
President and Assistant Secretary of The
John Nuveen Company (since May 1994);
Vice President and Assistant Secretary
(since September 1999) of Nuveen Senior
Loan Asset Management Inc.; Chartered
Financial Analyst.
</TABLE>
Timothy R. Schwertfeger and Peter R. Sawers serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee, which meets between
regular meetings of the Board of Trustees, is authorized to exercise all of the
powers of the Board of Trustees.
The trustees of the Trust are also directors or trustees, as the case may
be, of 37 other Nuveen open-end funds and 60 Nuveen closed-end funds advised by
Nuveen Advisory Corp. Mr. Schwertfeger is a director or trustee, as the case may
be, of 13 Nuveen open-end funds and closed-end funds advised by Nuveen
Institutional Advisory Corp. and two funds advised by Nuveen Senior Loan Asset
Management Inc. None of the independent trustees has ever been a director,
officer, or employee of, or a consultant to, Nuveen Advisory, Nuveen or their
affiliates.
Each trustee who is not affiliated with NAC receives a $60,000 annual
retainer for serving as a director or trustee of all funds for which NAC serves
as investment adviser or manager and a $1,000 fee per day plus expenses for
attendance at all meetings held on a day on which a regularly scheduled Board
meeting is held, a $1,000 fee per day plus expenses for attendance in person or
a $500 fee per day plus expenses for attendance by telephone at a meeting held
on a day which no regular Board meeting is held and a $500 fee per day plus
expenses for attendance in person or by telephone at a meeting of the Executive
Committee held solely to declare dividends. The annual retainer, fees and
expenses are allocated among the funds for which NAC serves as investment
adviser or manager on the basis of relative net asset sizes. The
B-19
<PAGE>
Trust requires no employees other than its officers, all of whom are compensated
by NAC or Nuveen.
The following table sets forth estimated compensation to be paid by the
Fund projected through the end of the Fund's first full fiscal year, ending
October 31, 2001. The Fund has no retirement or pension plans.
Estimated Estimated Estimated
Aggregate Deferred Total
Compensation Compensation Compensation
Name of Trustee From Trust * From Trust* From Fund Complex*
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Judith M. Stockdale...
* Based on the estimated compensation to be earned by the independent trustees
for the period from inception to the fiscal year ending October 31, 2001 for
services to the Fund.
** Based on the estimated compensation paid (including both deferred
compensation and compensation received in cash) to the trustees for the one year
period ending December 31, 2000 for services to the open-end and closed-end
funds advised by Nuveen Advisory Corp.
The John Nuveen Company (JNC) maintains charitable contributions programs to
encourage the active support and involvement of individuals in the civic
activities of their community. These programs include a matching contributions
program and a direct contributions program. The independent trustees of the
funds managed by NAC are eligible to participate in the charitable contributions
program of JNC. Under the matching program, JNC will match the personal
contributions of a trustee to Section 501(c)(3) organizations up to an aggregate
maximum amount of $10,000 during any calendar year. Under its direct (non-
matching) program, JNC makes contributions to qualifying Section 501(c)(3)
organizations, as approved by the Corporate Contributions Committee of JNC. The
independent trustees are also eligible to submit proposals to the committee
requesting that contributions be made under this program to Section 501(c)(3)
organizations identified by the trustee, in an aggregate amount not to exceed
$5,000 during any calendar year. Any contribution made by JNC under the direct
program is made solely at the discretion of the Corporate Contributions
Committee.
The officers and trustees of the Fund, in the aggregate, own less than 1% of the
shares of the Fund.
As of the date of this Prospectus, the Trust has been organized for less than
one full calendar year and therefore does not report the total remuneration for
the preceding fiscal year.
Investment Adviser. Nuveen Advisory Corp. (the "Adviser") acts as investment
------------------
adviser for and manages the investment and reinvestment of the assets of the
Fund. The Adviser 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
B-20
<PAGE>
without compensation as trustees or officers of the Trust if elected to such
positions. In managing the Fund's investments, the principal portfolio manager
is Ranga Nathan. Mr. Nathan has been a Vice President at Nuveen Investments
since July 2000. Prior to that he was a Senior Vice President at Sakura Dellsher
from 1998 to July 2000; a Principal at Naper Financial Services from 1996 to
1998 and a Principal at Waldner & Company from 1979 to 1996.
Pursuant to an investment management agreement between the Adviser and the
Trust, the Fund has agreed to pay an annual management fee of 0.45% of average
daily net assets.
The Fund is responsible for all its expenses, including the investment advisory
fees, costs of transfer agency, custody, fund administration, legal, audit and
other services, interest, taxes, brokerage commissions and other expenses
connected with executions of portfolio transactions, any distribution fees or
expenses and extraordinary expenses. The Adviser has agreed to waive such
portion of the fees or reimburse expenses which might cause the operating
expenses of the Fund (excluding interest expense, taxes, brokerage commissions
and extraordinary expenses) to exceed 0.50% of average daily net assets per
year.
The Adviser may modify or remove that expense cap at any time, without notice,
after February 28, 2002.
The Adviser is located at 333 West Wacker Drive, Chicago, Illinois 60606. It is
a wholly-owned subsidiary of Nuveen Investments ("Nuveen"). Founded in 1898,
Nuveen and its affiliates have over $70 billion of assets under management or
surveillance as of November 30, 2000. Nuveen is a wholly-owned subsidiary of The
John Nuveen Company which, in turn, is a majority-owned subsidiary of The St.
Paul Companies, Inc., a publicly-traded company which is principally engaged in
providing property-liability insurance through subsidiaries.
The Trust and the Adviser have adopted Codes of Ethics under Rule 17j-1 of the
1940 Act. The Codes permit personnel subject to the Codes to invest in
securities, subject to certain limitations, including securities that may be
purchased or held by the Funds.
Administrator, Custodian, Transfer Agent and Securities Lending Agent. State
---------------------------------------------------------------------
Street Bank & Trust Co. (the "Custodian") serves as Administrator, Custodian,
Transfer Agent and Securities Lending Agent for the Funds. Its principal address
is 225 Franklin Street, Boston, MA 02110.
Under the Administration Agreement with the Trust, the Custodian provides
necessary administrative and accounting services for the maintenance and
operations of the Trust and the Fund. In addition, the Custodian makes available
the office space, equipment, personnel and facilities required to provide such
services.
Under the Custodian Agreement with the Trust, the Custodian maintains in
separate accounts cash, securities and other assets of the Trust and the Fund,
keeps all necessary accounts and records, and provides other services. the
Custodian is required, upon the order of the Trust, to deliver securities held
by the Custodian and to make payments for securities purchased by the Trust for
the Fund.
Pursuant to a Transfer Agency and Service Agreement with the Trust, the
Custodian acts as a transfer agent for the Fund's authorized and issued shares
of beneficial interest, and as dividend disbursing agent of the Trust.
B-21
<PAGE>
Under a Securities Lending Agency Agreement with the Trust, the Custodian acts
as the Trust's agent for the purpose of lending Trust securities to third
parties.
As compensation for the foregoing services, the Custodian receives certain out-
of-pocket costs, transaction fees, and asset-based fees which are accrued daily
and paid monthly.
Distributor. Nuveen is the Distributor of the Fund's Shares. Its principal
-----------
address is 333 West Wacker Drive, Chicago, Illinois. The Distributor has entered
into a Distribution Agreement with the Trust pursuant to which it distributes
Fund Shares. Shares are continuously offered for sale by the Fund through the
Distributor only in Creation Unit Aggregations, as described in the Prospectus
and below under the heading Creation and Redemption of Creation Units
Aggregations. Fund Shares in less than Creation Unit Aggregations are not
------------
distributed by the Distributor. The Distributor will deliver the Prospectus and,
upon request, the Statement of Additional Information to persons purchasing
Creation Unit Aggregations and will maintain records of both orders placed with
it and confirmations of acceptance furnished by it. The Distributor is 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").
The Distribution Agreement for the Fund will provide that it may be terminated
at any time, without the payment of any penalty, on at least 60-days' written
notice to the other party (i) by vote of a majority of the Independent Trustees
or (ii) by vote of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the Fund. The Distribution Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The Distributor may also enter into agreements with securities dealers
("Soliciting Dealers") who will solicit purchases of Creation Unit Aggregations
of Fund Shares. Such Soliciting Dealers may also be Participating Parties (as
defined below), DTC Participants (as defined below) and/or Investor Services
Organizations.
Nuveen Advisory Corp. or Nuveen Investments may, from time to time and from its
or their own resources, pay, defray or absorb costs relating to distribution,
including payments out of its own resources to the Distributor or to otherwise
promote the sale of Shares.
Index Providers. The Fund will be based upon the American's Fastest Growing
---------------
Companies/TM/ Index compiled by Individual Investor Group, Inc. ("Individual
Investor Group"). Individual Investor Group is not affiliated with the Fund or
with Nuveen or its affiliates. The Fund is entitled to use the Underlying Index
pursuant to a sub-licensing agreement with Nuveen, which in turn has a licensing
agreement with Individual Investor Group. Nuveen will provide the sub-license
without charge to the Fund.
The only relationship that Individual Investor Group has with the Adviser
or Distributor of the Fund in connection with the Fund is that Individual
Investor Group has licensed certain of its intellectual property, including
the determination of the component stocks of the Underlying Index and the
name of the Underlying Index. The Underlying Index is selected and
calculated without regard to the Adviser, Distributor or owners of the
Fund. Individual Investor Group has no obligation to take the specific
needs of the Adviser, Distributor or owners of the Fund into consideration
in the determination and calculation of the Underlying Index. Individual
Investor Group is not responsible for and has not
B-22
<PAGE>
participated in the determination of pricing or the timing of the issuance or
sale of the Shares of the Fund or in the determination or calculation of the
asset value of the Fund. Individual Investor Group has no obligation or
liability in connection with the administration, marketing or trading of the
Fund.
INDIVIDUAL INVESTOR GROUP SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS RELATED TO THE FUND OR THE UNDERLYING INDEX. INDIVIDUAL INVESTOR
GROUP MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
ADVISER, DISTRIBUTOR OR OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY, FROM
THE USE OF THE UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. INDIVIDUAL
INVESTOR GROUP MAKES NO WARRANTY, EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIMS
ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE,
WITH RESPECT TO THE FUND OR TO THE UNDERLYING INDEX OR TO ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL INDIVIDUAL
INVESTOR GROUP HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) IN CONNECTION WITH THE FUND OR
THE UNDERLYING INDEX, EVEN IF INDIVIDUAL INVESTOR GROUP IS NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
Continuous Offering
The method by which Creation Unit Aggregations of Fund Shares are created and
traded may raise certain issues under applicable securities laws. Because new
Creation Unit Aggregations of Shares are issued and sold by the Fund on an
ongoing basis, at any point a "distribution", as such term is used in the
Securities Act of 1933, may occur. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus-delivery requirement and liability provisions of the Securities Act.
For example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker-dealer firms should also note that dealers who are not "underwriters" but
are effecting transactions in Shares, whether or not participating in the
distribution of Shares, are generally required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(3) of the Securities Act
is not available in respect of such transactions as a result of Section 24(d) of
the 1940 Act. Firms that incur a prospectus-delivery obligation with respect to
Shares
<PAGE>
are reminded that, under the Securities Act Rule 153, a prospectus-delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on the AMEX is satisfied by the fact that the
prospectus is available at the AMEX upon request. The prospectus delivery
mechanism provided in Rule 153 is only available with respect to transactions on
an exchange.
Brokerage Transactions
The policy of the Trust regarding purchases and sales of securities is that
primary consideration will be given to obtaining the most favorable prices and
efficient executions of transactions. Consistent with this policy, when
securities transactions are effected on a stock exchange, the Trust's policy is
to pay commissions that are considered fair and reasonable without necessarily
determining that the lowest possible commissions are paid in all circumstances.
In seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Adviser relies upon its experience and knowledge regarding
commissions generally charged by various brokers.
In seeking to implement the Trust's policies, the Adviser effects transactions
with those brokers and dealers that Nuveen Advisory believes provide the most
favorable prices and are capable of providing efficient executions. The Adviser
and its affiliates do not participate in soft dollar transactions.
The Adviser assumes general supervision over placing orders on behalf of the
Fund for the purchase or sale of portfolio securities. If purchases or sales of
portfolio securities of the Fund and one or more other investment companies or
clients supervised by the Adviser are considered at or about the same time,
transactions in such securities are allocated among the several investment
companies and clients in a manner deemed equitable to all by the Adviser. In
some cases, this procedure could have a detrimental effect on the price or
volume of the security as far as the Fund is concerned. However, in other
cases, it is possible that the ability to participate in volume transactions and
to negotiate lower brokerage commissions will be beneficial to the Fund. The
primary consideration is prompt execution of orders at the most favorable net
price.
Portfolio turnover may vary from year to year, as well as within a year. High
turnover rates are likely to result in comparatively greater brokerage expenses.
The portfolio turnover rate for the Fund is expected to be under 50%. The
overall reasonableness of brokerage commissions is evaluated by the Adviser
based upon its knowledge of available information as to the general level of
commissions paid by the other institutional investors for comparable services.
Additional Information Concerning the Trust
The Trust is an open-end management investment company under the Investment
Company Act of 1940. The Trust was organized as a Massachusetts business trust
on June 12, 2000.
The Board of Trustees of the Trust is authorized to issue an unlimited number of
shares in one or more series or "Funds". The Trust currently is comprised of
one Fund. The Board of Trustees of the Trust has the right to establish
additional series in the future, to change those series and to determine the
preferences, voting powers, rights and privileges thereof.
Each Share issued by the Fund has a pro rata interest in the assets of the
corresponding Fund. Fund Shares have no preemptive, exchange, subscription or
conversion rights and are freely transferable. Each Share is entitled to
participate equally in dividends and distributions declared
<PAGE>
by the Board with respect to the Fund, and in the net distributable assets of
the Fund on liquidation.
Each Share has one vote with respect to matters upon which a shareholder vote is
required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder. If, at the time of a vote, the Trust consists of Funds
in addition to the Fund, then Shares of all Funds would vote together as a
single class except that, if the matter being voted on affects only a particular
Fund, and, if a matter affects a particular Fund differently from other Funds,
that Fund will vote separately on such matter.
The Trust is not required and does not intend to hold annual meetings of
shareholders. Shareholders owning more than 10% of the outstanding shares of the
Fund have the right to call a special meeting to remove Trustees or for any
other purpose.
Under Massachusetts law applicable to Massachusetts business trusts,
shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for its obligations. However, the Declaration of
Trust of the Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Fund's Declaration of Trust further provides for
indemnification out of the assets and property of the Trust for all losses and
expenses of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust or Fund itself was unable to meet its
obligations. The Trust believes the likelihood of the occurrence of these
circumstances is remote.
Following the creation of the initial Creation Unit Aggregation(s) of Shares of
a Fund and immediately prior to the commencement of trading in Fund Shares, a
holder of Shares may be a "control person" of the Fund, as defined in the 1940
Act. The Fund cannot predict the length of time for which one or more
shareholders may remain a control person of the Fund.
The Trust does not have information concerning the beneficial ownership of
Shares held by any Depository Trust Company ("DTC") Participants (as defined
below).
Shareholders may make inquiries by writing to the Trust, c/o the Distributor,
Nuveen Investments, at 333 West Wacker Drive, Chicago, Illinois 60606.
Absent an applicable exemption or other relief from the SEC or its staff,
officers and Trustees of the Fund and beneficial owners of 10% of the Shares of
the Fund ("Insiders") may be subject to the insider reporting, short-swing
profit and short sale provisions of Section 16 of the Exchange Act and the SEC's
rules promulgated thereunder.
Book Entry Only System. The following information supplements and should be read
----------------------
in conjunction with the section in the Prospectus entitled Shareholder
Information.
DTC Acts as Securities Depository for Fund Shares. Shares of the Fund are
-------------------------------------------------
represented by securities registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC.
DTC, a limited-purpose trust company, was created to hold securities of its
participants (the "DTC Participants") and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the
<PAGE>
DTC Participants, thereby eliminating the need for physical movement of
securities' certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. More
specifically, DTC is owned by a number of its DTC Participants and by the New
York Stock Exchange ("NYSE"), the AMEX and the NASD. Access to the DTC system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a DTC Participant,
either directly or indirectly (the "Indirect Participants").
Beneficial ownership of Shares is limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and Indirect
Participants. Ownership of beneficial interests in Shares (owners of such
beneficial interests are referred to herein as "Beneficial Owners") is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase of Shares.
Conveyance of all notices, statements and other communications to Beneficial
Owners is effected as follows. Pursuant to the Depositary Agreement between the
Trust and DTC, DTC is required to make available to the Trust upon request and
for a fee to be charged to the Trust a listing of the Shares of the Fund held by
each DTC Participant. The Trust shall inquire of each such DTC Participant as
to the number of Beneficial Owners holding Shares, directly or indirectly,
through such DTC Participant. The Trust shall provide each such DTC Participant
with copies of such notice, statement or other communication, in such form,
number and at such place as such DTC Participant may reasonably request, in
order that such notice, statement or communication may be transmitted by such
DTC Participant, directly or indirectly, to such Beneficial Owners. In
addition, the Trust shall pay to each such DTC Participants a fair and
reasonable amount as reimbursement for the expenses attendant to such
transmittal, all subject to applicable statutory and regulatory requirements.
Fund distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all Fund Shares. DTC or its nominee, upon receipt of any
such distributions, shall immediately credit DTC Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
Shares of the Fund as shown on the records of DTC or its nominee. Payments by
DTC Participants to Indirect Participants and Beneficial Owners of Shares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a "street name", and will be the
responsibility of such DTC Participants.
The Trust has no responsibility or liability for any aspect of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such Shares, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests, or for
any other aspect of the relationship between DTC and the DTC Participants or the
relationship between such DTC Participants and the Indirect Participants and
Beneficial Owners owning through such DTC Participants.
DTC may decide to discontinue providing its service with respect to Shares at
any time by giving reasonable notice to the Trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action to find a replacement for DTC to
perform its functions at a comparable cost.
<PAGE>
Creation and Redemption of Creation Unit Aggregations
Creation. The Trust issues and sells Shares of the Fund only in Creation Unit
--------
Aggregations on a continuous basis through the Distributor, without a sales
load, at their NAVs next determined after receipt, on any Business Day (as
defined below), of an order in proper form.
A "Business Day" is any day on which the NYSE is open for business. As of the
date of the Prospectus, the NYSE observes the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Washington's Birthday, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Deposit of Securities and Deposit or Delivery of Cash. The consideration for
-----------------------------------------------------
purchase of Creation Unit Aggregations of the Fund generally consists of the in-
kind deposit of a designated portfolio of equity securities -- the "Deposit
Securities" -- per each Creation Unit Aggregation constituting a substantial
replication, or a portfolio sampling representation, of the stocks included in
the Underlying Index ("Fund Securities") and an amount of cash -- the "Cash
Component" - computed as described below. Together, the Deposit Securities and
the Cash Component constitute the "Fund Deposit", which represents the minimum
initial and subsequent investment amount for a Creation Unit Aggregation of the
Fund.
The Cash Component is sometimes also referred to as the Balancing Amount. The
Cash Component serves the function of compensating for any differences between
the NAV per Creation Unit Aggregation and the Deposit Amount (as defined below).
The Cash Component is an amount equal to the difference between the NAV of the
Fund Shares (per Creation Unit Aggregation) and the "Deposit Amount" - an amount
equal to the market value of the Deposit Securities. If the Cash Component is a
positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit
Amount), the creator will deliver the Cash Component. If the Cash Component is
a negative number (i.e., the NAV per Creation Unit Aggregation is less than the
Deposit Amount), the creator will receive the Cash Component.
The Adviser, through the National Securities Clearing Corporation ("NSCC")
(discussed below), makes available on each Business Day, prior to the opening of
business on the AMEX (currently 9:30 a.m., Eastern time), the list of the names
and the required number of shares of each Deposit Security to be included in the
current Fund Deposit (based on information at the end of the previous Business
Day) for the Fund.
Such Fund Deposit is applicable, subject to any adjustments as described below,
in order to effect creations of Creation Unit Aggregations of the Fund until
such time as the next-announced composition of the Deposit Securities is made
available.
The identity and number of shares of the Deposit Securities required for a Fund
Deposit for the Fund changes as rebalancing adjustments and corporate action
events are reflected from time to time by the Adviser with a view to the
investment objective of the Fund. The composition of the Deposit Securities may
also change in response to adjustments to the weighting or composition of the
Component Stocks of the Underlying Index. In addition, the Trust reserves the
right to permit or require the substitution of an amount of cash -- i.e., a
"cash in lieu" amount -- to be added to the Cash Component to replace any
Deposit Security that may not be available in sufficient quantity for delivery
or that may not be eligible for transfer through the systems of DTC or the
Clearing Process (discussed below), or which might not be eligible for trading
by an Authorized Participant (as defined below) or the investor for which it is
acting. Brokerage commissions
<PAGE>
incurred in connection with the acquisition of Deposit Securities not eligible
for transfer through the systems of DTC and hence not eligible for transfer
through the Clearing Process (discussed below) will be at the expense of the
Fund and will affect the value of all Shares; but the Adviser, subject to the
approval of the Board of Trustees, may adjust the transaction fee within the
parameters described above to protect ongoing shareholders. The adjustments
described above will reflect changes known to the Adviser on the date of
announcement to be in effect by the time of delivery of the Fund Deposit, in the
composition of the Underlying Index or resulting from certain corporate actions.
In addition to the list of names and numbers of securities constituting the
current Deposit Securities of a Fund Deposit, the Custodian, through the NSCC,
also makes available on each Business Day, the estimated Cash Component,
effective through and including the previous Business Day, per outstanding Share
of the Fund.
Procedures for Creation of Creation Unit Aggregations. To be eligible to place
-----------------------------------------------------
orders with the Distributor and to create a Creation Unit Aggregation of the
Fund, an entity must be (i) a "Participating Party", i.e., a broker-dealer or
other participant in the clearing process through the Continuous Net Settlement
System of the NSCC (the "Clearing Process"), a clearing agency that is
registered with the SEC; or (ii) a DTC Participant (see the Book Entry Only
System section), and, in each case, must have executed an agreement with the
Distributor, with respect to creations and redemptions of Creation Unit
Aggregations ("Participant Agreement") (discussed below). A Participating Party
and DTC Participant are collectively referred to as an "Authorized Participant."
Investors should contact the Distributor for the names of Authorized
Participants that have signed a Participant Agreement. All Fund Shares, however
created, will be entered on the records of DTC in the name of Cede & Co. for the
account of a DTC Participant.
All orders to create Fund Shares must be placed for one or more Creation Unit
Aggregations. All orders to create Creation Unit Aggregations, whether through
the Clearing Process (through a Participating Party) or outside the Clearing
Process (through a DTC Participant), must be received by the Distributor no
later than the closing time of the regular trading session on the NYSE ("Closing
Time") (ordinarily 4:00 p.m., Eastern time) in each case on the date such order
is placed in order for creation of Creation Unit Aggregations to be effected
based on the NAV of Shares of the Fund as next determined on such date after
receipt of the order in proper form. The date on which an order to create
Creation Unit Aggregations (or an order to redeem Creation Unit Aggregations, as
discussed below) is placed is referred to as the "Transmittal Date." Orders
must be transmitted by an Authorized Participant by telephone or other
transmission method acceptable to the Distributor pursuant to procedures set
forth in the Participant Agreement, as described below (see the Placement of
Creation Orders Using Clearing Process and the Placement of Creation Orders
Outside Clearing Process sections). Severe economic or market disruptions or
changes, or telephone or other communication failure may impede the ability to
reach the Distributor or an Authorized Participant.
All orders to create Creation Unit Aggregations shall be placed with an
Authorized Participant, as applicable, in the form required by such Authorized
Participant. In addition, the Authorized Participant may request the investor
to make certain representations or enter into agreements with respect to the
order, e.g., to provide for payments of cash, when required. Investors should be
aware that their particular broker may not have executed a Participant Agreement
and that, therefore, orders to create Creation Unit Aggregations of a Fund have
to be placed by the investor's broker through an Authorized Participant that has
executed a Participant Agreement. In such cases there may be additional charges
to such investor. At any given time, there may be only a limited number of
broker-dealers that have executed a Participant Agreement.
<PAGE>
Those placing orders for Creation Unit Aggregations through the Clearing Process
should afford sufficient time to permit proper submission of the order to the
Distributor prior to the Closing Time on the Transmittal Date. Orders for
Creation Unit Aggregations that are effected outside the Clearing Process are
likely to require transmittal by the DTC Participant earlier on the Transmittal
Date than orders effected using the Clearing Process. Those persons placing
orders outside the Clearing Process should ascertain the deadlines applicable
to DTC and the Federal Reserve Bank wire system by contacting the operations
department of the broker or depository institution effectuating such transfer of
Deposit Securities and Cash Component.
Placement of Creation Orders Using Clearing Process. The Clearing Process is the
---------------------------------------------------
process of creating or redeeming Creation Unit Aggregations through the
Continuous Net Settlement System of the NSCC. Fund Deposits made through the
Clearing Process must be delivered through a Participating Party that has
executed a Participant Agreement. The Participant Agreement authorizes the
Distributor to transmit through the Custodian to NSCC, on behalf of the
Participating Party, such trade instructions as are necessary to effect the
Participating Party's creation order. Pursuant to such trade instructions to
NSCC, the Participating Party agrees to deliver the requisite Deposit Securities
and the Cash Component to the Trust, together with such additional information
as may be required by the Distributor. An order to create Creation Unit
Aggregations through the Clearing Process is deemed received by the Distributor
on the Transmittal Date if (i) such order is received by the Distributor not
later than the Closing Time on such Transmittal Date, and (ii) all other
procedures set forth in the Participant Agreement are properly followed.
Placement of Creation Orders Outside Clearing Process. Fund Deposits made
-----------------------------------------------------
outside the Clearing Process must be delivered through a DTC Participant that
has executed a Participant Agreement pre-approved by the Adviser and the
Distributor. A DTC Participant who wishes to place an order creating Creation
Unit Aggregations to be effected outside the Clearing Process does not need to
be a Participating Party, but such orders must state that the DTC Participant is
not using the Clearing Process and that the creation of Creation Unit
Aggregations will instead be effected through a transfer of securities and cash
directly through DTC. The Fund Deposit transfer must be ordered by the DTC
Participant on the Transmittal Date in a timely fashion so as to ensure the
delivery of the requisite number of Deposit Securities through DTC to the
account of the Fund by no later than 11:00 a.m., Eastern time, of the next
Business Day immediately following the Transmittal Date.
All questions as to the number of Deposit Securities to be delivered, and the
validity, form and eligibility (including time of receipt) for the deposit of
any tendered securities, will be determined by the Trust, whose determination
shall be final and binding. The amount of cash equal to the Cash Component must
be transferred directly to the Custodian through the Federal Reserve Bank wire
transfer system in a timely manner so as to be received by the Custodian no
later than 2:00 p.m., Eastern time, on the next Business Day immediately
following such Transmittal Date. An order to create Creation Unit Aggregations
outside the Clearing Process is deemed received by the Distributor on the
Transmittal Date if (i) such order is received by the Distributor not later than
the Closing Time on such Transmittal Date; and (ii) all other procedures set
forth in the Participant Agreement are properly followed. However, if the
Custodian does not receive both the required Deposit Securities and the Cash
Component by 11:00 a.m. and 2:00 p.m., respectively on the next Business Day
immediately following the Transmittal Date, such order will be canceled. Upon
written notice to the Distributor, such canceled order may be resubmitted the
following Business Day using a Fund Deposit as newly constituted to reflect the
then current NAV of the Fund. The delivery of Creation Unit Aggregations so
created will occur no later than
<PAGE>
the third (3rd) Business Day following the day on which the purchase order is
deemed received by the Distributor.
Additional transaction fees may be imposed with respect to transactions effected
outside the Clearing Process (through a DTC participant) and in the limited
circumstances in which any cash can be used in lieu of Deposit Securities to
create Creation Units. (See Creation Transaction Fee section below).
Creation Unit Aggregations may be created in advance of receipt by the Trust of
all or a portion of the applicable Deposit Securities as described below. In
these circumstances, the initial deposit will have a value greater than the NAV
of the Fund Shares on the date the order is placed in proper form since, in
addition to available Deposit Securities, cash must be deposited in an amount
equal to the sum of (i) the Cash Component, plus (ii) 115% of the market value
of the undelivered Deposit Securities (the "Additional Cash Deposit"). The
order shall be deemed to be received on the Business Day on which the order is
placed provided that the order is placed in proper form prior to 4:00 p.m.,
Eastern time, on such date and federal funds in the appropriate amount are
deposited with the Custodian by 11:00 a.m., Eastern time, the following Business
Day. If the order is not placed in proper form by 4:00 p.m. or federal funds in
the appropriate amount are not received by 11:00 a.m. the next Business Day,
then the order may be deemed to be rejected and the Authorized Participant shall
be liable to the Fund for losses, if any, resulting therefrom. An additional
amount of cash shall be required to be deposited with the Trust, pending
delivery of the missing Deposit Securities to the extent necessary to maintain
the Additional Cash Deposit with the Trust in an amount at least equal to 115%
of the daily marked to market value of the missing Deposit Securities. To the
extent that missing Deposit Securities are not received by 1:00 p.m., Eastern
time, on the third Business Day following the day on which the purchase order is
deemed received by the Distributor or in the event a marked-to-market payment is
not made within one Business Day following notification by the Distributor that
such a payment is required, the Trust may use the cash on deposit to purchase
the missing Deposit Securities. Authorized Participants will be liable to the
Trust and Fund for the costs incurred by the Trust in connection with any such
purchases. These costs will be deemed to include the amount by which the actual
purchase price of the Deposit Securities exceeds the market value of such
Deposit Securities on the day the purchase order was deemed received by the
Distributor plus the brokerage and related transaction costs associated with
such purchases. The Trust will return any unused portion of the Additional Cash
Deposit once all of the missing Deposit Securities have been properly received
by the Custodian or purchased by the Trust and deposited into the Trust. In
addition, a transaction fee, as listed below, will be charged in all cases. The
delivery of Creation Unit Aggregations so created will occur no later than the
third Business Day following the day on which the purchase order is deemed
received by the Distributor.
Acceptance of Orders for Creation Unit Aggregations. The Trust reserves the
---------------------------------------------------
absolute right to reject a creation order transmitted to it by the Distributor
in respect of the Fund if: (i) the order is not in proper form; (ii) the
investor(s), upon obtaining the Fund Shares ordered, would own 80% or more of
the currently outstanding shares of any Fund; (iii) the Deposit Securities
delivered are not as disseminated through the facilities of the AMEX for that
date by the Custodian, as described above; (iv) acceptance of the Deposit
Securities would have certain adverse tax consequences to the Fund; (v)
acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful;
(vi) acceptance of the Fund Deposit would otherwise, in the discretion of the
Trust or the Adviser, have an adverse effect on the Trust or the rights of
beneficial owners; or (vii) in the event that circumstances outside the control
of the Trust, the Custodian, the Distributor and the Adviser make it for all
practical purposes impossible to process creation orders. Examples of
<PAGE>
such circumstances include acts of God; public service or utility problems such
as fires, floods, extreme weather conditions and power outages resulting in
telephone, telecopy and computer failures; market conditions or activities
causing trading halts; systems failures involving computer or other information
systems affecting the Trust, the Adviser, the Distributor, DTC, NSCC, the
Custodian or sub-custodian or any other participant in the creation process, and
similar extraordinary events. The Distributor shall notify a prospective creator
of a Creation Unit and/or the Authorized Participant acting on behalf of the
creator of a Creation Unit Aggregation of its rejection of the order of such
person. The Trust, the Custodian, a sub-custodian and the Distributor are under
no duty, however, to give notification of any defects or irregularities in the
delivery of Fund Deposits nor shall any of them incur any liability for the
failure to give any such notification.
All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility, and acceptance for deposit of
any securities to be delivered shall be determined by the Trust, and the Trust's
determination shall be final and binding.
Creation Transaction Fee. To compensate the Trust for transfer and other
------------------------
transaction costs involved in creation transactions through the Clearing
Process, investors will be required to pay a fixed creation transaction fee,
described below, payable to the Trust regardless of the number of creations made
each day. An additional charge of up to three (3) times the fixed transaction
fee (expressed as a percentage of the value of the Deposit Securities) may be
imposed for (i) creations effected outside the Clearing Process; and (ii) cash
creations (to offset the Trust's brokerage and other transaction costs
associated with using cash to purchase the requisite Deposit Securities).
Investors are responsible for the costs of transferring the securities
constituting the Deposit Securities to the account of the Trust.
The Standard Creation/Redemption Transaction Fee for the Fund will be $3,000.
The Maximum Creation/Redemption Transaction Fee for the Fund will be $12,000.
Redemption of Fund Shares in Creation Units Aggregations. Fund Shares may be
--------------------------------------------------------
redeemed only in Creation Unit Aggregations at their NAV next determined after
receipt of a redemption request in proper form by the Fund through the Transfer
Agent and only on a Business Day. The Fund will not redeem Shares in amounts
less than Creation Unit Aggregations. Beneficial Owners must accumulate enough
Shares in the secondary market to constitute a Creation Unit Aggregation in
order to have such Shares redeemed by the Trust. There can be no assurance,
however, that there will be sufficient liquidity in the public trading market at
any time to permit assembly of a Creation Unit Aggregation. Investors should
expect to incur brokerage and other costs in connection with assembling a
sufficient number of Fund Shares to constitute a redeemable Creation Unit
Aggregation.
With respect to the Fund, the Custodian, through the NSCC, makes available
immediately prior to the opening of business on the AMEX (currently 9:30 a.m.,
Eastern time) on each Business Day, the identity of the Fund Securities that
will be applicable (subject to possible amendment or correction) to redemption
requests received in proper form (as described below) on that day. Fund
Securities received on redemption may not be identical to Deposit Securities
that are applicable to creations of Creation Unit Aggregations.
Unless cash redemptions are available or specified for the Fund, the redemption
proceeds for a Creation Unit Aggregation generally consist of Fund Securities --
as announced on the Business Day of the request for redemption received in
proper form -- plus or minus cash in an amount equal to the difference between
the NAV of the Fund Shares being redeemed, as next determined
<PAGE>
after a receipt of a request in proper form, and the value of the Fund
Securities (the "Cash Redemption Amount"), less a redemption transaction fee as
listed below. In the event that the Fund Securities have a value greater then
the NAV of the Fund Shares, a compensating cash payment equal to the difference
is required to be made by or through an Authorized Participant by the redeeming
shareholder.
The right of redemption may be suspended or the date of payment postponed (i)
for any period during which the NYSE is closed (other than customary weekend and
holiday closings); (ii) for any period during which trading on the NYSE is
suspended or restricted; (iii) for any period during which an emergency exists
as a result of which disposal of the Shares of the Fund or determination of the
Fund's NAV is not reasonably practicable; or (iv) in such other circumstances as
is permitted by the SEC.
Redemption Transaction Fee. A redemption transaction fee is imposed to offset
--------------------------
transfer and other transaction costs that may be incurred by the Fund. An
additional variable charge for cash redemptions (when cash redemptions are
available or specified) for the Fund may be imposed. Investors will also bear
the costs of transferring the Fund Securities from the Trust to their account or
on their order. Investors who use the services of a broker or other such
intermediary in addition to an Authorized Participant to effect a redemption of
a Creation Unit Aggregation may be charged a fee for such services. The
redemption transaction fees for the Fund are the same as the creation fees set
forth above.
Placement of Redemption Orders Using Clearing Process. Orders to redeem Creation
-----------------------------------------------------
Unit Aggregations through the Clearing Process must be delivered through a
Participating Party that has executed the Participant Agreement. An order to
redeem Creation Unit Aggregations using the Clearing Process is deemed received
by the Trust on the Transmittal Date if (i) such order is received by the
Transfer Agent not later than 4:00 p.m., Eastern time, on such Transmittal Date,
and (ii) all other procedures set forth in the Participant Agreement are
properly followed; such order will be effected based on the NAV of the Fund as
next determined. An order to redeem Creation Unit Aggregations using the
Clearing Process made in proper form but received by the Trust after 4:00 p.m.,
Eastern time, will be deemed received on the next Business Day immediately
following the Transmittal Date and will be effected at the NAV next determined
on such Business Day. The requisite Fund Securities and the Cash Redemption
Amount will be transferred by the third NSCC Business Day following the date on
which such request for redemption is deemed received.
Placement of Redemption Orders Outside Clearing Process. Orders to redeem
-------------------------------------------------------
Creation Unit Aggregations outside the Clearing Process must be delivered
through a DTC Participant that has executed the Participant Agreement. A DTC
Participant who wishes to place an order for redemption of Creation Unit
Aggregations to be effected outside the Clearing Process does not need to be a
Participating Party, but such orders must state that the DTC Participant is not
using the Clearing Process and that redemption of Creation Unit Aggregations
will instead be effected through transfer of Fund Shares directly through DTC.
An order to redeem Creation Unit Aggregations outside the Clearing Process is
deemed received by the Trust on the Transmittal Date if (i) such order is
received by the Transfer Agent not later than 4:00 p.m., Eastern time on such
Transmittal Date; (ii) such order is accompanied or followed by the requisite
number of Shares of the Fund and any Cash Component specified in such order,
which delivery must be made through DTC to the Custodian no later than 11:00
a.m., Eastern time, (for the Fund Shares) on the next Business Day immediately
following such Transmittal Date (the "DTC Cut-Off-Time") and 2:00 p.m., Eastern
Time for any Cash Component; and (iii) all other procedures set forth in the
Participant Agreement are properly followed. After the Trust has deemed an order
for
<PAGE>
redemption outside the Clearing Process received, the Trust will initiate
procedures to transfer the requisite Fund Securities which are expected to be
delivered within three Business Days and the Cash Redemption Amount to the
Authorized Participant on behalf of the redeeming Beneficial Owner by the third
Business Day following the Transmittal Date on which such redemption order is
deemed received by the Trust.
The calculation of the value of the Fund Securities and the Cash Redemption
Amount to be delivered/received upon redemption will be made by the Custodian
according to the procedures set forth under Determination of NAV computed on the
Business Day on which a redemption order is deemed received by the Trust.
Therefore, if a redemption order in proper form is submitted to the Transfer
Agent by a DTC Participant not later than Closing Time on the Transmittal Date,
and the requisite number of Shares of the Fund are delivered to the Custodian
prior to the DTC Cut-Off- Time, then the value of the Fund Securities and the
Cash Redemption Amount to be delivered/received will be determined by the
Custodian on such Transmittal Date. If, however, a redemption order is
submitted to the Transfer Agent by a DTC Participant not later than the Closing
Time on the Transmittal Date but either (i) the requisite number of Shares of
the relevant Fund are not delivered by the DTC Cut-Off-Time, as described above,
on such Transmittal Date, or (ii) the redemption order is not submitted in
proper form, then the redemption order will not be deemed received as of the
Transmittal Date. In such case, the value of the Fund Securities and the Cash
Redemption Amount to be delivered/received will be computed on the Business Day
that such order is deemed received by the Trust, i.e., the Business Day on which
the Fund Shares of the relevant Fund are delivered through DTC to the Custodian
by the DTC Cut-Off-Time on such Business Day pursuant to a properly submitted
redemption order.
If it is not possible to effect deliveries of the Fund Securities, the Trust may
in its discretion exercise its option to redeem such Fund Shares in cash, and
the redeeming Beneficial Owner will be required to receive its redemption
proceeds in cash. In addition, an investor may request a redemption in cash
that the Fund may, in its sole discretion, permit. In either case, the investor
will receive a cash payment equal to the NAV of its Fund Shares based on the NAV
of Shares of the relevant Fund next determined after the redemption request is
received in proper form (minus a redemption transaction fee and additional
charge for requested cash redemptions specified above, to offset the Fund's
brokerage and other transaction costs associated with the disposition of Fund
Securities). The Fund may also, in its sole discretion, upon request of a
shareholder, provide such redeemer a portfolio of securities that differs from
the exact composition of the Fund Securities but does not differ in NAV.
Redemptions of Fund Shares for Fund Securities will be subject to compliance
with applicable federal and state securities laws and the Fund (whether or not
it otherwise permits cash redemptions) reserves the right to redeem Creation
Unit Aggregations for cash to the extent that the Trust could not lawfully
deliver specific Fund Securities upon redemptions or could not do so without
first registering the Fund Securities under such laws. An Authorized
Participant or an investor for which it is acting subject to a legal restriction
with respect to a particular stock included in the Fund Securities applicable to
the redemption of a Creation Unit Aggregation may be paid an equivalent amount
of cash. The Authorized Participant may request the redeeming Beneficial Owner
of the Fund Shares to complete an order form or to enter into agreements with
respect to such matters as compensating cash payment, beneficial ownership of
shares or delivery instructions.
Taxes
The following information also supplements and should be read in conjunction
with the section in the Prospectus entitled Taxes.
<PAGE>
The Fund intends to qualify for and to elect treatment as a separate Regulated
Investment Company ("RIC") under Subchapter M of the Internal Revenue Code (the
"Code"). To qualify for treatment as a RIC, a company must annually distribute
at least 90% of its net investment company taxable income (which includes
dividends, interest and net short-term capital gains) and meet several other
requirements. Among such other requirements are the following: (i) at least 90%
of the company's annual gross income must be derived from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies, or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies;
and (ii) at the close of each quarter of the company's taxable year, (a) at
least 50% of the market value of the company's total assets must be represented
by cash and cash items, U.S. government securities, securities of other
regulated investment companies and other securities, with such other securities
limited for purposes of this calculation in respect of any one issuer to an
amount not greater than 5% of the value of the company's assets and not greater
than 10% of the outstanding voting securities of such issuer, and (b) not more
than 25% of the value of its total assets may be invested in the securities of
any one issuer or of two or more issuers that are controlled by the company
(within the meaning of Section 851(b)(3)(B) of the Code) and that are engaged in
the same or similar trades or businesses or related trades or businesses (other
than U.S. government securities or the securities of other regulated investment
companies).
The Fund will be subject to a 4% excise tax on certain undistributed income if
it does not distribute to its shareholders in each calendar year at least 98% of
its ordinary income for the calendar year plus 98% of its capital gain net
income for the twelve months ended October 31 of such year. The Fund intends to
declare and distribute dividends and distributions in the amounts and at the
times necessary to avoid the application of this 4% excise tax.
Tax Aware Management. Taxable investors (that is, those not investing through a
tax-deferred account such as an IRA) benefit if the funds in which they invest
operate in a tax efficient manner by minimizing capital gains distributions. A
fund that avoids paying capital gains distributions permits shareholders to
defer payment of taxes on capital gains until they sell their fund shares. The
Advisor will attempt to minimize the Fund's capital gains distributions to the
extent such a tax strategy does not reduce the Fund's pre-tax return, although
there is no assurance that the Fund will be able to avoid paying capital gains
distributions.
The Trust on behalf of the Fund has the right to reject an order for a purchase
of Fund Shares if the purchaser (or group of purchasers) would, upon obtaining
the Shares so ordered, own 80% or more of the outstanding Shares of the Fund and
if, pursuant to section 351 of the Code, the Fund would have a basis in the
securities different from the market value of such securities on the date of
deposit. The Trust also has the right to require information necessary to
determine beneficial share ownership for purposes of the 80% determination.
The foregoing discussion is a summary only and is not intended as a substitute
for careful tax planning. Purchasers of Fund Shares should consult their own
tax advisors as to the tax consequences of investing in such shares, including
under state, local and foreign tax laws. Finally, the foregoing discussion is
based on applicable provisions of the Code, regulations, judicial authority and
administrative interpretations in effect on the date hereof. Changes in
applicable authority could materially affect the conclusions discussed above,
and such changes often occur.
<PAGE>
Federal Tax Treatment of Futures and Options Contracts. The Fund is required,
------------------------------------------------------
for federal income tax purposes, to mark-to-market and recognize as income for
each taxable year its net unrealized gains and losses on certain futures and
options contracts as of the end of the year as well as those actually realized
during the year. Gain or loss from futures and options contracts on broad-based
indices required to be marked-to-market will be 60% long-term and 40% short-term
capital gain or loss. Application of this rule may alter the timing and
character of distributions to shareholders. The Fund may be required to defer
the recognition of losses on futures contracts, option contracts and swaps to
the extent of any unrecognized gains on offsetting positions held by the Fund.
In order for a Fund to continue to qualify for federal income tax treatment as a
RIC, at least 90% of its gross income for a taxable year must be derived from
qualifying income, i.e., dividends, interest, income derived from loans of
securities, gains from the sale of securities or of foreign currencies or other
income derived with respect to the Fund's business of investing in securities.
It is anticipated that any net gain realized from the closing out of futures or
options contracts will be considered qualifying income for purposes of the 90%
requirement.
The Fund intends to distribute to shareholders annually any net capital gains
that have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on futures or options transactions.
Such distributions are combined with distributions of capital gains realized on
the Fund's other investments and shareholders are advised on the nature of the
distributions.
The foregoing is only a summary of certain material tax consequences affecting
the Fund and shareholders. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Determination of NAV
The following information supplements and should be read in conjunction with
the section in the Prospectus entitled Determining NAV.
The NAV per Share of the Fund is computed by dividing the value of the net
assets of the Fund (i.e., the value of its total assets less total liabilities)
by the total number of Shares of the Fund outstanding, rounded to the nearest
cent. Expenses and fees, including without limitation, the management and
administration fees, are accrued daily and taken into account for purposes of
determining NAV. The NAV of per Share is calculated by the Custodian and
determined as of the close of the regular trading session on the NYSE
(ordinarily 4:00 p.m., Eastern time) on each day that such exchange is open.
In computing the Fund's NAV, the Fund's securities holdings are valued based on
their last sale price. Price information on listed securities is taken from the
exchange where the security is primarily traded. Securities regularly traded in
an over-the-counter market are valued at the latest quoted sale price in such
market. Other portfolio securities and assets for which market quotations are
not readily available are valued based on fair value as determined in good faith
by the Adviser in accordance with procedures adopted by the Board.
Dividends and Distributions
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled Dividends and Distributions.
<PAGE>
General Policies. Dividends from net investment income, if any, are declared and
----------------
paid at least annually by the Fund. Distributions of net realized securities
gains, if any, generally are declared and paid once a year, but the Trust may
make distributions on a more frequent basis. The Trust reserves the right to
declare special distributions if, in its reasonable discretion, such action is
necessary or advisable to preserve the status of the Fund as a RIC or to avoid
imposition of income or excise taxes on undistributed income.
Dividends and other distributions on Fund Shares are distributed, as described
below, on a pro rata basis to Beneficial Owners of such Shares. Dividend
payments are made through DTC Participants and Indirect Participants to
Beneficial Owners then of record with proceeds received from the Fund.
Dividend Reinvestment Service. No reinvestment service is provided by the
-----------------------------
Trust. Broker-dealers may make available the DTC book-entry Dividend
Reinvestment Service for use by Beneficial Owners of the Fund for reinvestment
of their dividend distributions. Beneficial Owners should contact their broker
to determine the availability and costs of the service and the details of
participation therein. Brokers may require Beneficial Owners to adhere to
specific procedures and timetables. If this service is available and used,
dividend distributions of both income and realized gains will be automatically
reinvested in additional whole Shares of the Fund purchased in the secondary
market.
Performance and Other Information
The performance of the Fund may be quoted in advertisements, sales literature or
reports to shareholders in terms of average annual total return and cumulative
total return.
Quotations of average annual total return are expressed in terms of the average
annual rate of return of a hypothetical investment in the Fund over periods of
1, 5 and 10 years (or the life of a Fund, if shorter). Such total return
figures will reflect the deduction of a proportional share of the Fund's
expenses on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
Average annual total return is calculated according to the following formula:
P(1 + T)/n/ = ERV (where P = a hypothetical initial payment of $1,000, T = the
average annual total return, n = the number of years and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
1, 5 or 10 year period or fractional portion).
Quotations of a cumulative total return will be calculated for any specified
period by assuming a hypothetical investment in the Fund on the date of the
commencement of the period and will assume that all dividends and distributions
are reinvested on ex date. However, currently the Trust does not make a
dividend reinvestment option available to shareholders of Shares and such
calculation is provided for informational purposes only. The net increase or
decrease in the value of the investment over the period will be divided by its
beginning value to arrive at cumulative total return. Total return calculated
in this manner will differ from the calculation of average annual total return
in that it will not be expressed in terms of an average rate of return.
Quotations of cumulative total return or average annual total return reflect
only the performance of a hypothetical investment in the Fund during the
particular time period on which the calculations are based. Such quotations for
the Fund will vary based on changes in market
<PAGE>
conditions and the level of the Fund's expenses, and no reported performance
figure should be considered an indication of performance that may be expected in
the future.
The cumulative and average total returns do not take into account federal or
state income taxes which may be payable; total returns would, of course, be
lower if such charges were taken into account.
Whenever the Trust calculates total return using the market values of Fund
Shares as reported by the AMEX, it will also calculate a similar total return
using the relevant Fund's NAV. The Trust may also provide reported closing
price data for Fund Shares and calculations of any applicable premiums or
discounts against NAV on its website and in the Trust prospectuses and annual
reports.
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner.
Because there are different methods for calculating performance, investors
should consider the effects of the methods used to calculate performance when
comparing performance of the Fund with performance quoted with respect to other
investment companies or types of investments.
From time to time, in advertising and marketing literature, the Fund's
performance may be compared to the performance of broad groups of open-end and
closed-end investment companies with similar investment goals, as tracked by
independent organizations such as Investment Company Data, Inc., Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc.,
Value Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk.
In addition, in connection with the communication of its performance to current
or prospective shareholders, the Fund also may compare those figures to the
performance of certain unmanaged indices which may assume the reinvestment of
dividends or interest but generally do not reflect deductions for administrative
and management costs. Examples of such indices include, but are not limited to
the following:
. Dow Jones Industrial Average
. Consumer Price Index
. Standard & Poor's 500 Composite Stock Price Index (S&P 500)
. NASDAQ OTC Composite Index
. NASDAQ Composite Index
. Wilshire 5000 Stock Index
Miscellaneous Information
Counsel. Morgan, Lewis & Bockius, LLP, Washington, D.C., is counsel to the Trust
-------
and has passed upon the validity of the Shares of the Fund.
Independent Auditors. Ernst & Young, Boston, Massachusetts, serve as the
--------------------
independent auditors and accountants of the Trust. They audit the Fund's
financial statements and perform other related audit services.
<PAGE>
AMEX. The AMEX is generally open Monday through Friday and is closed on
----
weekends and the following holidays: New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Section 12(d)(1) of the Investment Company
Act of 1940 restricts investments by registered investment companies in the
securities of other investment companies, including Shares.
Financial Statements
Report of Independent Accountants
To the Shareholder and Board of Trustees of Nuveen America's Fastest Growing
Companies Index Fund:
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Nuveen America's
Fastest Growing Companies Fund at ____________, 2001, in conformity with
accounting principles generally accepted in the United States. This financial
statement is the responsibility of the Fund's management; our responsibility is
to express an opinion on this financial statement based on our audit. We
conducted our audit of this financial statement in accordance with auditing
standards generally accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
Dated: _____________, 2001
-----------------------------------
ASSETS:
Cash................................................................... $
Total Assets...........................................................
--------
LIABILITIES:
Total Liabilities......................................................
--------
NET ASSETS............................................................. $
========
Net assets consist of:
Paid-in Capital........................................................ $
--------
NET ASSETS:............................................................ $
========
Shares outstanding:....................................................
========
NET ASSET VALUE:....................................................... $
========
<PAGE>
Nuveen Exchange-Traded Index Trust (the "Trust") is organized as a Massachusetts
business trust pursuant to a Declaration of Trust dated June 9, 2000, and has
had no operations as of the date hereof other than matters relating to its
organization and registration as an investment company under the Investment
Company Act of 1940 and the Securities Act of 1933 and the sale and issuance of
10,000 shares of beneficial interest of the Nuveen America's Fastest Growing
Companies Fund (the "Fund"), a series of the Trust, to Nuveen Investments (the
"Distributor").
The preparation of this financial statement 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 this financial statement. Actual results could differ from those
estimates.
<PAGE>
PART C--OTHER INFORMATION
Item 22: Financial Statements.
Financial statements:
Included in the Prospectus:
None
Item 23: Exhibits.
a.1 Declaration of Trust of Registrant.*
a.2 Certificate for the Establishment and Designation of Series
dated December 21, 2000.*
b. By-Laws of Registrant.*
c. Not applicable.
d. Investment Management Agreement between Registrant and Nuveen
Advisory Corp.
e. Distribution Agreement between Registrant and Nuveen Investments.
f. Not applicable.
g. Custodian Agreement between Registrant and State Street Bank &
Trust Co.
i. Opinion of Morgan, Lewis, and Bockius LLP.
j. Consent of ___________________, Independent Public Accountants.
k. Not applicable.
l. Not applicable.
m. Plan of Distribution and Service Pursuant to Rule 12b-1.
o. Not Applicable
99(a). Original Power of Attorney for Registrant's initial trustee,
authorizing among others, Gifford R. Zimmerman and Alan G.
Berkshire to execute the Registration Statement on his behalf.*
99(c). Code of Ethics and Reporting Requirements.*
*Filed herewith
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 Amended and Restated 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.
C-2
<PAGE>
The rights of indemnification herein provided may be insured against by policies
maintained by the Trust, shall be severable, shall not affect any other rights
to which any Covered Person may now or hereafter be entitled, shall continue as
to a person who has ceased to be such a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which Trust
personnel other than Covered Persons may be entitled by contract or otherwise
under law.
Expenses of preparation and presentation of a defense to any claim, action, suit
or proceeding subject to a claim for indemnification under this Section 4 shall
be advanced by the Trust prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee, anyone
who has been exempted from being an Interested Person by any rule, regulation or
order of the Commission), and (y) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
C-3
<PAGE>
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 Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Multistate Trust I, Nuveen
Multistate Trust II, Nuveen Multistate Trust III, Nuveen Multistate Trust IV,
Nuveen Municipal Trust, Nuveen Taxable Funds Inc., Nuveen Municipal Money Market
Fund, Inc., and Nuveen Money Market Trust. It also serves as investment adviser
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., Municipal Fund, Nuveen New Jersey Investment Quality Municipal Fund, Inc.,
Nuveen Pennsylvania
C-4
<PAGE>
Investment Quality Municipal Fund, Nuveen Select Quality Municipal Fund, Inc.,
Nuveen California Select Quality Municipal Fund, Inc., Nuveen New York Select
Quality Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen
Insured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income
Municipal Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio
Quality Income Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund,
Nuveen California Quality Income Municipal Fund, Inc., Nuveen New York Quality
Income Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc. Nuveen Premium Income Municipal Fund
2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen
Insured New York Premium Income Municipal Fund, Inc., Nuveen Select Maturities
Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen
Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium Income
Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc.,
Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California Premium
Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income Municipal Fund
2, Nuveen Maryland Premium Income Municipal Fund, Nuveen Massachusetts Premium
Income Municipal Fund, Nuveen Virginia Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Dividend
Advantage Municipal Fund, Nuveen California Dividend Advantage Municipal Fund,
Nuveen New York Dividend Advantage Municipal Fund, Nuveen Arizona Dividend
Advantage Municipal Fund, Nuveen Connecticut Dividend Advantage Municipal Fund,
Nuveen Maryland Dividend Advantage Municipal Fund, Nuveen Massachusetts Dividend
Advantage Municipal Fund, Nuveen North Carolina Dividend Advantage Municipal
Fund and Nuveen Virginia Dividend Advantage Municipal Fund. Nuveen Advisory
Corp. has no other clients or business at the present time. The principal
business address for all of these investment companies is 333 West Wacker Drive,
Chicago, Illinois 60606.
C-5
<PAGE>
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than John P. Amboian,
of the investment adviser has engaged during the last two years for his account
or in the capacity of director, officer, employee, partner or trustee, see the
descriptions under "Management" in the Statement of Additional Information.
John P. Amboian is President, formerly Executive Vice President and Chief
Financial Officer, and Director of Nuveen Advisory Corp., the investment
adviser. Mr. Amboian has, during the last two years, been President, formerly
Executive Vice President and Chief Financial Officer of Nuveen Investments, the
John Nuveen Company and Nuveen Institutional Advisory Corp.; Executive Vice
President of Rittenhouse Financial Services, Inc. and President and Chief
Operating Officer of Nuveen Senior Loan Asset Management Inc. (since September
1999).
Item 27: Principal Underwriters
(a) Nuveen Investments ("Nuveen") acts as principal underwriter to the following
open-end management type investment companies: Nuveen Multistate Trust I, Nuveen
Multistate Trust II, Nuveen Multistate Trust III, Nuveen Multistate Trust IV,
Nuveen Municipal Trust, Nuveen Municipal Money Market Fund, Inc., Nuveen Taxable
Funds Inc., Nuveen Money Market Trust, Nuveen Investment Trust, Nuveen
Investment Trust II, and Nuveen Investment Trust III. Nuveen also acts as
depositor and principal underwriter of the Nuveen Tax-Free Unit Trust and the
Nuveen Unit Trust, registered unit investment trusts. Nuveen has also served or
is serving as co-managing underwriter to the following closed-end management
type investment companies: Nuveen Municipal Value Fund, Inc., Nuveen California
Municipal Value Fund, Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen
Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen
Performance Plus Municipal Fund, Inc., Nuveen California Performance Plus
Municipal Fund, Inc., Nuveen New York Performance Plus Municipal Fund, Inc.,
Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Opportunity Fund,
Inc., Nuveen California Municipal Market Opportunity Fund, Inc., Nuveen
Investment Quality Municipal Fund, Inc., Nuveen California Investment Quality
Municipal Fund, Inc., Nuveen New York Investment Quality Municipal Fund, Inc.,
Nuveen Insured Quality Municipal Fund, Inc., Nuveen
C-6
<PAGE>
Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment Quality
Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund,
Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select Quality
Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund, Inc.,
Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal Opportunity
Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen Michigan
Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income Municipal Fund,
Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen California Quality
Income Municipal Fund, Inc., Nuveen New York Quality Income Municipal Fund,
Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Premier Insured
Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund 2, Inc.,
Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured
New York Premium Income Municipal Fund, Inc., Nuveen Select Maturities Municipal
Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Insured Florida
Premium Income Municipal Fund, Nuveen Michigan Premium Income Municipal Fund,
Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen Premium
Income Municipal Fund 4, Inc., Nuveen Insured California Premium Income
Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income Municipal Fund 2,
Nuveen Maryland Premium Income Municipal Fund, Nuveen Massachusetts Premium
Income Municipal Fund, Nuveen Virginia Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select
Tax-Free Income Portfolio, Nuveen Select Tax-Free Income Portfolio 2, Nuveen
Insured California Select Tax-Free Income Portfolio, Nuveen Insured New York
Select Tax-Free Income Portfolio, Nuveen Select Tax-Free Income Portfolio 3,
Nuveen Dividend Advantage Municipal Fund, Nuveen California Dividend Advantage
Municipal Fund, Nuveen New York Dividend Advantage Municipal Fund, Nuveen
Arizona Dividend Advantage Municipal Fund, Nuveen Connecticut Dividend Advantage
Municipal Fund, Nuveen Maryland Dividend Advantage Municipal Fund, Nuveen
Massachusetts Dividend Advantage Municipal Fund, Nuveen North Carolina Dividend
Advantage Municipal Fund and Nuveen Virginia Dividend Advantage Municipal Fund.
C-7
<PAGE>
(b)
<TABLE>
<CAPTION>
Name and
Principal
Business Positions and Offices Positions and Offices
Address with Underwriter with Registrant
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Chairman of the Board, Chairman of the Board
Schwertfeger Chief Executive Officer and Director and Director
333 West
Wacker Drive
Chicago, IL
60606
John P. President None
Amboian
333 West
Wacker Drive
Chicago, IL
60606
William Executive Vice President None
Adams IV
333 West
Wacker Drive
Chicago, IL
60606
Alan G. Senior Vice President and Secretary Vice President and
Berkshire Assistant Secretary
333 West
Wacker Drive
Chicago, IL
60606
Robert K. Vice President None
Burke
333 West
Wacker Drive
Chicago, IL
60606
Peter H. Vice President and Treasurer Vice President and Treasurer
D'Arrigo
333 West
Wacker Drive
Chicago, IL
60606
Stephen D. Vice President Vice President and
Foy Controller
333 West
Wacker Drive
Chicago, IL
60606
</TABLE>
C-8
<PAGE>
<TABLE>
<S> <C> <C>
Benjamin T. Vice President None
Fulton
333 West
Wacker Drive
Chicago, IL
60606
Anna R. Vice President None
Kucinskis
333 West
Wacker Drive
Chicago, IL
60606
Robert B. Vice President None
Kuppenheimer
19900 MacAr-
thur Blvd.
Irvine, CA
92612
Larry W. Vice President and Vice President and
Martin Assistant Secretary Assistant Secretary
333 West
Wacker Drive
Chicago, IL
60606
Thomas C. Vice President None
Muntz
333 West
Wacker Drive
Chicago, IL
60606
</TABLE>
C-9
<PAGE>
Positions and
Name and Principal Positions and Offices Offices
Business Address with Underwriter with Registrant
--------------------------------------------------------------------
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Allen J. Williamson Group President None
333 West Wacker Drive
Chicago, IL 60606
Margaret E. Wilson Vice President and None
333 West Wacker Drive Corporate Controller
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Secretary
Chicago, IL 60606
(c) Not applicable.
Item 28: Location of Accounts and Records
Nuveen 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 Trust and all advisory material of the investment adviser.
State Street Bank & Trust Co., 225 Franklin Street, Boston, MA 02110, 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 Advisory Corp. State Street Bank & Trust Co. maintains all the required
records in its capacity as transfer, dividend paying, and shareholder service
agent for the Funds.
Item 29: Management Services
Not applicable.
Item 30: Undertakings
Not applicable.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Trust 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 28th day of December, 2000.
NUVEEN EXCHANGE-TRADED INDEX TRUST
/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.
Signature Title Date
--------- ----- ----
/s/ Stephen D. Foy
--------------------------
Stephen D. Foy Vice President and December 28, 2000
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger* Chairman of the Board
and sole Trustee (Principal
Executive Officer) December 28, 2000
/s/ Gifford R. Zimmerman
attorney-in-fact
*An original power of attorney authorizing, among others, Gifford R. Zimmerman
and Alan G. Berkshire to execute this Registration Statement, and Amendments
thereto, for each of the Trustees of the Registrant, has been executed and is
filed as an exhibit to this Registration Statement.
<PAGE>
Exhibit List
a.1 Declaration of Trust of Registrant.
a.2 Certificate for the Establishment and Designation of Series
dated December 21, 2000.
b. By-Laws of Registrant.
99(a). Original Power of Attorney for Registrant's initial trustee,
authorizing among others, Gifford R. Zimmerman and Alan G.
Berkshire to execute the Registration Statement on his behalf.
99(c). Code of Ethics and Reporting Requirements.
