Investment Adviser
Nuveen Fund Advisors, LLC
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Managers
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Name
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Title
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Portfolio Manager of Fund Since
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James A. Colon, CFA
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Vice President
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May 2012
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Derek B. Bloom, CFA
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Vice President
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May 2012
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Section
1
Fund Summaries
15
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the Fund on any business day, which is any day the New York Stock Exchange is open for business. You may purchase, redeem or exchange shares of the Fund either through
a financial advisor or other financial intermediary or directly from the Fund. The Funds initial and subsequent investment minimums generally are as follows, although the Fund may reduce or waive the minimums in some cases:
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Class A and Class C
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Class R3
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Class I
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Eligibility and Minimum Initial Investment
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$3,000 for all accounts except:
$2,500 for Traditional/Roth IRA
accounts.
$2,000 for Coverdell
Education Savings Accounts.
$250 for accounts opened through fee-based programs.
No minimum for retirement
plans.
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Available only through certain retirement plans.
No minimum.
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Available only through fee-based programs and certain retirement plans, and to other limited categories of
investors as described in the prospectus.
$100,000 for all accounts
except:
$250 for clients of
financial intermediaries and family offices that have accounts holding Class I shares with an aggregate value of at least $100,000 (or that are expected to reach this level).
No minimum for eligible retirement plans
and certain other categories of eligible investors as described in the prospectus.
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Minimum
Additional Investment
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$100
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No minimum.
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No minimum.
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Tax Information
The
Funds distributions are taxable and will generally be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred account, such as an IRA or 401(k) plan.
Payments to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial advisor), the Fund, its distributor or its investment adviser may pay the intermediary for the sale of Fund shares and related
services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the Fund over another investment. Ask your financial advisor or visit your financial
intermediarys website for more information.
16
Section
1
Fund Summaries
Section 2
How We Manage Your Money
To help you better understand the Funds, this section includes a detailed discussion of the Funds investment and risk
management strategies. For a more complete discussion of these matters, please see the statement of additional information, which is available by calling (800) 257-8787 or by visiting Nuveens website at www.nuveen.com.
Nuveen Fund Advisors, LLC (
Nuveen Fund Advisors
), the Funds investment adviser,
offers advisory and investment management services to a broad range of mutual fund clients. Nuveen Fund Advisors has overall responsibility for management of the Funds, oversees the management of the Funds portfolios, manages the Funds
business affairs and provides certain clerical, bookkeeping and other administrative services. Nuveen Fund Advisors is located at 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen Fund Advisors is a subsidiary of Nuveen Investments, Inc.
(
Nuveen Investments
). On November 13, 2007, Nuveen Investments was acquired by investors led by Madison Dearborn Partners, LLC, which is a private equity investment firm based in Chicago, Illinois. The Nuveen family of
advisers has been providing advice to investment companies since 1976, and had $220 billion of assets under management as of September 30, 2012.
Nuveen Fund Advisors has selected its affiliate, Nuveen Asset Management, LLC (
Nuveen Asset Management
), located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to each
Fund. Nuveen Asset Management manages the investment of the Funds assets on a discretionary basis, subject to the supervision of Nuveen Fund Advisors.
James A. Colon and Derek B. Bloom are the portfolio managers of the Funds.
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James A. Colon, CFA, entered the financial services industry in 2000 and joined an affiliate of Nuveen Asset Management in 2007. His responsibilities include
portfolio management, risk management and research, with a specific focus on asset allocation strategies. Mr. Colon is a member of the CFA Institute, the CFA Society of Chicago, and the International Association of Financial Engineers.
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Derek B. Bloom, CFA, entered the financial services industry in 2002 and joined FAF Advisors, Inc. (
FAF
) in 2003. He joined Nuveen Asset
Management on January 1, 2011 in connection with its acquisition of a portion of FAFs asset management business.
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Additional information about the portfolio managers compensation, other accounts managed by the portfolio managers and the portfolio
managers ownership of securities in the Funds is provided in the statement of additional information.
How the Intelligent Risk
Strategy Has Performed
The tables and charts below illustrate the historical performance of the Nuveen Intelligent Risk
PortfolioConservative Composite, Nuveen Intelligent Risk PortfolioModerate Composite, and Nuveen Intelligent Risk PortfolioGrowth Composite, each of which is derived from an account managed by Nuveen Asset Management that has an
investment objective and investment policies that are substantially similar to those of the Nuveen
Section 2
How We Manage Your
Money
17
Intelligent Risk Conservative Allocation Fund, Nuveen Intelligent Risk Moderate Allocation Fund, and Nuveen Intelligent Risk Growth Allocation Fund, respectively. The Nuveen Intelligent Risk
PortfolioConservative Composite consisted of 2 accounts totaling approximately $1.4 million in assets, the Nuveen Intelligent Risk PortfolioModerate Composite consisted of 2 accounts totaling approximately $1.5 million in assets, and the
Nuveen Intelligent Risk PortfolioGrowth Composite consisted of 2 accounts totaling approximately $1.4 million in assets, each as of September 30, 2012. The accounts are not subject to all of the same investment inflows and outflows and
distribution requirements as the Funds, which may affect Fund performance. In addition, the accounts are not subject to the diversification requirements and other restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986, which, if
applicable, might have adversely affected account performance. Composite performance is presented gross of fees and expenses but net of Class A maximum operating expenses of 1.33% for Nuveen Intelligent Risk Growth Allocation Fund, 1.28% for Nuveen
Intelligent Risk Moderate Allocation Fund and 1.25% for Nuveen Intelligent Risk Conservative Allocation Fund. Performance calculated on offer price also assumes deduction of the maximum Class A sales charge of 5.75%. These returns would be different
for Class C, R3 or I shares because of their different sales charges and operating expenses.
The tables and charts below also
show how the performance of the composites compare over the time periods indicated with those of a broad measures of market performance and indicies of funds with similar investment objectives. You cannot invest directly in an index.
Of course, past performance is no indication of future results. The tables and charts presented here represent the performance of other accounts
managed by Nuveen Asset Management and not actual Fund performance. Please see www.nuveen.com for the Funds most recent performance information.
Nuveen Intelligent Risk PortfolioConservative Composite: Growth of a $10,000 Investment 05/0909/12
Comparative Returns
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Average Annual Returns
as of September 30, 2012
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1 Year
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3 Years
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Since
Inception
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Nuveen Intelligent Risk Portfolios
®
Conservative Composite
(NAV)
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10.78
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%
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8.43
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%
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9.94
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%
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Nuveen Intelligent Risk Portfolios
®
Conservative Composite
(Offer)
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4.41
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%
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6.31
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%
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8.00
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%
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Morningstar Moderately Conservative Target Risk Index
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13.15
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%
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7.67
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%
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9.63
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%
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60% Barclays Global Aggregate / 40% MSCI ACWI
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11.45
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%
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6.21
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%
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8.88
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%
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Lipper Mixed-Asset Target Allocation Conservative Classification Avg
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12.28
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%
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7.50
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%
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9.86
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%
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18
Section
2
How We Manage Your Money
Nuveen Intelligent Risk PortfolioModerate Composite: Growth of a $10,000 Investment
05/0909/12
Comparative Returns
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Average Annual Returns
as of September 30, 2012
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1 Year
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3 Years
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Since
Inception
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Nuveen Intelligent Risk Portfolios
®
Moderate Composite
(NAV)
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11.16
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%
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10.95
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%
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13.12
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%
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Nuveen Intelligent Risk Portfolios
®
Moderate Composite
(Offer)
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4.77
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%
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8.78
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%
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11.13
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%
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Morningstar Moderate Target Risk Index
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16.88
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%
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8.83
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%
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11.58
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%
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60% MSCI ACWI / 40% Barclays Global Aggregate
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14.66
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%
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6.65
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%
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9.91
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%
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Lipper Mixed-Asset Target Allocation Moderate Funds Classification Avg
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16.89
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%
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8.36
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%
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11.35
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%
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Nuveen Intelligent Risk PortfolioGrowth Composite: Growth of a $10,000 Investment 05/0909/12
Comparative Returns
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Average Annual Returns
as of September 30, 2012
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1 Year
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3 Years
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Since
Inception
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Nuveen Intelligent Risk Portfolios
®
Growth Composite
(NAV)
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10.48
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%
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7.23
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%
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10.23
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%
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Nuveen Intelligent Risk Portfolios
®
Growth Composite
(Offer)
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4.13
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%
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5.13
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%
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8.29
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%
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Morningstar Moderately Aggressive Target Risk Index
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20.42
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%
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9.63
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%
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13.19
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%
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80% MSCI ACWI / 20% Barclays Global Aggregate
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17.83
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%
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6.99
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%
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10.83
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%
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Lipper Mixed-Asset Target Allocation Growth Funds Classification Avg
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20.19
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%
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9.04
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%
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12.32
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%
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Management Fees
The management fee schedule for each Fund consists of two components: a Fund-level fee, based only on the amount of assets within a Fund, and a complex-level fee, based on the aggregate amount of all eligible
fund assets managed by Nuveen Fund Advisors.
Section 2
How We Manage Your
Money
19
The annual Fund-level fee, payable monthly, is based upon the average daily net assets of each Fund
as follows:
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Average Daily Net Assets
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Fund-Level Fee
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For the first $125 million
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0.6000
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%
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For the next $125 million
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0.5875
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%
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For the next $250 million
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0.5750
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%
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For the next $500 million
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0.5625
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%
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For the next $1 billion
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0.5500
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%
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For net assets over $2 billion
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0.5250
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%
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The complex-level fee is the same for each Fund. It begins at a maximum rate of 0.2000% of each Funds
average daily net assets, based upon complex-level assets of $55 billion, with breakpoints for eligible assets above that level. Therefore, the maximum management fee rate for each Fund is the Fund-level fee plus 0.2000%. As of September 30, 2012,
the effective complex-level fee for each Fund was 0.1695% of the Funds average daily net assets.
The table below reflects
management fees paid to Nuveen Fund Advisors, after taking into account any fee waivers, for the Funds most recently completed fiscal period.
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Management Fee as a % of
Average Daily Net Assets
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Nuveen Intelligent Risk Growth Allocation Fund*
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Nuveen Intelligent Risk Moderate Allocation Fund*
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Nuveen Intelligent Risk Conservative Allocation Fund*
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*
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For the most recent fiscal period, Nuveen Fund Advisors reimbursed expenses in excess of management fees.
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Nuveen Fund Advisors has agreed to waive fees and/or reimburse expenses through October 31, 2014 so that total annual fund operating expenses
(excluding 12b-1 distribution and/or service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities, acquired fund fees and expenses, and extraordinary expenses) for each Fund do not exceed 0.71% of the
average daily net assets of any class of Fund shares. The expense limitation expiring October 31, 2014 may be terminated or modified prior to that date only with the approval of the Board of Trustees of the Funds.
Information regarding the Board of Trustees approval of the investment management agreements is available in the Funds annual report
for the fiscal period ended August 31, 2012.
The Funds investment objectives, which are described in the Fund Summaries section, may be
changed without shareholder approval. If your Funds investment objective changes, you will be notified at least 60 days in advance. The Funds investment policies may be changed by the Board of Trustees without shareholder approval unless
otherwise noted in this prospectus or the statement of additional information.
The Funds principal investment strategies are
discussed in the Fund Summaries section. These are the strategies that the Funds investment adviser and sub-adviser believe are most likely to be important in trying to achieve the Funds investment objectives. This section
provides more
20
Section
2
How We Manage Your Money
information about these strategies, as well as information about some additional strategies that the Funds sub-adviser uses, or may use, to achieve the Funds objectives. You should be
aware that each Fund may also use strategies and invest in securities that are not described in this prospectus, but that are described in the statement of additional information. For a copy of the statement of additional information, call Nuveen
Investor Services at (800) 257-8787 or visit Nuveens website at www.nuveen.com.
ETFs
An ETF is a pooled investment vehicle that holds a portfolio of investments that is typically designed to track the performance of an index. ETFs
trade on a securities exchange and their shares may, at times, trade at a premium or discount to their net asset value. In addition, the Funds will incur brokerage costs when purchasing and selling shares of ETFs. The Funds will not invest in
leveraged ETFs.
Generally, investments in ETFs regulated under the 1940 Act (
1940 Act ETFs
) are subject to
statutory limitations prescribed by the 1940 Act. These limitations include a prohibition on a fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of a funds total
assets in the securities of any one investment company or more than 10% of its total assets, in the aggregate, in investment company securities. Many 1940 Act ETFs, however, have obtained exemptive relief from the Securities and Exchange Commission
(
SEC
) to permit unaffiliated funds to invest in the ETFs shares beyond these statutory limitations, subject to certain conditions and pursuant to a contractual arrangement between the ETFs and the investing funds. Each Fund
intends to rely on these exemptive orders in order to invest in unaffiliated 1940 Act ETFs beyond the foregoing statutory limitations.
Derivatives
Each Fund may utilize the following derivatives: options; futures contracts,
including futures on various market indices, interest rates, and currencies; options on futures contracts; swap agreements, including total return swaps; and forward contracts. Each Fund may enter into standardized derivatives contracts traded on
domestic or foreign securities exchanges, boards of trade, or similar entities, and non-standardized derivatives contracts traded in the OTC market. Each Fund may use derivatives to gain exposure to different asset classes, in an attempt to manage
risk, or for speculative purposes in an effort to increase the Funds total return.
Commodities
The types of commodities to which the Funds may have exposure include: precious metals (e.g., gold), energy (e.g., oil), industrial metals
(e.g., aluminum), agriculture (e.g., corn), foods and fibers (e.g., orange juice and lumber), and livestock (e.g., feeder cattle).
Equity Securities
Equity
securities include common stocks; preferred securities; warrants to purchase common stocks or preferred securities; securities convertible into common stocks or preferred securities; and other securities with equity characteristics.
Real Estate
The types of
real estate to which the Funds may have exposure include commercial (including industrial, retail, office and storage facilities) and residential (including multifamily and senior housing).
Section 2
How
We Manage Your Money
21
Corporate Debt Securities
Corporate debt securities are fully taxable debt obligations issued by corporations. These securities fund capital improvements, expansions, debt
refinancing or acquisitions that require more capital than would ordinarily be available from a single lender. Investors in corporate debt securities lend money to the issuing corporation in exchange for interest payments and repayment of the
principal at a set maturity date. Rates on corporate debt securities are set according to prevailing interest rates at the time of the issue, the credit rating of the issuer, the length of the maturity and other terms of the security, such as a call
feature.
High Yield Bonds
Bonds that are rated lower than investment grade are commonly referred to as high yield bonds or junk bonds. These bonds generally provide high income in an effort to compensate investors for their higher risk of
default, which is the failure to make required interest or principal payments. High yield bond issuers include small or relatively new companies lacking the history or capital to merit investment-grade status, former blue chip companies downgraded
because of financial problems, companies electing to borrow heavily to finance or avoid a takeover or buyout, and firms with heavy debt loads.
Government Obligations
Government obligations are debt obligations issued or guaranteed by a
national government.
Asset-Backed Securities (ABS)
Asset-backed securities are securities issued by trusts and special purpose entities that are backed by pools of assets, such as automobile loans and credit-card receivables, and which pass through the payments on
the underlying obligations to the security holders (less servicing fees paid to the originator or fees for any credit enhancement). Typically, the originator of the loan or accounts receivable transfers it to a specially created trust, which
repackages it as securities with a minimum denomination and a specific term. The securities are then privately placed or publicly offered.
Mortgage-Backed Securities (MBS)
A mortgage-backed security is a type of pass-through
security backed by an ownership interest in a pool of mortgage loans. MBS may be guaranteed by, or secured by collateral that is guaranteed by, the United States government, its agencies, instrumentalities or sponsored corporations. There is also
privately issued MBS, which includes commercial mortgage-backed securities (CMBS).
Inflation-Protected Securities
Inflation-protected securities are designed to provide protection against the negative effects of inflation. Unlike traditional debt
securities, which pay regular fixed interest payments on a fixed principal amount, interest payments on inflation-protected securities will vary with the rate of inflation. The U.S. Treasury uses the Consumer Price Index for Urban Consumers
(
CPI-U
) as the inflation measure. Inflation-protected securities issued by foreign governments and corporations are generally linked to a non-U.S. inflation rate.
Municipal Bonds
States,
local governments and municipalities and other issuing authorities issue municipal bonds to raise money for various public purposes such as
22
Section
2
How We Manage Your Money
building public facilities, refinancing outstanding obligations and financing general operating expenses. These bonds include general obligation bonds, which are backed by the full faith and
credit of the issuer and may be repaid from any revenue source, and revenue bonds, which may be repaid only from the revenue of a specific facility or source.
Emerging Market Countries
Emerging market countries include any country
other than Canada, the United States and the countries comprising the MSCI EAFE
®
Index (currently, Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom).
Cash Equivalents and Short-Term Investments
The Funds may hold cash or cash equivalents, including money market funds and short-term fixed-income securities. In addition, for temporary defensive purposes and during periods of high cash inflows or outflows,
the Funds may depart from their principal investment strategies and invest part or all of their assets in such holdings. During such periods, the Funds may not be able to achieve their investment objectives. A fund may adopt a defensive strategy
when its sub-adviser believes securities in which it normally invests have elevated risks due to political or economic factors and in other extraordinary circumstances.
Portfolio Holdings
A description of the Funds policies and procedures with respect
to the disclosure of the Funds portfolio holdings is available in the Funds statement of additional information. Certain portfolio holdings information for each Fund is available on the Funds websitewww.nuveen.comby
clicking the Individual Investors link and then clicking the Products & PerformanceMutual Funds link and following the applicable link for your Fund. By following these links, you can obtain a list of your
Funds top ten holdings as of the end of the most recent month. A complete list of portfolio holdings information is generally made available on the Funds website ten business days after the end of each month. This information will remain
available on the website until the Funds file with the Securities and Exchange Commission their annual, semi-annual or quarterly holdings report for the fiscal period that includes the date(s) as of which the website information is current.
For each Fund, the portfolio management team will invest primarily in ETFs and certain derivatives in an attempt
to assemble a portfolio that will provide long-term positive risk adjusted returns and a stable risk profile consistent with the investment strategies of the particular Fund. The Funds portfolio management team starts its investment selection
process by analyzing a wide variety of asset classes (including domestic and foreign equities, taxable and tax-free bonds, and different commodities) in an effort to identify those asset classes that it expects to have long-term positive risk
premiums. The portfolio management team next identifies (i) indices representative of these asset classes and (ii) investment vehicles (primarily ETFs and futures contracts) providing exposure to these indices.
Section 2
How We Manage Your Money
23
Once the portfolio management team has selected the universe of potential investment vehicles, it
uses proprietary models to forecast the short-term volatility of the various asset classes represented by these investment vehicles and correlation across the asset classes. It then uses the short-term volatility and correlation forecasts to
construct each Funds portfolio using the following guidelines:
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The portfolios short-term volatility should fall within the Funds specified range.
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The overall risk of the portfolio should be distributed as evenly as possible across the different asset classes.
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The portfolio management team will monitor each Funds expected short-term volatility, and make adjustments to its portfolio in response to
changing macro-economic and market conditions in an attempt to keep volatility at a stable level.
Risk is inherent in all investing. Investing in a mutual fund involves risk, including the risk that you may
receive little or no return on your investment or even that you may lose part or all of your investment. Therefore, before investing you should consider carefully the principal risks and certain other risks that you assume when you invest in the
Funds. These risks are listed alphabetically below. Because of these risks, you should consider an investment in the Funds to be a long-term investment.
Principal Risks
Commodities risk:
The Funds may invest in instruments providing
exposure to commodities. Commodities markets historically have been extremely volatile, and the performance of securities and other instruments that provide an exposure to those markets therefore also may be highly volatile. Commodity prices are
affected by factors such as the cost of producing commodities, changes in consumer demand for commodities, the hedging and trading strategies of producers and consumers of commodities, speculative trading in commodities by commodity pools and other
market participants, disruptions in commodity supply, drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political, and regulatory developments. Suspensions or disruptions of market trading in the
commodities markets and related futures markets may adversely affect the value of securities providing an exposure to the commodities markets.
Credit risk:
Each Fund is subject to the risk that the issuers of debt securities to which the Fund has exposure will not make payments on the securities. There is also the risk that an issuer could suffer
adverse changes in financial condition that could lower the credit quality of a security. This could lead to greater volatility in the price of the security and in shares of the Fund. Also, a change in the credit quality rating of a bond could
affect the bonds liquidity and make it more difficult for the Fund to sell. When a Fund purchases unrated securities, it will depend on the sub-advisers analysis of credit risk without the assessment of an independent rating
organization, such as Moodys or Standard & Poors.
Derivatives risk:
The use of derivatives presents risks
different from, and possibly greater than, the risks associated with investing directly in traditional securities. Among the risks presented are market risk, credit risk,
24
Section
2
How We Manage Your Money
management risk and liquidity risk. Derivatives can be highly volatile, illiquid and difficult to value, and there is the risk that changes in the value of a derivative held by a Fund will not
correlate with the underlying instruments or the Funds other investments.
The use of derivatives can lead to losses because of
adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives. Derivative instruments also involve the risk that a loss may be sustained as a result of the failure of
the counterparty to the derivative instruments to make required payments or otherwise comply with the derivative instruments terms. These risks are heightened when the management team uses derivatives to enhance a Funds return or as a
substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the Fund.
In addition, when a Fund invests in certain derivative securities, including, but not limited to, futures contracts and forward commitments, it is
effectively leveraging its investments, which could result in exaggerated changes in the net asset value of the Funds shares and can result in losses that exceed the amount originally invested. The success of a Funds derivatives
strategies will depend on the sub-advisers ability to assess and predict the impact of market or economic developments on the underlying asset, index or rate and the derivative itself, without the benefit of observing the performance of the
derivative under all possible market conditions. A Fund may also enter into OTC transactions in derivatives. Transactions in the OTC markets generally are conducted on a principal-to-principal basis. The terms and conditions of these instruments
generally are not standardized and tend to be more specialized or complex, and the instruments may be harder to value. In general, there is less governmental regulation and supervision of transactions in the OTC markets than of transactions entered
into on organized exchanges. In addition, certain derivative instruments and markets may not be liquid, which means a Fund may not be able to close out a derivatives transaction in a cost-efficient manner.
Short positions in derivatives may involve greater risks than long positions, as the risk of loss on short positions is theoretically unlimited
(unlike a long position, in which the risk of loss may be limited to the amount invested).
Recent legislation requires the
development of a new regulatory framework for the derivatives market. The impact of the new regulations is still unknown, but has the potential to increase the costs of using derivatives, may limit the availability of some forms of derivatives or
the Funds ability to use derivatives, and may adversely affect the performance of some derivative instruments used by the Funds as well as the Funds ability to pursue their investment objectives through the use of such instruments.
Equity security risk:
Equity securities may decline significantly in price over short or extended periods of time. Price
changes may occur in the market as a whole, or they may occur in only a particular country, company, industry, or sector of the market. In addition, the types of securities in which a particular Fund invests, such as value stocks, growth stocks,
large-capitalization stocks, mid-capitalization stocks, small-capitalization stocks and/or micro-capitalization stocks, may underperform the market as a whole.
ETF risk:
Like any fund, an ETF is subject to the risks of the underlying investments that it holds. In addition, investments in ETFs present certain risks that do not apply to investments in traditional
mutual funds. Index-based ETFs seek to achieve the same returns as a particular market index,
Section 2
How We Manage Your Money
25
but the performance of an ETF may diverge from the performance of such index (commonly known as tracking error). Moreover, ETFs are limited in their ability to perfectly replicate the composition
of an index and ETF shares may trade at a premium or discount to their net asset value. As ETFs trade on an exchange, they are subject to the risks of any exchange-traded instrument, including: (i) an active trading market for its shares may not
develop or be maintained, (ii) trading of its shares may be halted by the exchange, and (iii) its shares may be delisted from the exchange. ETFs are subject to fees and expenses (like management fees and operating expenses), and investors in a
Fund will bear both their proportionate share of Fund expenses and, indirectly, the expenses of ETFs in which the Fund invests.
Frequent trading risk:
Frequent trading of a Funds securities may produce capital gains, which are taxable to shareholders when
distributed. Frequent trading may also increase the amount of commissions or mark-ups to broker-dealers that a Fund pays when it buys and sells securities, which may detract from a Funds performance.
High yield securities risk:
The Funds may invest in high yield securities, which involve more risk than investment grade securities. High
yield securities may be more susceptible to real or perceived adverse economic conditions than investment grade securities, and they generally have more volatile prices and carry more risk to principal. In addition, liquidity risk is greater for
high yield securities than for investment grade securities.
Indexing methodology risk:
Interest payments on
inflation-protected securities will vary with the rate of inflation, as measured by a specified index. There can be no assurance that the CPI-U (used as the inflation measure by U.S. Treasury inflation-protected securities) or any foreign inflation
index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If
the market perceives that the adjustment mechanism of an inflation-protected security does not accurately adjust for inflation, the value of the security could be adversely affected. There may be a lag between the time a security is adjusted for
inflation and the time interest is paid on that security. This may have an adverse effect on the trading price of the security, particularly during periods of significant, rapid changes in inflation. In addition, to the extent that inflation has
increased during the period of time between the inflation adjustment and the interest payment, the interest payment will not be protected from the inflation increase.
Interest rate risk:
Debt securities to which the Funds have exposure will fluctuate in value with changes in interest rates. In general, debt securities will increase in value when interest rates fall and
decrease in value when interest rates rise. Longer-term debt securities are generally more sensitive to interest rate changes.
Mortgage- and asset-backed securities risk:
The value of mortgage- and asset-backed securities can fall if the owners of the underlying
mortgages or other obligations pay off their mortgages or other obligations sooner than expected, which could happen when interest rates fall or for other reasons.
Mortgage- and asset-backed securities are also subject to extension risk, which is the risk that rising interest rates could cause mortgages or other obligations underlying the securities to be prepaid more slowly
than expected, resulting in slower prepayments of the securities. This would, in
26
Section
2
How We Manage Your Money
effect, convert a short- or medium-duration mortgage- or asset-backed security into a longer-duration security, increasing its sensitivity to interest rate changes and causing its price to
decline.
A mortgage-backed security may be negatively affected by the quality of the mortgages underlying such security and the
structure of its issuer. For example, if a mortgage underlying a certain mortgage-back securities defaults, the value of that security may decrease. Moreover, the downturn in the housing market and the resulting recession in the United States have
negatively affected, and may continue to negatively affect, both the price and liquidity of privately issued mortgage-backed securities.
Mortgage-backed securities issued by a private issuer, such as commercial mortgage-backed securities, generally entail greater risk than
obligations directly or indirectly guaranteed by the U.S. government or a government-sponsored entity.
Non-U.S./emerging markets
risk:
Non-U.S. issuers or U.S. issuers with significant non-U.S. operations may be subject to risks in addition to those of issuers located in or that principally operate in the United States due to political, social and economic developments
abroad, different regulatory environments and laws, potential seizure by the government of company assets, higher taxation, withholding taxes on dividends and interest and limitations on the use or transfer of portfolio assets.
Other non-U.S. investment risks include the following:
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Enforcing legal rights may be difficult, costly and slow in non-U.S. countries, and there may be special problems enforcing claims against non-U.S. governments.
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Non-U.S. companies may not be subject to accounting standards or governmental supervision comparable to U.S. companies, and there may be less public information
about their operations.
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Non-U.S. markets may be less liquid and more volatile than U.S. markets.
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The U.S. and non-U.S. equity markets often rise and fall at different times or by different amounts due to economic or other developments particular to a given
country or region. This phenomenon would tend to lower the overall price volatility of a portfolio that included both U.S. and non-U.S. stocks. Sometimes, however, global trends will cause the U.S. and non-U.S. markets to move in the same direction,
reducing or eliminating the risk reduction benefit of international investing.
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Because the non-U.S. securities to which the Funds have exposure generally trade in currencies other than the U.S. dollar, changes in currency exchange rates
will affect the Funds net asset value, the value of dividends and interest earned, and gains and losses realized on the sale of securities. A strong U.S. dollar relative to these other currencies will adversely affect the value of a Fund.
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Securities of companies traded in many countries outside the United States, particularly emerging markets countries, may be subject to further risks due to
the inexperience of local investment professionals and financial institutions, the possibility of permanent or temporary termination of trading, and greater spreads between bid and asked prices for securities. In addition, non-U.S. stock exchanges
and investment professionals are subject to less governmental regulation, and commissions may be higher than in the United States. Also, there may be delays in the settlement of non-U.S. stock exchange transactions.
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Section 2
How We Manage Your Money
27
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A Funds income from non-U.S. issuers may be subject to non-U.S. withholding taxes. In some countries, the Fund also may be subject to taxes on trading
profits and, on certain securities transactions, transfer or stamp duties tax. To the extent non-U.S. income taxes are paid by the Fund, U.S. shareholders may be entitled to a credit or deduction for U.S. tax purposes.
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Some countries, particularly emerging markets, restrict to varying degrees foreign investment in their securities markets. In some circumstances, these
restrictions may limit or preclude investment in certain countries or may increase the cost of investing in securities of particular companies.
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Emerging markets generally do not have the level of market efficiency and strict standards in accounting and securities regulation to be on par with advanced
economies. Investments in emerging markets come with much greater risk due to political instability, domestic infrastructure problems, currency volatility and limited equity opportunities (many large companies may still be state-run or
private). Also, local stock exchanges may not offer liquid markets for outside investors.
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Political and
economic risks
: The values of municipal securities may be adversely affected by local political and economic conditions and developments. Adverse conditions in an industry significant to a local economy could have a correspondingly adverse
effect on the financial condition of local issuers. Other factors that could affect municipal securities include a change in the local, state, or national economy, demographic factors, ecological or environmental concerns, statutory limitations on
the issuers ability to increase taxes, and other developments generally affecting the revenue of issuers (for example, legislation or court decisions reducing state aid to local governments or mandating additional services). The value of
municipal securities also may be adversely affected by future changes in federal or state income tax laws, including rate reductions, the imposition of a flat tax, or the loss of a current state income tax exemption.
Real estate investment risk:
Real estate companies are subject to substantial fluctuations and declines on a local, regional and national
basis in the past and may continue to be in the future. Real property values and incomes from real property may decline due to general and local economic conditions, overbuilding and increased competition, increases in property taxes and operating
expenses, changes in zoning laws, casualty or condemnation losses, regulatory limitations on rents, changes in neighborhoods and in demographics, increases in market interest rates, or other factors. Factors such as these may adversely affect
companies which own and operate real estate directly, companies which lend to them, and companies which service the real estate industry.
Smaller company risk:
Prices of small-cap stocks may be subject to more abrupt or erratic movements, and to wider fluctuations, than stock
prices of larger, more established companies or the market averages in general. It may be difficult to sell small-cap stocks at the desired time and price. While mid-cap stocks may be slightly less volatile than small-cap stocks, they still involve
similar risks.
Statistical method risk:
Each Fund attempts to keep its daily volatility within a specified range using
a proprietary statistical method. There can be no assurance that this method will perform as anticipated or enable a Fund to achieve its objective.
28
Section
2
How We Manage Your Money
Other Risks
Inflation risk:
The value of assets or income from investments may be less in the future as inflation decreases the value of money. As inflation increases, the value of a Funds assets can decline, as
can the value of a Funds distributions.
Small fund risk:
The Funds have less assets than larger funds, and like other
relatively small funds, large inflows and outflows may impact a Funds market exposure for limited periods of time, causing a Funds performance to vary from that of a Funds model portfolio. This impact may be positive or negative,
depending on the direction of market movement during the period affected. Each Fund has policies in place which seek to reduce the impact of these flows where Nuveen Fund Advisors has prior knowledge of them.
Section 2
How We Manage Your Money
29
Section 3
How You Can Buy and Sell
Shares
The Funds offer multiple classes of shares, each with a different combination of sales charges, fees, eligibility
requirements and other features. Your financial advisor can help you determine which class is best for you. For further details, please see the statement of additional information.
Class A Shares
You can purchase Class A shares at the offering price, which is the net asset value per share plus an up-front sales charge. You may qualify for a reduced sales charge, or the sales charge may be waived, as
described in How to Reduce Your Sales Charge. Class A shares are also subject to an annual service fee of 0.25% of your Funds average daily net assets, which compensates your financial advisor or other financial intermediary
for providing ongoing service to you. Nuveen Securities, LLC (the
Distributor
), a subsidiary of Nuveen Investments and the distributor of the Funds, retains the up-front sales charge and the service fee on accounts with no
financial intermediary of record. The up-front Class A sales charges for the Funds are as follows:
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Amount of Purchase
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Sales Charge as
% of Public
Offering Price
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Sales Charge as %
of Net Amount
Invested
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Maximum
Financial Intermediary
Commission as % of
Public Offering Price
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Less than $50,000
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5.75
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%
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6.10
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%
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5.00
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%
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$50,000 but less than $100,000
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4.50
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4.71
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4.00
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$100,000 but less than $250,000
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3.75
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3.90
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3.25
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$250,000 but less than $500,000
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2.75
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2.83
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2.50
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$500,000 but less than $1,000,000
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2.00
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2.04
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1.75
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$1,000,000 and over*
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1.00
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*
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You can purchase $1 million or more of Class A shares at net asset value without an up-front sales charge. The Distributor pays financial intermediaries of record a commission
equal to 1% of the first $2.5 million, plus 0.75% of the next $2.5 million, plus 0.50% of the amount over $5 million. Unless you are eligible for a waiver, you may be assessed a contingent deferred sales charge (
CDSC
) of 1% if you
redeem any of your shares within 12 months of purchase. See How to Sell SharesContingent Deferred Sales Charge below for more information.
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Class C Shares
You can purchase Class C shares at the offering price, which is the net asset
value per share without any up-front sales charge. Class C shares are subject to annual distribution and service fees of 1% of your Funds average daily net assets. The annual 0.25% service fee compensates your financial advisor or other
financial intermediary for providing ongoing service to you. The annual 0.75% distribution fee compensates the Distributor for paying your financial advisor or other financial intermediary an ongoing sales commission as well as an advance of the
first years service and distribution fees. The Distributor retains the service and distribution fees on accounts with no financial intermediary of record. If you redeem your shares within 12 months of purchase, you will normally pay a 1% CDSC,
which is calculated on the lower of your purchase price or redemption proceeds. You do not pay a CDSC on any Class C shares you purchase by reinvesting dividends.
30
Section
3
How You Can Buy and Sell Shares
The Funds have established a limit to the amount of Class C shares that may be purchased by an
individual investor. See the statement of additional information for more information.
Class R3 Shares
You can purchase Class R3 shares at the offering price, which is the net asset value per share without any up-front sales charge.
Class R3 shares are subject to annual distribution and service fees of 0.50% of your Funds average daily net assets.
Class R3 shares are only available for purchase by eligible retirement plans. Class R3 shares are not available to traditional and Roth
IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs or individual 403(b) plans. See the statement of additional information for more information.
Class I Shares
You can purchase Class I shares at the offering price, which is the net asset
value per share without any up-front sales charge. As Class I shares are not subject to sales charges or ongoing service or distribution fees, they have lower ongoing expenses than the other classes.
Class I shares are available for purchase by clients of financial intermediaries who charge such clients an ongoing fee for advisory, investment,
consulting or related services. Such clients may include individuals, corporations, endowments and foundations. The minimum initial investment for such clients is $100,000, but this minimum will be lowered to $250 for clients of financial
intermediaries that have accounts holding Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of financial intermediaries anticipated to reach this Class I share holdings level.
Class I shares are also available for purchase by family offices and their clients. A family office is a company that provides certain
financial and other services to a high net worth family or families. The minimum initial investment for family offices and their clients is $100,000, but this minimum will be lowered to $250 for clients of family offices that have accounts holding
Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of family offices anticipated to reach this Class I share holdings level.
Class I shares are also available for purchase, with no minimum initial investment, by the following categories of investors:
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Certain employer-sponsored retirement plans.
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Certain bank or broker-affiliated trust departments.
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Advisory accounts of Nuveen Fund Advisors and its affiliates.
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Current and former trustees/directors of any Nuveen Fund, and their immediate family members (as defined in the statement of additional information).
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Officers, directors and former directors of Nuveen Investments and its affiliates, and their immediate family members.
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Full-time and retired employees of Nuveen Investments and its affiliates, and their immediate family members.
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Certain financial intermediary personnel, and their immediate family members.
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Certain other institutional investors described in the statement of additional information.
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Section 3
How You Can Buy and Sell Shares
31
Please refer to the statement of additional information for more information about Class A,
Class C, Class R3 and Class I shares, including more detailed program descriptions and eligibility requirements. Additional information is also available from your financial advisor, who can also help you prepare any necessary application forms.
The Funds offer a number of ways to reduce or eliminate the up-front sales charge on Class A shares. See
What Share Classes We Offer (above) for a discussion of eligibility requirements for purchasing Class I shares.
Class A Sales Charge Reductions
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Rights of Accumulation.
In calculating the appropriate sales charge on a purchase of Class A shares of a Fund, you may be able to add the amount of
your purchase to the value, based on the current net asset value per share, of all of your prior purchases of any Nuveen Mutual Fund.
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Letter of Intent.
Subject to certain requirements, you may purchase Class A shares of a Fund at the sales charge rate applicable to the total amount
of the purchases you intend to make over a 13-month period.
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For purposes of calculating the appropriate sales charge
as described under
Rights of Accumulation
and
Letter of Intent
above, you may include purchases by (i) you, (ii) your spouse or domestic partner and children under the age of 21 years, and (iii) a corporation,
partnership or sole proprietorship that is 100% owned by any of the persons in (i) or (ii). In addition, a trustee or other fiduciary can count all shares purchased for a single trust, estate or other single fiduciary account that has multiple
accounts (including one or more employee benefit plans of the same employer).
Class A Sales Charge Waivers
Class A shares of a Fund may be purchased at net asset value without a sales charge as follows:
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Purchases of $1,000,000 or more.
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Monies representing reinvestment of Nuveen Mutual Fund distributions
.
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Certain employer-sponsored retirement plans.
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Employees of Nuveen Investments and its affiliates.
Purchases by full-time and retired employees of Nuveen Investments and its affiliates and such
employees immediate family members (as defined in the statement of additional information).
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Current and former trustees/directors of the Nuveen Funds.
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Financial intermediary personnel.
Purchases by any person who, for at least the last 90 days, has been an officer, director, or employee of any financial
intermediary or any such persons immediate family member.
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Certain trust departments.
Purchases by bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary
investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity.
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Additional categories of investors.
Purchases made (i) by investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through
a broker-dealer sponsored mutual fund purchase program;
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32
Section
3
How You Can Buy and Sell Shares
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(ii) by clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services; and (iii) through a financial
intermediary that has entered into an agreement with the Distributor to offer the Funds shares to self-directed investment brokerage accounts and that may or may not charge a transaction fee to its customers.
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In order to obtain a sales charge reduction or waiver, it may be necessary at the time of purchase for you to inform the Funds or your financial
advisor of the existence of other accounts in which there are holdings eligible to be aggregated for such purposes. You may need to provide the Funds or your financial advisor information or records, such as account statements, in order to verify
your eligibility for a sales charge reduction or waiver. This may include account statements of family members and information regarding Nuveen Mutual Fund shares held in accounts with other financial advisors. You or your financial advisor must
notify the Distributor at the time of each purchase if you are eligible for any of these programs. The Funds may modify or discontinue these programs at any time.
Fund shares may be purchased on any business day, which is any day the New York Stock Exchange (the
NYSE
) is open for business. Generally, the NYSE is closed on weekends and national holidays. The share price you pay depends on when the Distributor receives your order and on the share class you are purchasing. Orders received
before the close of trading on a business day (normally, 4:00 p.m. New York time) will receive that days closing share price; otherwise, you will receive the next business days price.
You may purchase Fund shares (1) through a financial advisor or (2) directly from the Funds.
Through a Financial Advisor
You may buy shares through your financial advisor, who can handle all the details for you, including opening a new account. Financial advisors can also help you review your financial needs and formulate long-term
investment goals and objectives. In addition, financial advisors generally can help you develop a customized financial plan, select investments and monitor and review your portfolio on an ongoing basis to help assure your investments continue to
meet your needs as circumstances change. Financial advisors (including brokers or agents) are paid for providing ongoing investment advice and services, either from Fund sales charges and fees or by charging you a separate fee in lieu of a sales
charge.
Financial advisors or other dealer firms may charge their customers a processing or service fee in connection with the
purchase or redemption of Fund shares. The amount and applicability of such a fee is determined and disclosed to customers by each individual dealer. Processing or service fees typically are fixed, nominal dollar amounts and are in addition to the
sales and other charges described in this prospectus and the statement of additional information. Your dealer will provide you with specific information about any processing or service fees you will be charged. Shares you purchase through your
financial advisor or other intermediary will normally be held with that firm. For more information, please contact your financial advisor.
Section 3
How You Can Buy and Sell
Shares
33
Directly from the Funds
Eligible investors may purchase shares directly from the Funds.
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By wire.
You can purchase shares by making a wire transfer from your bank. Before making an initial investment by wire, you must submit a new account form
to a Fund. After receiving your form, a service representative will contact you with your account number and wiring instructions. Your order will be priced at the next closing share price based on the share class of your Fund, calculated after your
Funds custodian receives your payment by wire. Wired funds must be received prior to 4:00 p.m. New York time to be eligible for same day pricing. Neither your Fund nor the transfer agent is responsible for the consequences of delays resulting
from the banking or Federal Reserve wire system, or from incomplete wiring instructions. Before making any additional purchases by wire, you should call Nuveen Investor Services at (800) 257-8787. You cannot purchase shares by wire on days when
federally chartered banks are closed.
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By mail
. You may open an account directly with the Funds and buy shares by completing an application and mailing it along with your check to: Nuveen
Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530. Applications may be obtained at www.nuveen.com or by calling (800) 257-8787. No third party checks will be accepted.
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The Funds do not consider the U.S. Postal Service or other independent delivery services to be their agents. Therefore, deposit in the mail or with
such services, or receipt at the post office box above, of purchase orders or redemption requests does not constitute receipt by the transfer agent of the Funds.
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On-line.
Existing shareholders with direct accounts may process certain account transactions on-line. You may purchase additional shares or exchange
shares between existing, identically registered direct accounts. You can also look up your account balance, history and dividend information, as well as order duplicate account statements and tax forms from the Funds website. To access your
account, click the Individual Investors link on www.nuveen.com and then choose Account Access under the Resources tab. The system will walk you through the log-in process. To purchase shares on-line, you must have
established Fund Direct privileges on your account prior to the requested transaction. See Special ServicesFund Direct below.
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By telephone.
Existing shareholders with direct accounts may also process account transactions via the Funds automated information line. Simply call
(800) 257-8787, press 1 for mutual funds and the voice menu will walk you through the process. To purchase shares by telephone, you must have established Fund Direct privileges on your account prior to the requested transaction. See
Special ServicesFund Direct below.
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To help make your investing with us easy and efficient, we offer you the following services at no extra cost.
Your financial advisor can help you complete the forms for these services, or you can call Nuveen Investor Services at (800) 257-8787 for copies of the necessary forms.
34
Section
3
How You Can Buy and Sell Shares
Systematic Investing
Once you have opened an account satisfying the applicable investment minimum, systematic investing allows you to make regular additional
investments through automatic deductions from your bank account, directly from your paycheck or from exchanging shares from another mutual fund account. The minimum automatic deduction is $100 per month. There is no charge to participate in your
Funds systematic investment plan. You can stop the deductions at any time by notifying your Fund in writing.
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From your bank account.
You can make systematic investments of $100 or more per month by authorizing your Fund to draw pre-authorized checks on your bank
account.
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From your paycheck.
With your employers consent, you can make systematic investments each pay period (collectively meeting the monthly minimum of
$100) by authorizing your employer to deduct monies from your paycheck.
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Systematic exchanging.
You can make systematic investments by authorizing the Distributor to exchange shares from one Nuveen Mutual Fund account into
another identically registered Nuveen Mutual Fund account of the same share class.
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Systematic Withdrawal
If the value of your Fund account is at least $10,000, you may request to have $50 or more withdrawn automatically from your
account. You may elect to receive payments monthly, quarterly, semi-annually or annually, and may choose to receive a check, have the monies transferred directly into your bank account (see Fund Direct below), paid to a third party or
sent payable to you at an address other than your address of record. You must complete the appropriate section of the account application or Account Update Form to participate in each Funds systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent purchases of Class A or Class C shares because you may
unnecessarily pay a sales charge or CDSC on these purchases.
Exchanging Shares
You may exchange Fund shares into an identically registered account for the same class of another Nuveen Mutual Fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you are exchanging. You may also, under certain limited circumstances, exchange between certain classes of shares of the same fund, subject to the payment of any applicable
CDSC. Please consult the statement of additional information for details.
Each Fund reserves the right to revise or suspend the
exchange privilege, limit the amount or number of exchanges, or reject any exchange. Shareholders will be provided with at least 60 days notice of any material revision to or termination of the exchange privilege.
Because an exchange between funds is treated for tax purposes as a purchase and sale, any gain may be subject to tax. An exchange between classes
of shares of the same fund may not be considered a taxable event. You should consult your tax advisor about the tax consequences of exchanging your shares.
Fund
Direct
SM
The Fund Direct Program allows you to link your Fund account to your bank account, transfer money electronically between these accounts and perform
Section 3
How You Can Buy and Sell Shares
35
a variety of account transactions, including purchasing shares by telephone and investing through a systematic investment plan. You may also have dividends, distributions, redemption payments or
systematic withdrawal plan payments sent directly to your bank account.
Reinstatement Privilege
If you redeem Fund shares, you may reinvest all or part of your redemption proceeds up to one year later without incurring any additional charges.
You may only reinvest into the same share class you redeemed. If you paid a CDSC, your Fund will refund your CDSC and reinstate your holding period for purposes of calculating the CDSC. You may use this reinstatement privilege only once for any
redemption.
You may sell (redeem) your shares on any business day, which is any day the NYSE is open for business. You
will receive the share price next determined after your Fund has received your properly completed redemption request. Your redemption request must be received before the close of trading on the NYSE (normally, 4:00 p.m. New York time) for you to
receive that days price. The Fund will normally mail your check the next business day after a redemption request is received, but in no event more than seven days after your request is received. If you are selling shares purchased recently
with a check, your redemption proceeds will not be mailed until your check has cleared, which may take up to ten business days from your purchase date.
You may sell your shares (1) through a financial advisor or (2) directly to the Funds.
Through a Financial Advisor
You may sell your shares through your financial advisor, who can prepare the necessary documentation. Your financial advisor may charge for this
service.
Directly to the Funds
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By mail.
You can sell your shares at any time by sending a written request to the appropriate Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston,
Massachusetts 02266-8530. Your request must include the following information:
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Your name and account number;
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The dollar or share amount you wish to redeem;
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The signature of each owner exactly as it appears on the account;
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The name of the person to whom you want your redemption proceeds paid (if other than to the shareholder of record);
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The address where you want your redemption proceeds sent (if other than the address of record);
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Any certificates you have for the shares; and
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Any required signature guarantees.
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After you have established your account, signatures on a written request must be guaranteed if:
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You would like redemption proceeds payable or sent to any person, address or bank account other than that on record;
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36
Section
3
How You Can Buy and Sell Shares
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to confirm the identity of callers, it will not be liable for losses
resulting from following telephone instructions it reasonably believes to be genuine. Also, you should verify your trade confirmations immediately upon receipt.
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You have changed the address on your Funds records within the last 30 days;
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Your redemption request is in excess of $50,000; or
|
|
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You are requesting a change in ownership on your account.
|
Non-financial transactions, including establishing or modifying certain services such as changing bank information on an account, will require a signature guarantee or signature verification from a Medallion
Signature Guarantee Program member or other acceptable form of authentication from a financial institution source. In addition to the situations described above, the Funds reserve the right to require a signature guarantee, or another acceptable
form of signature verification, in other instances based on the circumstances of a particular situation.
A signature guarantee assures
that a signature is genuine and protects shareholders from unauthorized account transfers. Banks, savings and loan associations, trust companies, credit unions, broker-dealers and member firms of a national securities exchange may guarantee
signatures. Call your financial intermediary to determine if it has this capability. A notary public is not an acceptable signature guarantor. Proceeds from a written redemption request will be sent to you by check unless another form of payment is
requested.
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On-line.
You may redeem shares or exchange shares between existing, identically registered accounts on-line. To access your account, click the
Individual Investors link on www.nuveen.com and then choose Account Access under the Resources tab. The system will walk you through the log-in process. On-line redemptions are not available for shares owned in
certificate form and, with respect to redemptions where the proceeds are payable by check, may not exceed $50,000. Checks will only be issued to you as the shareholder of record and mailed to your address of record. If you have established Fund
Direct privileges, you may have redemption proceeds transferred electronically to your bank account.
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By telephone.
If your account is held with your Fund and not in your brokerage account, and you have authorized telephone redemption privileges, call
(800) 257-8787 to redeem your shares, press 1 for mutual funds and the voice menu will walk you through the process. Telephone redemptions are not available for shares owned in certificate form and, with respect to redemptions where the proceeds are
payable by check, may not exceed $50,000. Checks will only be issued to you as the shareholder of record and mailed to your address of record, normally the next business day after the redemption request is received. If you have established Fund
Direct privileges, you may have redemption proceeds transferred electronically to your bank account. In this case, the redemption proceeds will be transferred to your bank on the next business day after the redemption request is received. You should
contact your bank for further information concerning the timing of the credit of the redemption proceeds in your bank account.
|
Contingent Deferred Sales Charge
If you redeem Class A or Class C shares that are
subject to a
CDSC, you may be assessed a CDSC upon redemption. When you redeem Class A or Class C shares subject to a CDSC, your Fund will first redeem any shares that are not subject to a CDSC, and then redeem the shares you have
owned for the longest period of time, unless you ask the Fund to redeem your shares in
Section 3
How You Can Buy and Sell Shares
37
a different order. No CDSC is imposed on shares you buy through the reinvestment of dividends and capital gains. The CDSC holding period is calculated on a monthly basis and begins on the first
day of the month in which the purchase was made. When you redeem shares subject to a CDSC, the CDSC is calculated on the lower of your purchase price or redemption proceeds, deducted from your redemption proceeds, and paid to the Distributor. The
CDSC may be waived under certain special circumstances as described in the statement of additional information.
Accounts with Low
Balances
The Funds reserve the right to liquidate or assess a low balance fee on any account (other than accounts holding Class R3
shares) held directly with the Funds that has a balance that has fallen below the account balance minimum of $1,000 for any reason, including market fluctuations.
If a Fund elects to exercise the right to assess a low balance fee, then annually the Fund will assess a $15 low balance account fee on certain accounts with balances under the account balance minimum that are
IRAs, Coverdell Education Savings Accounts or accounts established pursuant to the UTMA or UGMA. At the same time, other accounts with balances under the account balance minimum will be liquidated, with proceeds being mailed to the address of
record. Prior to the assessment of any low balance fee or liquidation of low balance accounts, affected shareholders will receive a communication notifying them of the pending action, thereby providing time to ensure that balances are at or above
the account balance minimum prior to any fee assessment or account liquidation. You will not be assessed a CDSC if your account is liquidated.
Redemptions In-Kind
The Funds generally pay redemption proceeds in cash. However, if a
Fund determines that it would be detrimental to its remaining shareholders to make payment of a redemption order wholly in cash, that Fund may pay a portion of your redemption proceeds in securities or other Fund assets. Although it is unlikely that
your shares would be redeemed in-kind, you would probably have to pay brokerage costs to sell the securities or other assets distributed to you, as well as taxes on any capital gains from that sale.
38
Section
3
How You Can Buy and Sell Shares
Section 4
General Information
To help you understand the tax implications of investing in the Funds, this section includes important details about how the
Funds make distributions to shareholders. We discuss some other Fund policies as well. Please consult the statement of additional information and your tax advisor for more information about taxes.
Dividends from a Funds net investment income, if any, are normally declared and paid annually for
Nuveen Intelligent Risk Growth Allocation Fund, declared and paid quarterly for Nuveen Intelligent Risk Moderate Allocation Fund, and declared and paid monthly for Nuveen Intelligent Risk Conservative Allocation Fund. Any capital gains are normally
distributed at least once each year. A Fund may, however, pay dividends or make distributions more frequently.
Payment and
Reinvestment Options
The Funds automatically reinvest your dividends in additional Fund shares unless you request otherwise. You
may request to have your dividends paid to you by check, sent via electronic funds transfer through Automated Clearing House network or reinvested in shares of another Nuveen Mutual Fund. For further information, contact your financial advisor or
call Nuveen Investor Services at (800) 257-8787. If you request that your distributions be paid by check but those distributions cannot be delivered because of an incorrect mailing address, or if a distribution check remains uncashed for six
months, the undelivered or uncashed distributions and all future distributions will be reinvested in Fund shares at the current net asset value.
Non-U.S. Income Tax Considerations
Investment income that the Funds receive from their
non-U.S. investments may be subject to non-U.S. income taxes, which generally will reduce Fund distributions. However, the United States has entered into tax treaties with many non-U.S. countries that may entitle you to certain tax benefits.
Taxes and Tax Reporting
The Funds will make distributions that may be taxed as ordinary income (which may be taxable at different rates, depending on the sources of the distributions) or capital gains (which may be taxable at different
rates, depending on the length of time a Fund holds its assets). Dividends from a Funds long-term capital gains are generally taxable as capital gains, while dividends from short-term capital gains and net investment income are generally
taxable as ordinary income. However, for tax years beginning before January 1, 2013, certain ordinary income distributions received from a Fund that are determined to be qualified dividend income may be taxed at tax rates equal to those applicable
to long-term capital gains. The tax you pay on a given capital gains distribution depends generally on how long the Fund has held the portfolio securities it sold. It does not depend on how long you have owned your Fund shares. Dividends generally
do not qualify for a dividends received deduction if you are a corporate shareholder.
Early in each year, you will receive a
statement detailing the amount and nature of all dividends and capital gains that you were paid during the prior
Section 4
General Information
39
year. If you hold your investment at the firm where you purchased your Fund shares, you will receive the statement from that firm. If you hold your shares directly with the Fund, the Distributor
will send you the statement. The tax status of your dividends is the same whether you reinvest your dividends or elect to receive them in cash. The sale of shares in your account may produce a gain or loss, and is a taxable event. For tax purposes,
an exchange of shares between funds is generally the same as a sale.
Please note that if you do not furnish your Fund with your
correct Social Security number or employer identification number, you fail to provide certain certifications to your Fund, you fail to certify whether you are a U.S. citizen or a U.S. resident alien, or the Internal Revenue Service notifies the Fund
to withhold, federal law requires your Fund to withhold federal income tax from your distributions and redemption proceeds at the applicable withholding rate.
Buying or Selling Shares Close to a Record Date
Buying Fund shares shortly before the
record date for a taxable income or capital gain distribution is commonly known as buying the dividend. The entire distribution may be taxable to you even though a portion of the distribution effectively represents a return of your
purchase price.
Cost Basis Method
You may elect a cost basis method to apply to all existing and future accounts you may establish. The cost basis method you select will determine the order in which shares are redeemed and how your cost basis
information is calculated and subsequently reported to you and to the Internal Revenue Service. Please consult your tax advisor to determine which cost basis method best suits your specific situation. If you hold your account directly with a Fund,
please contact Nuveen Investor Services at (800) 257-8787 for instructions on how to make your election. If you hold your account with a financial intermediary, please contact that financial intermediary for instructions on how to make your
election. If you hold your account directly with a Fund and do not elect a cost basis method, your account will default to the average cost basis method. For a definition of average cost basis method, please see the glossary. Financial
intermediaries choose their own default method.
The Distributor serves as the selling agent and distributor of the Funds shares. In this capacity,
the Distributor manages the offering of the Funds shares and is responsible for all sales and promotional activities. In order to reimburse the Distributor for its costs in connection with these activities, including compensation paid to
financial intermediaries, each Fund has adopted a distribution and service plan under Rule 12b-1 under the 1940 Act. See How You Can Buy and Sell SharesWhat Share Classes We Offer for a description of the distribution and service
fees paid under this plan.
Under the plan, the Distributor receives a distribution fee for Class C and Class R3 shares
primarily for providing compensation to financial intermediaries, including the Distributor, in connection with the distribution of shares. The Distributor receives a service fee for Class A, Class C and Class R3 shares to compensate
financial intermediaries, including the Distributor, for providing ongoing account services to shareholders. These services may include establishing and maintaining shareholder accounts,
40
Section
4
General Information
answering shareholder inquiries and providing other personal services to shareholders. These fees also compensate the Distributor for other expenses, including printing and distributing
prospectuses to persons other than shareholders, and preparing, printing, and distributing advertising materials, sales literature and reports to shareholders used in connection with the sale of shares. Because these fees are paid out of a
Funds assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Long-term holders of Class C and Class R3 shares may pay more in distribution and
service fees and CDSCs (Class C shares only) than the economic equivalent of the maximum front-end sales charge permitted under the Financial Industry Regulatory Authority Conduct Rules.
Other Payments to Financial Intermediaries
In addition to the sales commissions and certain payments from distribution and service fees to financial intermediaries as previously described, the Distributor may from time to time make additional payments, out
of its own resources, to certain financial intermediaries that sell shares of Nuveen Mutual Funds in order to promote the sales and retention of Fund shares by those firms and their customers. The amounts of these payments vary by financial
intermediary and, with respect to a given firm, are typically calculated by reference to the amount of the firms recent gross sales of Nuveen Mutual Fund shares and/or total assets of Nuveen Mutual Funds held by the firms customers. The
level of payments that the Distributor is willing to provide to a particular financial intermediary may be affected by, among other factors, the firms total assets held in and recent net investments into Nuveen Mutual Funds, the firms
level of participation in Nuveen Mutual Fund sales and marketing programs, the firms compensation program for its registered representatives who sell Fund shares and provide services to Fund shareholders, and the asset class of the Nuveen
Mutual Funds for which these payments are provided. For 2011, these payments in the aggregate were approximately 0.070% to 0.073% of the assets in the Nuveen Mutual Funds, although payments to particular financial intermediaries can be significantly
higher. The statement of additional information contains additional information about these payments, including the names of the firms to which payments are made. The Distributor may also make payments to financial intermediaries in connection with
sales meetings, due diligence meetings, prospecting seminars and other meetings at which the Distributor promotes its products and services.
In connection with the availability of Nuveen Mutual Funds within selected mutual fund no-transaction fee institutional platforms and fee-based wrap programs (together,
Platform Programs
) at
certain financial intermediaries, the Distributor also makes payments out of its own assets to those firms as compensation for certain recordkeeping, shareholder communications and other account administration services provided to Nuveen Mutual Fund
shareholders who own their Fund shares in these Platform Programs. These payments are in addition to the service fee and any applicable omnibus sub-accounting fees paid to these firms with respect to these services by the Nuveen Mutual Funds out of
Fund assets.
The amounts of payments to a financial intermediary could be significant, and may create an incentive for the
intermediary or its representatives to recommend or offer shares of the Funds to you. The intermediary may elevate the prominence or profile of the Funds within the intermediarys organization by, for example, placing the Funds on a list of
preferred or
Section 4
General Information
41
recommended funds and/or granting the Distributor and/or its affiliates preferential or enhanced opportunities to promote the Funds in various ways within the intermediarys organization.
The price you pay for your shares is based on your Funds net asset value per share, which is
determined as of the close of trading (normally 4:00 p.m. New York time) on each day the NYSE is open for business. Net asset value is calculated for each class of each Fund by taking the value of the classs total assets, including interest or
dividends accrued but not yet collected, less all liabilities, and dividing by the total number of shares outstanding. The result, rounded to the nearest cent, is the net asset value per share. All valuations are subject to review by the Funds
Board of Trustees or its designee; however, the Board of Trustees retains oversight responsibility for valuing the Funds portfolio securities.
In determining net asset value, portfolio instruments generally are valued using prices provided by independent pricing services or obtained from other sources, such as broker-dealer quotations, all as approved by
the Board of Trustees. Exchange-traded instruments generally are valued at the last reported sales price or official closing price on an exchange, if available. Independent pricing services typically value non-exchange-traded instruments utilizing a
range of market-based inputs and assumptions, including readily available market quotations obtained from broker-dealers making markets in such instruments, cash flows, and transactions for comparable instruments. In pricing certain instruments, the
pricing services may consider information about an instruments issuer or market activity provided by the Funds investment adviser or sub-adviser. Non-U.S. securities and currency are valued in U.S. dollars based on non-U.S. currency
exchange rate quotations supplied by an independent quotation service.
If a price cannot be obtained from a pricing service or other
pre-approved source, or if Nuveen Fund Advisors deems such price to be unreliable, a portfolio instrument may be valued by a Fund at its fair value as determined in good faith by the Board of Trustees or its designee. Nuveen Fund Advisors might find
a price obtained from a pricing service or other pre-approved source to be unreliable if, for example, the price has not changed for an identified period of time, or because it differs from the previous days price by a threshold amount, and
Nuveen Fund Advisors determines that recent transactions and/or broker-dealer price quotations differ materially from such price. As a general principle, the fair value of a portfolio instrument is the amount that an owner might reasonably expect to
receive upon the instruments current sale. A range of factors and analysis may be considered when determining fair value, including relevant market data, interest rates, credit considerations and/or issuer-specific news. For non-U.S. traded
securities whose principal local markets close before the close of the NYSE, a Fund may adjust the local closing price based upon such factors as developments in non-U.S. markets, the performance of U.S. securities markets and the performance of
instruments trading in U.S. markets that represent non-U.S. securities. A Fund may rely on an independent fair valuation service in making any such fair value determinations. A security that is fair valued may be valued at a price higher or lower
than actual market quotations, the last price determined by the pricing service, the last bid or ask price in the market or the value determined by other funds using their own fair valuation procedures.
42
Section
4
General Information
If a Fund holds portfolio instruments that are primarily listed on non-U.S. exchanges, the value of
such instruments may change on days when shareholders will not be able to purchase or redeem the Funds shares.
The Funds are intended for long-term investment and should not be used for excessive trading. Excessive trading
in the Funds shares can disrupt portfolio management, lead to higher operating costs, and cause other operating inefficiencies for the Funds. However, the Funds are also mindful that shareholders may have valid reasons for periodically
purchasing and redeeming Fund shares.
Accordingly, the Funds have adopted a Frequent Trading Policy that seeks to balance the
Funds need to prevent excessive trading in Fund shares while offering investors the flexibility in managing their financial affairs to make periodic purchases and redemptions of Fund shares.
The Funds Frequent Trading Policy generally limits an investor to two round trip trades in a 60-day period. A round
trip is the purchase and subsequent redemption of Fund shares, including by exchange. Each side of a round trip may be comprised of either a single transaction or a series of closely-spaced transactions.
The Funds primarily receive share purchase and redemption orders through third-party financial intermediaries, some of whom rely on the use of
omnibus accounts. An omnibus account typically includes multiple investors and provides the Funds only with a net purchase or redemption amount on any given day where multiple purchases, redemptions and exchanges of shares occur in the account. The
identity of individual purchasers, redeemers and exchangers whose orders are aggregated in omnibus accounts, and the size of their orders, will generally not be known by the Funds. Despite the Funds efforts to detect and prevent frequent
trading, the Funds may be unable to identify frequent trading because the netting effect in omnibus accounts often makes it more difficult to identify frequent traders. The Distributor has entered into agreements with financial intermediaries that
maintain omnibus accounts with the Funds transfer agent. Under the terms of these agreements, the financial intermediaries undertake to cooperate with the Distributor in monitoring purchase, exchange and redemption orders by their customers in
order to detect and prevent frequent trading in the Funds through such accounts. Technical limitations in operational systems at such intermediaries or at the Distributor may also limit the Funds ability to detect and prevent frequent trading.
In addition, the Funds may permit certain financial intermediaries, including broker-dealer and retirement plan administrators, among others, to enforce their own internal policies and procedures concerning frequent trading. Such policies may differ
from the Funds Frequent Trading Policy and may be approved for use in instances where the Funds reasonably believe that the intermediarys policies and procedures effectively discourage inappropriate trading activity. Shareholders holding
their accounts with such intermediaries may wish to contact the intermediary for information regarding its frequent trading policy. Although the Funds do not knowingly permit frequent trading, they cannot guarantee that they will be able to identify
and restrict all frequent trading activity.
Section 4
General Information
43
The Funds reserve the right in their sole discretion to waive unintentional or minor violations
(including transactions below certain dollar thresholds) if they determine that doing so would not harm the interests of Fund shareholders. In addition, certain categories of redemptions may be excluded from the application of the Frequent Trading
Policy, as described in more detail in the statement of additional information. These include, among others, redemptions pursuant to systematic withdrawal plans, redemptions in connection with the total disability or death of the investor,
involuntary redemptions by operation of law, redemptions in payment of account or plan fees, and certain redemptions by retirement plans, including redemptions in connection with qualifying loans or hardship withdrawals, termination of plan
participation, return of excess contributions, and required minimum distributions. The Funds may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
The Funds reserve the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if they determine,
in their sole discretion, that a transaction or a series of transactions involves market timing or excessive trading that may be detrimental to Fund shareholders. The Funds also reserve the right to reject any purchase order, including exchange
purchases, for any reason. For example, a Fund may refuse purchase orders if the Fund would be unable to invest the proceeds from the purchase order in accordance with the Funds investment policies and/or objective, or if the Fund would be
adversely affected by the size of the transaction, the frequency of trading in the account or various other factors. For more information about the Funds Frequent Trading Policy and its enforcement, see Purchase and Redemption of Fund
SharesFrequent Trading Policy in the statement of additional information.
The custodian of the assets of the Funds is U.S. Bank National Association, 60 Livingston Avenue, St. Paul,
MN 55101. The Funds transfer, shareholder services and dividend paying agent, Boston Financial Data Services, Inc., P.O. Box 8530, Boston, Massachusetts 02266-8530, performs bookkeeping, data processing and administrative services
for the maintenance of shareholder accounts.
44
Section
4
General Information
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (
SAI
) is not a prospectus. This SAI relates to, and should be read in conjunction with,
the Prospectus dated January 1, 2013 for Nuveen Intelligent Risk Growth Allocation Fund, Nuveen Intelligent Risk Moderate Allocation Fund and Nuveen Intelligent Risk Conservative Allocation Fund (each, a
Fund
, and collectively,
the
Funds
), each a series of Nuveen Investment Trust. A Prospectus may be obtained without charge from certain securities representatives, banks and other financial institutions that have entered into sales agreements with Nuveen
Securities, LLC (the
Distributor
), or from a Fund, by written request to the applicable Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530, or by calling (800) 257-8787.
The audited financial statements for each Funds most recent fiscal period appear in the Funds Annual Report dated August 31, 2012,
which is incorporated herein by reference and is available without charge by calling (800) 257-8787.
TABLE OF
CONTENTS
S-1
S-2
S-3
GENERAL INFORMATION
The Funds are diversified series of Nuveen Investment Trust (the
Trust
), an open-end management investment company organized as a
Massachusetts business trust on May 6, 1996. Each series of the Trust represents shares of beneficial interest in a separate portfolio of securities and other assets, with its own objective and policies. Currently, 11 series of the Trust are
authorized and outstanding. The Funds investment adviser is Nuveen Fund Advisors, LLC (
Nuveen Fund Advisors
or the
Adviser
). The Funds sub-adviser is Nuveen Asset Management, LLC (
Nuveen
Asset Management
or the
Sub-Adviser
).
Certain matters under the Investment Company Act of 1940, as
amended (the
1940 Act
), which must be submitted to a vote of the holders of the outstanding voting securities of a series, shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the
outstanding voting shares of each series affected by such matter.
INVESTMENT RESTRICTIONS
The investment objective and certain investment policies of each Fund are described in the Prospectus for the Funds. Each Fund, as a fundamental
policy, may not, without the approval of the holders of a majority of the Funds outstanding voting shares:
(1) With respect to 75% of the total assets of the Fund, purchase the securities of any issuer (except securities issued or
guaranteed by the United States government or any agency or instrumentality thereof or securities issued by other investment companies) if, as a result, (i) more than 5% of the Funds 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 as permitted by the 1940 Act and exemptive orders granted under the 1940 Act.
(3) Act as an underwriter of another issuers 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 except as permitted by the 1940 Act and exemptive orders granted under the 1940 Act.
(5) Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options, futures contracts,
or other derivative instruments, or from investing in securities or other instruments backed by physical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall
not prohibit the Fund from purchasing or selling securities or other instruments backed by real estate or of issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the 1940 Act.
(8) Purchase the securities of any issuer if, as a result, 25% or more of the Funds 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 (i) securities issued or guaranteed by the U.S. government or any agency or instrumentality thereof, (ii)
securities issued by other investment companies, or (iii) repurchase agreements fully collateralized by U.S. Government securities.
Except with respect to paragraph (2) above, the foregoing restrictions and limitations will apply only at the time of purchase of securities,
and the percentage limitations will not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of an acquisition of securities, unless otherwise indicated.
S-4
For purposes of applying the limitations set forth in numbers 2 and 7 above,
under the 1940 Act as currently in effect, a Fund is not permitted to issue senior securities, except that a Fund may borrow from any bank if immediately after such borrowing the value of the Funds total assets is at least 300% of the
principal amount of all of the Funds borrowings (i.e., the principal amount of the borrowings may not exceed 33
1
/
3
% of the Funds total assets). In the event that such asset coverage shall at any time fall below 300% the Fund
shall, within three days thereafter (not including Sundays and holidays) reduce the amount of its borrowings to an extent that the asset coverage of such borrowing shall be at least 300%.
For purposes of applying the limitation set forth in number 4 above, there are no limitations with respect to unsecured loans made by a Fund to an
unaffiliated party. However, when a Fund loans its portfolio securities, the obligation on the part of the Fund to return collateral upon termination of the loan could be deemed to involve the issuance of a senior security within the meaning of
Section 18(f) of the 1940 Act. In order to avoid violation of Section 18(f), the Fund may not make a loan of portfolio securities if, as a result, more than one-third of its total asset value (at market value computed at the time of making
a loan) would be on loan.
The limitation in number 8 above refers to concentration as that term is applied under the 1940 Act, as
interpreted or modified from time to time by any regulatory authority having jurisdiction. The limitation will be interpreted to permit investment without limit in the following: securities of the U.S. government and its agencies or
instrumentalities; securities of state, territory, possession or municipal governments and their authorities, agencies, instrumentalities or political subdivisions; securities of foreign governments; and repurchase agreements collateralized by any
such obligations. Accordingly, issuers of the foregoing securities will not be considered to be members of any industry. This limitation also does not place a limit on investment in issuers domiciled in a single jurisdiction or country.
For purposes of applying the limitation set forth in number 8 above, each Fund classifies asset-backed securities in its portfolio in separate
industries based upon a combination of the industry of the issuer or sponsor and the type of collateral. The industry of the issuer or sponsor and the type of collateral will be determined by the Adviser. For example, an asset-backed security known
as Money Store 94-D A2 would be classified as follows: the issuer or sponsor of the security is The Money Store, a personal finance company, and the collateral underlying the security is automobile receivables. Therefore, the industry
classification would be Personal Finance CompaniesAutomobile. Similarly, an asset-backed security known as Midlantic Automobile Grantor Trust 1992-1 B would be classified as follows: the issuer or sponsor of the security is
Midlantic National Bank, a banking organization, and the collateral underlying the security is automobile receivables. Therefore, the industry classification would be BanksAutomobile. Thus, an issuer or sponsor may be included in more than one
industry classification, as may a particular type of collateral.
The foregoing fundamental investment policies cannot
be changed without approval by holders of a majority of the Funds outstanding voting shares. As defined in the 1940 Act, this means the vote of (i) 67% or more of a Funds shares present at a meeting, if the holders of
more than 50% of the Funds shares are present or represented by proxy, or (ii) more than 50% of the Funds shares, whichever is less.
In addition to the foregoing fundamental investment policies, each Fund is also subject to the following non-fundamental restrictions and policies, which may be changed by the Board of Trustees. A 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) Pledge, mortgage or hypothecate any assets owned by the Fund except as may be necessary in connection
with permissible borrowings or investments and then such pledging, mortgaging, or hypothecating may not exceed 33
1
/
3
% of the Funds total assets at the time of the borrowing or investment.
S-5
(3) Purchase securities when borrowings exceed 5% of its total assets. If due to
market fluctuations or other reasons, the value of the Funds assets falls below 300% of its borrowings, the Fund will reduce its borrowings within 3 business days.
(4) Invest in illiquid securities if, as a result of such investment, more than 15% of the Funds net assets would be
invested in illiquid securities.
(5) Acquire any securities of registered open-end investment companies or registered
unit investment trusts in reliance on subparagraph (F) or subparagraph (G) of Section 12(d)(1) of the 1940 Act.
(6)
Invest directly in futures, options on futures and swaps to the extent that the Adviser would be required to register with the Commodity Futures Trading Commission (
CFTC
) as a commodity pool operator. See Investment Policies
and TechniquesDerivativesLimitations on the Use of Futures, Options on Futures and Swaps.
For the purposes of
paragraph 4 above, illiquid securities will have the same meaning as it does under the 1940 Act.
INVESTMENT
POLICIES AND TECHNIQUES
The following information supplements the discussion of the Funds investment objectives, principal
investment strategies, policies and techniques that appears in the Prospectus for the Funds. Additional information concerning principal investment strategies of the Funds, and other investment strategies that may be used by the Funds, is set forth
below. The Funds have attempted to identify investment strategies that will be employed in pursuing each Funds investment objective. Additional information concerning the Funds investment restrictions is set forth above under
Investment Restrictions.
If a percentage limitation on investments by a Fund stated in this SAI or the Prospectus is
adhered to at the time of an investment, a later increase or decrease in percentage resulting from changes in asset value will not be deemed to violate the limitation except in the case of the limitations on borrowing.
References in this section to the Adviser also apply, to the extent applicable, to the sub-adviser of each Fund.
Asset-Backed Securities
The Funds may have exposure to asset-backed securities. Asset-backed securities are securities that are secured or backed by pools of various types of assets on which cash payments are due at fixed
intervals over set periods of time. Asset-backed securities are created in a process called securitization. In a securitization transaction, an originator of loans or an owner of accounts receivables of a certain type of asset class sells such
underlying assets in a true sale to a special purpose entity, so that there is no recourse to such originator or owner. Payments of principal and interest on asset-backed securities typically are tied to payments made on the pool of
underlying assets in the related securitization. Such payments on the underlying assets are effectively passed through to the asset-backed security holders on a monthly or other regular, periodic basis. The level of seniority of a
particular asset-backed security will determine the priority in which the holder of such asset-backed security is paid, relative to other security holders and parties in such securitization. Examples of underlying assets include consumer loans or
receivables, home equity loans, automobile loans or leases, and time shares, though other types of receivables or assets also may be used.
While asset-backed securities typically have a fixed, stated maturity date, low prevailing interest rates may lead to an increase in the prepayments
made on the underlying assets. This may cause the outstanding balances due on the underlying assets to be paid down more rapidly. As a result, a decrease in the originally anticipated interest from such underlying securities may occur, causing the
asset-backed securities to pay-down in whole or in part prior to their original stated maturity date. Prepayment proceeds would then have to be reinvested at the lower prevailing interest rates. Conversely, prepayments on the underlying assets may
be less than anticipated, causing an extension in the duration of the asset-backed securities.
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Delinquencies or losses that exceed the anticipated amounts for a given securitization could adversely
impact the payments made on the related asset-backed securities. This is a reason why, as part of a securitization, asset-backed securities are often accompanied by some form of credit enhancement, such as a guaranty, insurance policy, or
subordination. Credit protection in the form of derivative contracts may also be purchased. In certain securitization transactions, insurance, credit protection, or both may be purchased with respect to only the most senior classes of asset-backed
securities, on the underlying collateral pool, or both. The extent and type of credit enhancement varies across securitization transactions.
The ratings and creditworthiness of asset-backed securities typically depend on the legal insulation of the issuer and transaction from the consequences of a sponsoring entitys bankruptcy, as well as on the
credit quality of the underlying receivables and the amount and credit quality of any third-party credit enhancement supporting the underlying receivables or the asset-backed securities. Asset-backed securities and their underlying receivables
generally are not issued or guaranteed by any governmental entity.
Asset Coverage Requirements
To the extent required by SEC guidelines, a Fund will only engage in transactions that expose it to an obligation to another party if it owns either
(a) an offsetting position for the same type of financial asset, or (b) cash or liquid securities, designated on the Funds books or held in a segregated account, with a value sufficient at all times to cover its potential obligations
not covered as provided in (a). Examples of transactions governed by these asset coverage requirements include, for example, options written by the Funds, futures contracts and options on futures contracts, forward currency contracts, and swaps.
Assets used as offsetting positions, designated on a Funds books, or held in a segregated account cannot be sold while the positions requiring cover are open unless replaced with other appropriate assets. As a result, the commitment of a large
portion of assets to be used as offsetting positions or to be designated or segregated in such a manner could impede portfolio management or the ability to meet redemption requests or other current obligations.
Borrowing and Leverage
The Funds may borrow for temporary or emergency purposes, including to meet redemption requests, pay dividends or clear portfolio transactions. Such borrowing may, in some instances, effectively leverage the
Funds portfolio, which could exaggerate changes in the net asset value of the Funds shares and affect the Funds net income. When a Fund borrows money, it must pay interest and other fees, which will reduce its returns if such costs
exceed the returns on the portfolio securities purchased or retained with such borrowings. Any such borrowings are intended to be temporary. However, under certain market conditions, including periods of low demand or decreased liquidity, such
borrowings might be outstanding for longer periods of time. As prescribed by the 1940 Act, the Funds will be required to maintain specified asset coverages of at least 300% with respect to any bank borrowing immediately following such borrowing. A
Fund may be required to dispose of assets on unfavorable terms if market fluctuations or other factors reduce its asset coverage to less than the prescribed amount.
In addition, when the Funds invest in certain derivative securities, including, but not limited to, forward commitments and futures contracts, they are effectively leveraging their investments. Certain investments
or trading strategies that involve leverage can exaggerate changes in the net asset value of the Funds shares and can result in losses that exceed the amount originally invested.
Commodity-Linked Securities
The Funds may invest in commodity-linked
exchange-traded funds (
ETFs
) and derivative securities, which are designed to provide investment exposure to commodities without direct investment in physical commodities or commodities futures contracts. Commodities to which a
Fund may gain exposure include assets such as oil, gas, industrial and precious metals, livestock, and agricultural or meat products, or other items that have tangible properties. A Fund may invest in securities that give it exposure to various
commodities and commodity sectors. The value of commodity-linked securities held by a Fund may be affected by a variety of factors, including, but not limited to, overall market movements and other factors affecting the value of particular
industries or commodities, such as weather, disease, embargoes, acts of war or terrorism, or political and regulatory developments.
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The prices of commodity-linked securities may move in different directions than investments in
traditional equity and debt securities. For example, during periods of rising inflation, debt securities have historically tended to decline in value due to the general increase in prevailing interest rates. Conversely, during those same periods of
rising inflation, the prices of certain commodities, such as oil and metals, have historically tended to increase. Of course, there cannot be any guarantee that these investments will perform in that manner in the future, and at certain times the
price movements of commodity-linked securities have been parallel to those of debt and equity securities. Commodities have historically tended to increase and decrease in value during different parts of the business cycle than financial assets.
Nevertheless, at various times, commodities prices may move in tandem with the prices of financial assets and thus may not provide overall portfolio diversification benefits.
Corporate Debt Securities
The Funds may have exposure to corporate
debt securities. Corporate debt securities are fully taxable debt obligations issued by corporations. These securities fund capital improvements, expansions, debt refinancing or acquisitions that require more capital than would ordinarily be
available from a single lender. Investors in corporate debt securities lend money to the issuing corporation in exchange for interest payments and repayment of the principal at a set maturity date. Rates on corporate debt securities are set
according to prevailing interest rates at the time of the issue, the credit rating of the issuer, the length of the maturity and other terms of the security, such as a call feature. Corporate debt securities are subject to the risk of an
issuers inability to meet principal and interest payments on the obligations and may also be subject to price volatility due to such factors as market interest rates, market perception of the creditworthiness of the issuer and general market
liquidity. In addition, corporate restructurings, such as mergers, leveraged buyouts, takeovers or similar corporate transactions are often financed by an increase in a corporate issuers debt securities. As a result of the added debt burden,
the credit quality and market value of an issuers existing debt securities may decline significantly.
Debt
Obligations Rated Less Than Investment Grade
The Funds may have exposure to non-investment grade debt obligations. Debt obligations
rated less than investment grade are sometimes referred to as high yield securities or junk bonds.
Yields on non-investment grade debt obligations will fluctuate over time. The prices of such obligations have been found to be less sensitive to
interest rate changes than higher rated obligations, but more sensitive to adverse economic changes or individual corporate developments. Also, during an economic downturn or period of rising interest rates, highly leveraged issuers may experience
financial stress which could adversely affect their ability to service principal and interest payment obligations, to meet projected business goals, and to obtain additional financing. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of non-investment grade debt obligations.
In addition, the secondary trading
market for non-investment grade debt obligations may be less developed than the market for investment grade obligations. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity
of non-investment grade obligations, especially in a thin secondary trading market.
Certain risks also are associated with the use of
credit ratings as a method for evaluating non-investment grade debt obligations. For example, credit ratings evaluate the safety of principal and interest payments, not the market value risk of such obligations. In addition, credit rating agencies
may not timely change credit ratings to reflect current events. Thus, the success of a Funds use of non-investment grade debt obligations may be more dependent on the Advisers own credit analysis than is the case with investment grade
obligations.
Derivatives
Subject to the limitations set forth below under Limitations on the Use of Futures, Options on Futures and Swaps, each Fund may use derivative instruments. Generally, a derivative is a financial
contract the value of which depends upon, or is derived from, the value of an underlying asset, reference rate or index. Derivatives generally take the form of contracts under which the parties agree to payments between them based upon the
performance of a wide variety of underlying references, such as stocks, bonds, loans, commodities, interest rates, currency exchange rates, and various
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domestic and foreign indices. Derivative instruments that the Funds may use include futures contracts, options on futures contracts, forward currency contracts and swap transactions, all of which
are described in more detail below.
The Funds may use derivatives for a variety of reasons, including as a substitute for investing
directly in securities and currencies and for other purposes related to the management of the Funds. Derivatives permit a Fund to increase or decrease the level of risk, or change the character of the risk, to which its portfolio is exposed in much
the same way as the Fund can increase or decrease the level of risk, or change the character of the risk, of its portfolio by making investments in specific securities. However, derivatives may entail investment exposures that are greater than their
cost would suggest. As a result, a small investment in derivatives could have a large impact on a Funds performance.
Derivatives
can be volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative and the portfolio as a whole. If a Fund invests in derivatives at inopportune times or judges market conditions
incorrectly, such investments may lower the Funds return or result in a loss. A Fund also could experience losses or limit its gains if the performance of its derivatives is poorly correlated with the underlying instruments or the Funds
other investments, or if the Fund is unable to liquidate its position because of an illiquid secondary market. The market for derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable
changes in the prices for derivatives.
While transactions in some derivatives may be effected on established exchanges, many other
derivatives are privately negotiated and entered into in the over-the-counter market with a single counterparty. When exchange-traded derivatives are purchased and sold, a clearing agency associated with the exchange stands between each buyer and
seller and effectively guarantees performance of each contract, either on a limited basis through a guaranty fund or to the full extent of the clearing agencys balance sheet. Transactions in over-the-counter derivatives have no such
protection. Each party to an over-the-counter derivative bears the risk that its direct counterparty will default. In addition, over-the-counter derivatives may be less liquid than exchange-traded derivatives since the other party to the transaction
may be the only investor with sufficient understanding of the derivative to be interested in bidding for it.
Derivatives generally
involve leverage in the sense that the investment exposure created by the derivative is significantly greater than a Funds initial investment in the derivative. As discussed above under Asset Coverage Requirements, a Fund may
be required to segregate permissible liquid assets, or engage in other permitted measures, to cover the Funds obligations relating to its transactions in derivatives. For example, in the case of futures contracts or forward
contracts that are not contractually required to cash settle, a Fund must set aside liquid assets equal to such contracts full notional value (generally, the total numerical value of the asset underlying a future or forward contract at the
time of valuation) while the positions are open. With respect to futures contracts or forward contracts that are contractually required to cash settle, however, a Fund is permitted to set aside liquid assets in an amount equal to the Funds
daily mark-to-market net obligation (i.e., the Funds daily net liability) under the contracts, if any, rather than such contracts full notional value. By setting aside assets equal to only its net obligations under cash-settled futures
and forward contracts, the Fund may employ leverage to a greater extent than if the Fund were required to segregate assets equal to the full notional value of such contracts.
Derivatives also may involve other types of leverage. For example, an instrument linked to the value of a securities index may return income calculated as a multiple of the price movement of the underlying index.
This leverage will increase the volatility of these derivatives since they may increase or decrease in value more quickly than the underlying instruments.
The particular derivative instruments the Funds can use are described below. A Funds portfolio managers may decide not to employ some or all of these instruments, and there is no assurance that any
derivatives strategy used by a Fund will succeed. The Funds may employ new derivative instruments and strategies when they are developed, if those investment methods are consistent with the particular Funds investment objective and are
permissible under applicable regulations governing the Fund.
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Limitations on the Use of Futures, Options on Futures and Swaps
The Adviser has claimed the relief from registration as a commodity pool operator with respect to the Funds provided by CFTC Letter 12-38. Pursuant
to that relief, each Fund will limit its direct investments in futures, options on futures and swaps (excluding investments for bona fide hedging purposes, as defined by the CFTC) such that it meets one of the following tests under CFTC
Rule 4.5:
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Aggregate initial margin and premiums required to establish its futures, options on futures and swaps do not exceed 5% of the liquidation value of the
Funds portfolio, after taking into account unrealized profits and losses on such positions; or
|
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Aggregate net notional value of its futures, options on futures and swaps does not exceed 100% of the liquidation value of the Funds portfolio, after
taking into account unrealized profits and losses on such positions.
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The requirement for qualification as a regulated
investment company may also limit the extent to which a Fund may invest in futures, options on futures and swaps. See Tax MattersQualification as a Regulated Investment Company.
Futures and Options on Futures
The Funds
may engage in futures transactions. The Funds may buy and sell futures contracts that relate to: (1) interest rates, (2) debt securities, (3) bond indices, (4) commodities and commodities indices, (5) foreign currencies,
(6) stock indices, and (7) individual stocks. The Funds also may buy and write options on the futures contracts in which they may invest (
futures options
) and may write straddles, which consist of a call and a put option
on the same futures contract. The Funds will only write options and straddles which are covered. This means that, when writing a call option, a Fund must either segregate liquid assets with a value equal to the fluctuating market value
of the optioned futures contract, or the Fund must own an option to purchase the same futures contract having an exercise price that is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise
price of the call written, provided the difference is maintained by the Fund in segregated liquid assets. When writing a put option, the Fund must segregate liquid assets in an amount not less than the exercise price, or own a put option on the same
futures contract where the exercise price of the put held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the Fund in
segregated liquid assets. A straddle will be covered when sufficient assets are deposited to meet the Funds immediate obligations. A Fund may use the same liquid assets to cover both the call and put options in a straddle where the exercise
price of the call and put are the same, or the exercise price of the call is higher than that of the put. In such cases, the Fund will also segregate liquid assets equivalent to the amount, if any, by which the put is in the money. The
Funds may only enter into futures contracts and futures options which are standardized and traded on a U.S. or foreign exchange, board of trade or similar entity, or quoted on an automated quotation system.
A futures contract is an agreement between two parties to buy and sell a security, index, interest rate, currency or commodity (each a
financial instrument
) for a set price on a future date. Certain futures contracts, such as futures contracts relating to individual securities, call for making or taking delivery of the underlying financial instrument. However,
these contracts generally are closed out before delivery by entering into an offsetting purchase or sale of a matching futures contract (same exchange, underlying financial instrument, and delivery month). Other futures contracts, such as futures
contracts on interest rates and indices, do not call for making or taking delivery of the underlying financial instrument, but rather are agreements pursuant to which two parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the financial instrument at the close of the last trading day of the contract and the price at which the contract was originally written. These contracts also may be settled by entering into an offsetting futures
contract.
Unlike when a Fund purchases or sells a security, no price is paid or received by a Fund upon the purchase or sale of a
futures contract. Initially, a Fund will be required to deposit with the futures broker, known as a futures commission merchant (
FCM
), an amount of cash or securities equal to a varying specified percentage of the contract amount.
This amount is known as initial margin. The margin deposit is intended to ensure completion of the contract. Minimum initial margin requirements
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are established by the futures exchanges and may be revised. In addition, FCMs may establish margin deposit requirements that are higher than the exchange minimums. Cash held in the margin
account generally is not income producing. However, coupon-bearing securities, such as Treasury securities, held in margin accounts generally will earn income. Subsequent payments to and from the FCM, called variation margin, will be made on a daily
basis as the price of the underlying financial instrument fluctuates, making the futures contract more or less valuable, a process known as marking the contract to market. Changes in variation margin are recorded by a Fund as unrealized gains or
losses. At any time prior to expiration of the futures contract, a Fund may elect to close the position by taking an opposite position that will operate to terminate its position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a gain or loss. In the event of the bankruptcy or insolvency of an FCM that holds margin on behalf of a Fund, the Fund may be entitled to the return
of margin owed to it only in proportion to the amount received by the FCMs other customers, potentially resulting in losses to the Fund. Futures transactions also involve brokerage costs and the Fund may have to segregate additional liquid
assets in accordance with applicable SEC requirements. See Asset Coverage Requirements above.
A futures option gives
the purchaser of such option the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of the option. Upon exercise of a call
option, the purchaser acquires a long position in the futures contract and the writer is assigned the opposite short position. Upon the exercise of a put option, the opposite is true. Futures options possess many of the same characteristics as
options on securities, currencies and indices (discussed below under Options Transactions).
Risks
Associated with Futures and Futures Options.
There are risks associated with the use of futures contracts and futures options. A purchase or sale of a futures contract may result in a loss in excess of the amount invested in the futures
contract.
If futures are used for hedging purposes, there can be no guarantee that there will be a correlation between price movements
in the futures contract and in the underlying financial instruments that are being hedged. This could result from differences between the financial instruments being hedged and the financial instruments underlying the standard contracts available
for trading (e.g., differences in interest rate levels, maturities and the creditworthiness of issuers). In addition, price movements of futures contracts may not correlate perfectly with price movements of the financial instruments underlying the
futures contracts due to certain market distortions.
Successful use of futures by the Funds also is subject to the Advisers
ability to predict correctly movements in the direction of the relevant market. For example, if a Fund uses futures to hedge against the possibility of a decline in the market value of securities held in its portfolio and the prices of such
securities increase instead, the Fund will lose part or all of the benefit of the increased value of the securities which it has hedged because it will have offsetting losses in its futures positions. Furthermore, if in such circumstances the Fund
has insufficient cash, it may have to sell securities to meet daily variation margin requirements. The Fund may have to sell such securities at a time when it may be disadvantageous to do so.
There can be no assurance that a liquid market will exist at a time when a Fund seeks to close out a futures or a futures option position, and
the Fund would remain obligated to meet margin requirements until the position is closed. Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down from the previous days settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit,
no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of
unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures
contracts to substantial losses.
Additional Risks Associated with Commodity Futures Contracts.
There are several additional risks
associated with transactions in commodity futures contracts into which the Funds may enter.
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Storage
. Unlike the financial futures markets, in the commodity futures markets there are costs
of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical
commodity. To the extent that the storage costs for an underlying commodity change while a Fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.
Reinvestment
. In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the
commodity by selling futures contracts today to lock in the price of the commodity at the time of delivery. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the
futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the
futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in the commodity markets will influence whether futures prices are above or below the expected future
spot price, which can have significant implications for a Fund. If the nature of hedgers and speculators in futures markets has shifted when it is time for a Fund to reinvest the proceeds of a maturing contract in a new futures contract, such Fund
might reinvest at higher or lower futures prices, or choose to pursue other investments.
Other Economic Factors
. The commodities
which underlie commodity futures contracts may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments.
These factors may have a larger impact on commodity prices and commodity-linked instruments, including futures contracts, than on traditional securities. Certain commodities are also subject to limited pricing flexibility because of supply and
demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional investment
risks which subject a Funds investments to greater volatility than investments in traditional securities.
Forward Currency Contracts and other
Foreign Currency Transactions
The Funds may enter into forward currency contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly
between currency traders (usually large commercial banks) and their customers. Unlike futures contracts, which are standardized contracts, forward contracts can be specifically drawn to meet the needs of the parties that enter into them. The parties
to a forward currency contract may agree to offset or terminate the contract before its maturity, or may hold the contract to maturity and complete the contemplated exchange. Because forward contracts are not traded on an exchange, the Funds are
subject to the credit and performance risk of the counterparties to such contracts.
Risks Associated with Forward Currency
Transactions.
The Advisers decision whether to enter into foreign currency transactions will depend in part on its view regarding the direction and amount in which exchange rates are likely to move. The forecasting of movements in exchange
rates is extremely difficult, so that it is highly uncertain whether a currency management strategy, if undertaken, would be successful. To the extent that the Advisers view regarding future exchange rates proves to have been incorrect, a Fund
may realize losses on its foreign currency transactions. Even if a foreign currency hedge is effective in protecting a Fund from losses resulting from unfavorable changes in exchange rates between the U.S. dollar and foreign currencies, it also
would limit the gains which might be realized by the Fund from favorable changes in exchange rates.
Options Transactions
To the extent set forth below, the Funds may purchase put and call options on specific securities (including groups or baskets of
specific securities), interest rates, stock indices, bond indices, and/or foreign currencies. In addition, the Funds may write put and call options on such financial instruments. Options on futures contracts are discussed above under
Futures and Options on Futures.
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Options on Securities
. The Funds may purchase put and call options on securities they own
or have the right to acquire. A put option on a security gives the purchaser of the option the right (but not the obligation) to sell, and the writer of the option the obligation to buy, the underlying security at a stated price (the
exercise price
) at any time before the option expires. A call option on a security gives the purchaser the right (but not the obligation) to buy, and the writer the obligation to sell, the underlying security at the exercise price
at any time before the option expires. The purchase price for a put or call option is the premium paid by the purchaser for the right to sell or buy.
A Fund may purchase put options to hedge against a decline in the value of its portfolio. By using put options in this way, a Fund would reduce any profit it might otherwise have realized in the underlying security
by the amount of the premium paid for the put option and by transaction costs. In similar fashion, a Fund may purchase call options to protect against an increase in the price of securities that the Fund anticipates purchasing in the future, a
practice sometimes referred to as anticipatory hedging. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire unexercised.
Options on Interest Rates and Indices
. The Funds
may purchase put and call options on interest rates and on stock and bond indices. An option on interest rates or on an index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing value of the
underlying interest rate or index is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. This amount of cash is equal to the difference between the exercise-settlement value of the interest rate
option or the closing price of the index and the exercise price of the option expressed in dollars times a specified multiple (the
multiplier
). The writer of the option is obligated, for the premium received, to make delivery of
this amount. Settlements for interest rate and index options are always in cash.
Options on Currencies
. The Funds may purchase
put and call options on foreign currencies. A foreign currency option provides the option buyer with the right to buy or sell a stated amount of foreign currency at the exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a put option gives its owner the right, but not the obligation, to sell the currency. The option seller (writer) is obligated to fulfill the terms of the option sold if it
is exercised. However, either seller or buyer may close its position during the option period in the secondary market for such options at any time prior to expiration.
A foreign currency call option rises in value if the underlying currency appreciates. Conversely, a foreign currency put option rises in value if the underlying currency depreciates. While purchasing a foreign
currency option may protect a Fund against an adverse movement in the value of a foreign currency, it would limit the gain which might result from a favorable movement in the value of the currency. For example, if the Fund were holding securities
denominated in an appreciating foreign currency and had purchased a foreign currency put to hedge against a decline in the value of the currency, it would not have to exercise its put. In such an event, however, the amount of the Funds gain
would be offset in part by the premium paid for the option. Similarly, if the Fund entered into a contract to purchase a security denominated in a foreign currency and purchased a foreign currency call to hedge against a rise in the value of the
currency between the date of purchase and the settlement date, the Fund would not need to exercise its call if the currency instead depreciated in value. In such a case, the Fund could acquire the amount of foreign currency needed for settlement in
the spot market at a lower price than the exercise price of the option.
Writing Options
. The Funds may write (sell) covered
put and call options. These transactions would be undertaken principally to produce additional income. The Funds receive a premium from writing options which it retains whether or not the option is exercised. The Funds may write covered straddles
consisting of a combination of a call and a put written on the same underlying instrument.
The Funds will write options only if
they are covered. In the case of a call option on a security, the option is covered if the Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration
(or, if additional cash consideration is required, cash or other liquid assets in such amount are segregated) upon conversion or exchange of the securities held by the Fund. For a call option on an index or currency, the option is
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covered if the Fund segregates liquid assets in an amount equal to the contract value of the index or currency. A call option is also covered if the Fund holds a call on the same security, index
or currency as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided the difference is
maintained by the Fund in segregated liquid assets. A put option on a security, currency or index is covered if the Fund segregates liquid assets equal to the exercise price. A put option is also covered if the Fund holds a put on the
same security, currency or index as the put written where the exercise price of the put held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the
difference is maintained by the Fund in segregated liquid assets. A straddle will be covered when sufficient assets are deposited to meet the Funds immediate obligations. The Fund may use the same liquid assets to cover both the call and put
options in a straddle where the exercise price of the call and put are the same, or the exercise price of the call is higher than that of the put. In such cases, the Fund will also segregate liquid assets equivalent to the amount, if any, by which
the put is in the money.
Expiration or Exercise of Options
. If an option written by a Fund expires unexercised, the
Fund realizes a capital gain equal to the premium received at the time the option was written. If an option purchased by a Fund expires unexercised, the Fund realizes a capital loss equal to the premium paid. Prior to the earlier of exercise or
expiration, an exchange traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security, currency or index, exercise price, and expiration). There can be no assurance, however,
that a closing purchase or sale transaction can be effected when the Fund desires.
A Fund may sell put or call options it has previously
purchased, which could result in a net gain or loss depending on whether the amount realized on the sale is more or less than the premium and other transaction costs paid on the put or call option which is sold. Prior to exercise or expiration, an
option may be closed out by an offsetting purchase or sale of an option of the same series. A Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the
option, or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the Fund will
realize a capital loss. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security, currency or index in relation to the exercise price of
the option, the volatility of the underlying security, currency or index, and the time remaining until the expiration date.
Risks
Associated with Options Transactions
. There are several risks associated with options transactions. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between
these markets, causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree
because of market behavior or unexpected events.
When a Fund purchases a put or call option, it risks a total loss of the premium paid
for the option, plus any transaction costs, if the price of the underlying security does not increase or decrease sufficiently to justify the exercise of such option. Also, where a put or call option on a particular security is purchased to hedge
against price movements in a related security, the price of the put or call option may move more or less than the price of the related security.
There can be no assurance that a liquid market will exist when a Fund seeks to close out an option position. If a Fund were unable to close out an option that it had purchased on a security, it would have to
exercise the option in order to realize any profit or the option may expire worthless. If a Fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security unless the option
expired without exercise. There is also a risk that, if restrictions on exercise were imposed, a Fund might be unable to exercise an option it had purchased.
With respect to options written by the Funds during the option period, the covered call writer has, in return for the premium on the option, given up the opportunity to profit from a price increase in the
underlying security above the exercise price, but, as long as its obligation as a writer continues,
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has retained the risk of loss should the price of the underlying security decline. The writer of an option has no control over the time when it may be required to fulfill its obligations as a
writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and must deliver the underlying security at the exercise price.
Swap Transactions
The Funds may
enter into swap transactions for any purpose consistent with their investment objectives and strategies.
Swap agreements are two party
contracts entered into primarily by institutional investors for a specified period of time. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on a particular
predetermined asset, reference rate or index. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a notional amount, e.g., the return on or increase in value of a particular dollar amount
invested at a particular interest rate or in a basket of securities representing a particular index. The notional amount of the swap agreement generally is only used as a basis upon which to calculate the obligations that the parties to the swap
agreement have agreed to exchange. A Funds current obligations under a net swap agreement will be accrued daily (offset against any amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by
assets determined to be liquid by the Adviser. See Asset Coverage Requirements above.
Total Return Swaps.
In a
total return swap, one party agrees to pay the other the total return of a defined underlying asset during a specified period, in return for periodic payments based on a fixed or variable interest rate or the total return from other
underlying assets. A total return swap may be applied to any underlying asset but is most commonly used with equity indices, single stocks, bonds and defined baskets of loans and mortgages. A Fund might enter into a total return swap involving an
underlying index or basket of securities to create exposure to a potentially widely-diversified range of securities in a single trade. An index total return swap can be used by a portfolio manager to assume risk, without the complications of buying
the component securities from what may not always be the most liquid of markets.
Risks Associated with Swap Transactions.
The use
of swap transactions is a highly specialized activity which involves strategies and risks different from those associated with ordinary portfolio security transactions. If the sub-adviser is incorrect in its forecasts of default risks, market
spreads or other applicable factors the investment performance of a Fund would diminish compared with what it would have been if these techniques were not used. As the protection seller in a credit default swap, a Fund effectively adds economic
leverage to its portfolio because, in addition to being subject to investment exposure on its total net assets, a Fund is subject to investment exposure on the notional amount of the swap. A Fund may only close out a swap, cap, floor, collar or
other two-party contract with its particular counterparty, and may only transfer a position with the consent of that counterparty. In addition, the price at which a Fund may close out such a two party contract may not correlate with the price change
in the underlying reference asset. If the counterparty defaults, a Fund will have contractual remedies, but there can be no assurance that the counterparty will be able to meet its contractual obligations or that the Fund will succeed in enforcing
its rights. It also is possible that developments in the derivatives market, including potential government regulation, could adversely affect a Funds ability to terminate existing swap or other agreements or to realize amounts to be received
under such agreements.
Equity Securities
Common Stock and Partnership Units.
The Funds may have exposure to common stock and master limited partnership (MLP) and other partnership units. Common stock represents units of ownership in a corporation.
Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and
owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of
management, liquidity, and general market conditions for the markets on which the stock
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trades. Stocks may decline significantly in price over short or extended periods of time. Price changes may occur in the market as a whole, or they may occur in only a particular country,
company, industry, or sector of the market. In addition, the types of stocks to which a particular Fund has exposure may underperform the market or may not pay dividends as anticipated.
A limited partnership is a partnership consisting of one or more general partners, jointly and severally responsible as ordinary partners, and by
whom the business is conducted, and one or more limited partners who contribute cash as capital to the partnership and who generally are not liable for the debts of the partnership beyond the amounts contributed. Limited partners are not involved in
the day-to-day management of the partnership. They receive income, capital gains and other tax benefits associated with the partnership project in accordance with terms established in the partnership agreement. Typical limited partnerships are in
real estate, oil and gas and equipment leasing, but they also finance movies, research and development, and other projects. For an organization classified as a partnership under the Internal Revenue Code of 1986, as amended (the
Code
), each item of income, gain, loss, deduction, and credit is not taxed at the partnership level but flows through to the holder of the partnership unit. This allows the partnership to avoid double taxation and to pass through
income to the holder of the partnership unit at lower individual rates.
An MLP is a publicly traded limited partnership. The partnership
units are registered with the SEC and are freely exchanged on a securities exchange or in the over-the-counter market. The risks of investing in a MLP are generally those involved in investing in a partnership as opposed to a corporation. For
example, state law governing partnerships is often less restrictive than state law governing corporations. Accordingly, there may be fewer protections afforded investors in a MLP than investors in a corporation. Additional risks involved with
investing in a MLP are risks associated with the specific industry or industries in which the partnership invests, such as the risks of investing in real estate, or oil and gas industries.
Fixed Income Securities
Fixed income securities to which the Funds
may have exposure include securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, nonconvertible preferred stocks, nonconvertible corporate debt securities, and short-term obligations of the kinds described below
under Short-Term Investments or as otherwise described under Investment Policies and Techniques. Obligations rated BBB, Baa or their equivalent, although investment grade, have speculative characteristics and carry a
somewhat higher risk of default than higher rated obligations.
The fixed income securities specified above are subject to
(i) interest rate risk (the risk that increases in market interest rates will cause declines in the value of debt securities to which a Fund has exposure); and (ii) credit risk (the risk that the issuers of debt securities to which a Fund
has exposure default in making required payments).
Foreign Securities
General.
The Funds may have exposure to foreign securities, including those payable in U.S. dollars. In addition, the Funds may have exposure
to non-dollar denominated foreign securities.
Investment in foreign securities is subject to special investment risks that differ in
some respects from those related to investments in securities of U.S. domestic issuers. These risks include political, social or economic instability in the country of the issuer, the difficulty of predicting international trade patterns, the
possibility of the imposition of exchange controls, expropriation, limits on removal of currency or other assets, nationalization of assets, foreign withholding and income taxation, and foreign trading practices (including higher trading
commissions, custodial charges and delayed settlements). Foreign securities also may be subject to greater fluctuations in price than securities issued by U.S. corporations. The principal markets on which these securities trade may have less volume
and liquidity, and may be more volatile, than securities markets in the United States.
In addition, there may be less publicly available
information about a foreign company than about a U.S. domiciled company. Foreign companies generally are not subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to U.S. domestic companies. There
is also generally less government regulation of securities exchanges, brokers and listed companies abroad than in the United States. Confiscatory taxation or diplomatic developments could also affect investment in those countries. In addition,
foreign branches of U.S. banks, foreign
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banks and foreign issuers may be subject to less stringent reserve requirements and to different accounting, auditing, reporting, and record keeping standards than those applicable to domestic
branches of U.S. banks and U.S. domestic issuers.
Emerging Markets.
The Funds may have exposure to securities issued by
governmental and corporate issuers that are located in emerging market countries. Investments in securities of issuers in emerging market countries may be subject to potentially higher risks than investments in developed countries. These risks
include (i) less social, political and economic stability; (ii) the small current size of the markets for such securities and the currently low or nonexistent volume of trading, which may result in a lack of liquidity and in greater price
volatility; (iii) certain national policies which may restrict a Funds investment opportunities, including restrictions on investment in issuers or industries deemed sensitive to national interests; (iv) foreign taxation;
(v) the absence of developed structures governing private or foreign investment or allowing for judicial redress for injury to private property; (vi) the limited development and recent emergence, in certain countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent favorable economic developments in certain countries may be slowed or reversed by unanticipated political or social events in such countries.
Despite the dissolution of the Soviet Union, the Communist Party may continue to exercise a significant role in certain (particularly Eastern
European) countries. To the extent of the Communist Partys influence, investments in such countries will involve risks of nationalization, expropriation and confiscatory taxation. The communist governments of a number of such countries
expropriated large amounts of private property in the past, in many cases without adequate compensation, and there can be no assurance that such expropriation will not occur in the future. In the event of such expropriation, a Fund could lose a
substantial portion of any investments it has made in the affected countries. Further, no accounting standards exist in many developing countries. Finally, even though certain currencies may be convertible into U.S. dollars, the conversion rates may
be artificial to the actual market values and may be adverse to the Funds shareholders.
Certain countries, which do not have
market economies, are characterized by an absence of developed legal structures governing private and foreign investments and private property. Certain countries require governmental approval prior to investments by foreign persons, or limit the
amount of investment by foreign persons in a particular company, or limit the investment of foreign persons to only a specific class of securities of a company that may have less advantageous terms than securities of the company available for
purchase by nationals.
Foreign Sovereign Debt Obligations
The Funds may have exposure to sovereign debt obligations. Investments in sovereign debt obligations involve special risks which are not present in
corporate debt securities. The foreign issuer of the sovereign debt or the foreign governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and there may be limited recourse
in the event of a default. During periods of economic uncertainty, the market prices of sovereign debt, and the net asset value of a Fund, to the extent it has exposure to such securities, may be more volatile than prices of U.S. debt issuers. In
the past, certain foreign countries have encountered difficulties in servicing their debt obligations, withheld payments of principal and interest and declared moratoria on the payment of principal and interest on their sovereign debt.
A sovereign debtors willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign currency reserves, the availability of sufficient foreign exchange, the relative size of the debt service burden, the sovereign debtors policy toward principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies and other entities to reduce principal and interest arrearages on their debt. The failure of a sovereign debtor
to implement economic reforms, achieve specified levels of economic performance or repay principal or interest when due may result in the cancellation of third party commitments to lend funds to the sovereign debtor, which may further impair such
debtors ability or willingness to service its debts.
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Index Participations and Index Participation Contracts
The Funds may invest in index participations and index participation contracts as a principal investment strategy. Index participations and index
participation contracts provide the equivalent of a position in the securities comprising an index, with each securitys representation equaling its index weighting. Moreover, their holders are entitled to payments equal to the dividends paid
by the underlying index securities. Generally, the value of an index participation or index participation contract will rise and fall along with the value of the related index.
Inflation Protected Securities
The Funds may have exposure to
inflation protected securities. Inflation protected securities are fixed income securities designed to provide protection against the negative effects of inflation. Two structures are common. The U.S. Treasury and some other issuers use a structure
that accrues inflation into the principal value of the bond. Most other issuers pay out the inflation accruals as part of a semiannual coupon.
Inflation protected securities issued by the U.S. Treasury have maturities of five, ten, twenty or thirty years, although it is possible that securities with other maturities will be issued in the future. The U.S.
Treasury securities pay interest on a semi-annual basis, equal to a fixed percentage of the inflation-adjusted principal amount. For example, if a Fund purchased an inflation protected bond with a par value of $1,000 and a 3% real rate of return
coupon (payable 1.5% semi-annually), and inflation over the first six months was 1%, the mid-year par value of the bond would be $1,010 and the first semi-annual interest payment would be $15.15 ($1,010 times 1.5%). If inflation during the second
half of the year resulted in the whole years inflation equaling 3%, the end-of-year par value of the bond would be $1,030 and the second semi-annual interest payment would be $15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the principal value of U.S. Treasury inflation protected securities will be adjusted
downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case
of U.S. Treasury inflation protected bonds, even during a period of deflation. However, the current market value of the bonds is not guaranteed, and will fluctuate. Other inflation-protected securities that accrue inflation into their principal
value may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
The value of inflation-protected securities is expected to change in response to changes in real interest rates. Real interest rates in turn are
tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation
protected securities. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-protected securities.
The periodic adjustment of U.S. inflation protected bonds is tied to the Consumer Price Index for Urban Consumers (
CPI-U
), which
is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation protected securities issued by a foreign
government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure the real rate of inflation in the prices of
goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If the market perceives that the adjustment mechanism of an inflation-protected
security does not accurately adjust for inflation, the value of the security could be adversely affected.
While inflation protected
securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. The calculation of the inflation index ratio for inflation protected securities issued by the U.S. Treasury
incorporates an approximate three-month lag, which may have an effect on the trading price of the securities, particularly during periods of significant, rapid changes in the inflation index. To the extent that inflation has increased
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during the three months prior to an interest payment, that interest payment will not be protected from the inflation increase. Further, to the extent that inflation has increased during the final
three months of a securitys maturity, the final value of the security will not be protected against that increase, which will negatively impact the value of the security. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in inflation-protected securities may not be protected to the extent that the increase is not reflected in the bonds inflation measure.
Any increase in the principal amount of an inflation-protected security will be considered taxable income to a Fund, even though the Fund does not
receive its principal until maturity.
Investment Companies and Other Pooled Investment Vehicles
Each Fund may invest in other investment companies, including ETFs regulated under the 1940 Act
(1940 Act ETFs)
. Under the
1940 Act, a Funds investment in such securities, subject to certain exceptions, currently is limited to 3% of the total voting stock of any one investment company; 5% of such Funds total assets with respect to any one investment
company; and 10% of such Funds total assets in the aggregate. Many 1940 Act ETFs, however, have obtained exemptive relief from the SEC to permit unaffiliated funds to invest in their shares beyond these statutory limits, subject to certain
conditions and pursuant to contractual arrangements between the ETFs and the investing funds. The Funds may rely on these exemptive orders in investing in 1940 Act ETFs. A Funds investments in other investment companies may include money
market mutual funds. Investments in money market funds are not subject to the percentage limitations set forth above.
Each Fund may also
invest in other pooled investment vehicles that are not investment companies, including ETFs that are not regulated under the 1940 Act.
The Funds will only invest in other pooled investment vehicles that invest in Fund-eligible investments. If a Fund invests in other pooled
investment vehicles, such Funds shareholders will bear not only their proportionate share of such Funds expenses, but also, indirectly, the similar expenses of the underlying pooled investment vehicles. Shareholders would also be exposed
to the risks associated not only to the Fund, but also to the portfolio investments of the underlying investment companies.
ETFs in
which the Funds may invest are a type of index fund bought and sold on a securities exchange. An ETF trades like common stock and represents a portfolio of securities designed to track a particular market index. ETFs can give exposure to all or a
portion of the U.S. market, a foreign market, a region, a commodity, a currency, or to any other index that an ETF tracks. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track,
although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. An ETF may fail to accurately track the returns of the market segment or index that it is designed to track, and the
price of an ETFs shares may fluctuate. In addition, because they, unlike traditional mutual funds, are traded on an exchange, ETFs are subject to the following risks: (i) the performance of the ETF may not replicate the performance of the
underlying index that it is designed to track; (ii) the market price of the ETFs shares may trade at a premium or discount to the ETFs net asset value; (iii) an active trading market for an ETF may not develop or be maintained;
and (iv) there is no assurance that the requirements of the exchange necessary to maintain the listing of the ETF will continue to be met or remain unchanged. In the event substantial market or other disruptions affecting ETFs should occur in
the future, the liquidity and value of a Funds shares could also be substantially and adversely affected.
Money
Market Funds
The Funds may invest in money market funds as a temporary investment. As a shareholder of another investment company, a
Fund would bear, along with other shareholders, its pro rata portion of that companys expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that the Fund bears directly in connection with its
own operations. Investment companies in which a Fund may invest may also impose a sales or distribution charge in connection with the purchase or redemption of their shares and other types of commissions or charges. Such charges will be payable by
such Fund and, therefore, will be borne indirectly by their shareholders.
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Mortgage-Backed Securities
The Funds may have exposure to mortgage-backed securities. These investments include agency pass-through certificates, private mortgage pass-through
securities, collateralized mortgage obligations, and commercial mortgage-backed securities, as defined and described below.
A
mortgage-backed security is a type of pass-through security, which is a security representing pooled debt obligations repackaged as interests that pass income through an intermediary to investors. In the case of mortgage-backed securities, the
ownership interest is in a pool of mortgage loans. Residential mortgage-backed securities (
RMBS
) are backed by a pool of mortgages on residential property while commercial mortgage-backed securities (
CMBS
) are
backed by a pool of mortgages on commercial property.
Mortgage-backed securities are most commonly issued or guaranteed by the
Government National Mortgage Association (
Ginnie Mae
or
GNMA
), Federal National Mortgage Association (
Fannie Mae
or
FNMA
) or Federal Home Loan Mortgage Corporation
(
Freddie Mac
or
FHLMC
), but may also be issued or guaranteed by other private issuers.
GNMA is a
government-owned corporation that is an agency of the U.S. Department of Housing and Urban Development. It guarantees, with the full faith and credit of the United States, full and timely payment of all monthly principal and interest on its
mortgage-backed securities.
Government-related guarantors (i.e., not backed by the full faith and credit of the United States
Government) include FNMA and FHLMC. FNMA is a government-sponsored corporation. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state
and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA, but
are not backed by the full faith and credit of the United States Government. FHLMC was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. It is a government-sponsored corporation
that issues Participation Certificates (
PCs
), which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. FHLMC guarantees the timely payment of interest and ultimate collection
of principal, but PCs are not backed by the full faith and credit of the United States Government.
On September 6, 2008, the
Federal Housing Finance Agency (
FHFA
) placed FNMA and FHLMC into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers and privileges of FNMA and FHLMC and of any stockholder, officer or director of
FNMA and FHLMC with respect to FNMA and FHLMC and the assets of FNMA and FHLMC. FHFA selected a new chief executive officer and chairman of the board of directors for each of FNMA and FHLMC. In addition, the U.S. Treasury Department agreed to
provide FNMA and FHLMC with up to $100 billion of capital each to ensure that they are able to continue to provide ongoing liquidity to the U.S. home mortgage market. FNMA and FHLMC are continuing to operate as going concerns while in
conservatorship and each remain liable for all of its obligations, including its guaranty obligations, associated with its mortgage-backed securities.
Mortgage-backed securities issued by private issuers, whether or not such obligations are subject to guarantees by the private issuer, may entail greater risk than obligations directly or indirectly guaranteed by
the U.S. Government. Any investments a Fund makes in mortgage-related securities that are issued by private issuers have some exposure to subprime loans as well as to the mortgage and credit markets generally. Private issuers include commercial
banks, savings associations, mortgage companies, investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles or structured investment vehicles) and other entities that acquire and package
mortgage loans for resale as mortgage-related securities. Unlike mortgage-related securities issued or guaranteed by the U.S. Government or one of its sponsored entities, mortgage-related securities issued by private issuers do not have a government
or government-sponsored entity guarantee, but may have credit enhancement provided by external entities such as banks or financial institutions or achieved through the structuring of the transaction itself. Examples of such credit support arising
out of the structure of the transaction include: (1) the issuance of senior and subordinated securities (e.g., the issuance of securities by a special purpose vehicle in multiple classes or tranches, with one or more classes being
senior to other subordinated classes as to the
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payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); (2) the creation of reserve
funds (in which case cash or investments, sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and (3) overcollateralization (in which case the scheduled
payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment of the securities and pay any servicing or other fees). However, there can be no guarantee that credit enhancements, if any, will be
sufficient to prevent losses in the event of defaults on the underlying mortgage loans.
In addition, mortgage-related securities that
are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those mortgage-related securities that have a government or government-sponsored entity guarantee. As a result, the
mortgage loans underlying private mortgage-related securities may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored mortgage-related securities and have
wider variances in a number of terms including interest rate, term, size, purpose and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon
rates and maturities of the underlying mortgage loans in a private-label mortgage-related securities pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans. Subprime
loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. For these reasons, the loans underlying these securities have had in many cases higher default rates than those
loans that meet government underwriting requirements.
The risk of non-payment is greater for mortgage-related securities that are backed
by mortgage pools that contain subprime loans, but a level of risk exists for all loans. Market factors adversely affecting mortgage loan repayments may include a general economic turndown, high unemployment, a general slowdown in the real estate
market, a drop in the market prices of real estate, or an increase in interest rates resulting in higher mortgage payments by holders of adjustable rate mortgages.
Privately issued mortgage-related securities are generally less liquid than obligations directly or indirectly guaranteed by the U.S. government or a government-sponsored entity, especially when there is a
perceived weakness in the mortgage and real estate market sectors. The average life of a mortgage-backed security is likely to be substantially less than the original maturity of the mortgage pools underlying the securities. Prepayments of principal
by mortgagors and mortgage foreclosures will usually result in the return of the greater part of principal invested far in advance of the maturity of the mortgages in the pool or can result in credit losses.
Collateralized mortgage obligations (
CMOs
) are debt obligations collateralized by mortgage loans or mortgage pass-through
securities (collateral collectively referred to hereinafter as Mortgage Assets). Multi-class pass-through securities are interests in a trust composed of Mortgage Assets. All references in this section to CMOs include multi-class
pass-through securities. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates, resulting in a loss of all or part of the premium if any has been
paid. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis. The principal and interest payments on the Mortgage Assets may be allocated among the various classes of CMOs in several ways. Typically,
payments of principal, including any prepayments, on the underlying mortgages are applied to the classes in the order of their respective stated maturities or final distribution dates, so that no payment of principal is made on CMOs of a class until
all CMOs of other classes having earlier stated maturities or final distribution dates have been paid in full.
Stripped mortgage-backed
securities (
SMBS
) are derivative multi-class mortgage securities. SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions from a pool of mortgage assets. A common
type of SMBS will be structured so that one class receives some of the interest and most of the principal from the mortgage assets, while the other class receives most of the interest and the remainder of the principal. The market value of any class
which consists primarily or entirely of principal payments generally is unusually volatile in response to changes in interest rates.
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Investment in mortgage-backed securities poses several risks, including, among others, prepayment,
market and credit risk. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investments average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost
entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise.
Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions. Market risk reflects the risk that
the price of a security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding and the liquidity of the issue. In a
period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and a Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price
at which they may be sold. Credit risk reflects the risk that a Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. Government-related entities are
guaranteed as to the payment of principal and interest, but are not backed by the full faith and credit of the U.S. Government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial
health of those institutions.
The risks to which CMBS are subject differ somewhat from the risks to which RMBS are subject. CMBS are
typically backed by a much smaller number of mortgages than RMBS are, so problems with one or a small number of mortgages backing a CMBS can have a large impact on its value. As CMBS have a less diversified pool of loans backing them, they are much
more susceptible to property-specific risk. The values of CMBS are also more sensitive to macroeconomic trends. For example, when the economy slows rents generally decrease and vacancies generally increase for commercial real estate. Similarly, as
many CMBS have a large exposure to retail properties, events that negatively impact the retail industry can also negatively impact the value of CMBS.
Municipal Bonds and Other Municipal Obligations
The Funds may have exposure to municipal bonds and other municipal obligations. These bonds and other obligations are issued by the states and by their local and special-purpose political subdivisions. The term
municipal bond includes short-term municipal notes issued by the states and their political subdivisions, including, but not limited to, tax anticipation notes (
TANs
), bond anticipation notes (
BANs
),
revenue anticipation notes (
RANs
), construction loan notes, tax free commercial paper, and tax free participation certificates.
Municipal Bonds.
The two general classifications of municipal bonds are general obligation bonds and revenue bonds. General obligation bonds are secured by the governmental
issuers pledge of its faith, credit and taxing power for the payment of principal and interest upon a default by the issuer of its principal and interest payment obligations. They are usually paid from general revenues of the issuing
governmental entity. Revenue bonds, on the other hand, are usually payable only out of a specific revenue source rather than from general revenues. Revenue bonds ordinarily are not backed by the faith, credit or general taxing power of the issuing
governmental entity. The principal and interest on revenue bonds for private facilities are typically paid out of rents or other specified payments made to the issuing governmental entity by a private company which uses or operates the facilities.
Examples of these types of obligations are industrial revenue bond and pollution control revenue bonds. Industrial revenue bonds are issued by governmental entities to provide financing aid to community facilities such as hospitals, hotels, business
or residential complexes, convention halls and sport complexes. Pollution control revenue bonds are issued to finance air, water and solids pollution control systems for privately operated industrial or commercial facilities.
Revenue bonds for private facilities usually do not represent a pledge of the credit, general revenues or taxing powers of issuing governmental
entity. Instead, the private company operating the facility is the sole source of payment of the obligation. Sometimes, the funds for payment of revenue bonds come solely from revenue generated by operation of the facility. Revenue bonds which are
not backed by the credit of the issuing governmental entity frequently provide a higher rate of return than other municipal obligations, but they entail greater risk than obligations which are guaranteed by a
S-22
governmental unit with taxing power. Federal income tax laws place substantial limitations on industrial revenue bonds, and particularly certain specified private activity bonds issued after
August 7, 1986. In the future, legislation could be introduced in Congress which could further restrict or eliminate the income tax exemption for interest on debt obligations to which the Funds have exposure.
Refunded Bonds.
The Funds may have exposure to refunded bonds. Refunded bonds may have originally been issued as general obligation or
revenue bonds, but become refunded when they are secured by an escrow fund, usually consisting entirely of direct U.S. government obligations and/or U.S. government agency obligations sufficient for paying the bondholders. There are two types of
refunded bonds: pre-refunded bonds and escrowed-to-maturity (
ETM
) bonds. The escrow fund for a pre-refunded municipal bond may be structured so that the refunded bonds are to be called at the first possible date or a subsequent
call date established in the original bond debenture. The call price usually includes a premium from 1% to 3% above par. This type of structure usually is used for those refundings that either reduce the issuers interest payment expenses or
change the debt maturity schedule. In escrow funds for ETM refunded municipal bonds, the maturity schedules of the securities in the escrow funds match the regular debt-service requirements on the bonds as originally stated in the bond indentures.
Municipal Leases and Certificates of Participation.
The Funds also may have exposure to municipal lease obligations, primarily
through certificates of participation. Certificates of participation in municipal leases are undivided interests in a lease, installment purchase contract or conditional sale contract entered into by a state or local governmental unit to acquire
equipment or facilities. Municipal leases frequently have special risks which generally are not associated with general obligation bonds or revenue bonds.
Municipal leases and installment purchase or conditional sales contracts (which usually provide for title to the leased asset to pass to the governmental issuer upon payment of all amounts due under the contract)
have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of municipal debt. The debt issuance limitations are deemed to be inapplicable because
of the inclusion in many leases and contracts of non-appropriation clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for this purpose by
the appropriate legislative body on a yearly or other periodic basis. Although these kinds of obligations are secured by the leased equipment or facilities, the disposition of the pledged property in the event of non-appropriation or foreclosure
might, in some cases, prove difficult and time-consuming.
Derivative Municipal Securities.
The Funds may also have exposure to
derivative municipal securities, which are custodial receipts of certificates underwritten by securities dealers or banks that evidence ownership of future interest payments, principal payments or both on certain municipal securities. The
underwriter of these certificates or receipts typically purchases municipal securities and deposits them in an irrevocable trust or custodial account with a custodian bank, which then issues receipts or certificates that evidence ownership of the
periodic unmatured coupon payments and the final principal payment on the obligation.
The principal and interest payments on the
municipal securities underlying custodial receipts may be allocated in a number of ways. For example, payments may be allocated such that certain custodial receipts may have variable or floating interest rates and others may be stripped securities
which pay only the principal or interest due on the underlying municipal securities.
Tender Option Bonds (TOBs).
TOBs
are created by municipal bond dealers who purchase long-term tax-exempt bonds in the secondary market, place the certificates in trusts, and sell interests in the trusts with puts or other liquidity guarantees attached. The credit quality of the
resulting synthetic short-term instrument is based on the put providers short-term rating and the underlying bonds long-term rating. There is some risk that a remarketing agent will renege on a tender option agreement if the underlying
bond is downgraded or defaults. Because of this the Adviser will consider on an ongoing basis the creditworthiness of the issuer of the underlying municipal securities, of any custodian, and of the third-party provider of the tender option. In
certain instances and for certain TOBs, the option may be terminable in the event of a default in payment of principal or interest on the underlying municipal securities and for other reasons.
S-23
Variable Rate Demand Notes (VRDNs).
VRDNs are long-term municipal obligations that
have variable or floating interest rates. Such securities typically bear interest at a rate that is intended to cause the securities to trade at par. The interest rate may float or be adjusted at regular intervals (ranging from daily to annually),
and is normally based on an applicable interest index or another published interest rate or interest rate index. Most VRDNs allow a holder to demand the repurchase of the security on not more than seven days prior notice. Other notes only permit a
holder to tender the security at the time of each interest rate adjustment or at other fixed intervals. Variable interest rates generally reduce changes in the market value of municipal obligations from their original purchase prices. Accordingly,
as interest rates decrease, the potential for capital appreciation is less for variable rate municipal obligations than for fixed income obligations.
Inverse Floating Rate Municipal Obligations.
The Funds may have exposure to inverse floating rate municipal obligations. An inverse floating rate obligation entitles the holder to receive interest at a rate
which changes in the opposite direction from, and in the same magnitude as, or in a multiple of, changes in a specified index rate. Although an inverse floating rate municipal obligation would tend to increase portfolio income during a period of
generally decreasing market interest rates, its value would tend to decline during a period of generally increasing market interest rates. In addition, its decline in value may be greater than for a fixed-rate municipal obligation, particularly if
the interest rate borne by the floating rate municipal obligation is adjusted by a multiple of changes in the specified index rate. For these reasons, inverse floating rate municipal obligations have more risk than more conventional fixed-rate and
floating rate municipal obligations.
Preferred Stock
The Funds may have exposure to preferred stock. Preferred stock, unlike common stock, offers a stated dividend rate payable from the issuers
earnings. Preferred stock dividends may be cumulative or non-cumulative, participating, or auction rate. As with all equity securities, the price of preferred stock fluctuates based on changes in a companys financial condition and on overall
market and economic conditions. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as
call/redemption provisions prior to maturity, a negative feature when interest rates decline.
Real Estate Investment Trust
(REIT) Securities
The Funds may have exposure to securities of real estate investment trusts. REITs are publicly traded
corporations or trusts that specialize in acquiring, holding, and managing residential, commercial or industrial real estate. A REIT is not taxed at the entity level on income distributed to its shareholders or unitholders if it distributes to
shareholders or unitholders at least 90% of its taxable income for each taxable year and complies with regulatory requirements relating to its organization, ownership, assets and income.
REITs generally can be classified as Equity REITs, Mortgage REITs and Hybrid REITs. An Equity REIT invests the majority of its assets directly in
real property and derives its income primarily from rents and from capital gains on real estate appreciation which are realized through property sales. A Mortgage REIT invests the majority of its assets in real estate mortgage loans and services its
income primarily from interest payments. A Hybrid REIT combines the characteristics of an Equity REIT and a Mortgage REIT.
A Funds
investment in the real estate industry subjects the Fund to risks associated with that industry. The real estate industry has been subject to substantial fluctuations and declines on a local, regional and national basis in the past and may continue
to be in the future. Real property values and income from real property may decline due to general and local economic conditions, overbuilding and increased competition, increases in property taxes and operating expenses, changes in zoning laws,
casualty or condemnation losses, regulatory limitations on rents, changes in neighborhoods and in demographics, increases in market interest rates, or other factors. Factors such as these may adversely affect companies which own and operate real
estate directly, companies which lend to such companies, and companies which service the real estate industry.
A Fund is also subject to
risks associated with direct investments in REITs. Equity REITs will be affected by changes in the values of and income from the properties they own, while Mortgage REITs may be affected by the credit quality of the mortgage loans they hold. In
addition, REITs are dependent on specialized management skills and on their ability to generate cash flow for operating purposes and to make distributions to shareholders or unitholders. REITs may have limited
S-24
diversification and are subject to risks associated with obtaining financing for real property, as well as to the risk of self-liquidation. REITs also can be adversely affected by their
failure to qualify for tax-free pass-through treatment of their income under the Code or their failure to maintain an exemption from registration under the 1940 Act. By investing in REITs indirectly through the Funds, a shareholder of such
Funds bears not only a proportionate share of the expenses of the Fund, but also may indirectly bear similar expenses of some of the REITs to which such Fund has exposure.
Short-Term Temporary Investments
In an attempt to respond to
adverse market, economic, political or other conditions, each Fund may temporarily invest without limit in a variety of short-term instruments such as commercial paper and variable amount master demand notes; U.S. dollar-denominated time and savings
deposits (including certificates of deposit); bankers acceptances; obligations of the U.S. government or its agencies or instrumentalities; repurchase agreements collateralized by eligible investments of a Fund; securities of other mutual
funds that invest primarily in debt obligations with remaining maturities of 13 months or less (which investments also are subject to an advisory fee); and other similar high-quality short-term U.S. dollar-denominated obligations. During such
periods, the Funds may not be able to achieve their investment objectives.
Each Fund may also invest in Eurodollar certificates of
deposit issued by foreign branches of U.S. or foreign banks; Eurodollar time deposits, which are U.S. dollar-denominated deposits in foreign branches of U.S. or foreign banks; and Yankee certificates of deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and held in the United States. In each instance, the Funds may only invest in bank instruments issued by an institution which has capital, surplus and undivided profits of more than
$100 million or the deposits of which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund.
Commercial Paper.
Commercial paper consists of unsecured promissory notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return. Subject to the limitations described in their prospectuses, the Funds may purchase commercial paper consisting of issues rated at the time of purchase within the two highest rating
categories by Standard & Poors, Fitch or Moodys, or which have been assigned an equivalent rating by another nationally recognized statistical rating organization. The Funds also may invest in commercial paper that is not rated
but that is determined by the Adviser to be of comparable quality to instruments that are so rated.
Bankers Acceptances.
Bankers acceptances are credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the full amount of the instrument upon
maturity.
Variable Amount Master Demand Notes.
Variable amount master demand notes are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the interest rate according to the terms of the instrument. Because master demand notes are direct lending arrangements between a Fund and the issuer, they are not normally
traded. Although there is no secondary market in the notes, a Fund may demand payment of principal and accrued interest at any time. While the notes are not typically rated by credit rating agencies, issuers of variable amount master demand notes
(which are normally manufacturing, retail, financial, and other business concerns) must satisfy the same criteria as set forth above for commercial paper. The Adviser will consider the earning power, cash flow and other liquidity ratios of the
issuers of such notes and will continuously monitor their financial status and ability to meet payment on demand.
Variable Rate
Demand Obligations.
Variable rate demand obligations (
VRDOs
) are securities in which the interest rate is adjusted at pre-designated periodic intervals. VRDOs may include a demand feature which is a put that entitles the
holder to receive the principal amount of the underlying security or securities and which may be exercised either at any time on no more than 30 days notice or at specified intervals not exceeding 397 calendar days on no more than 30
days notice.
S-25
U.S. Government Securities
The Funds may have exposure to U.S. government securities. The U.S. government securities to which the Funds may have exposure are either issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The U.S. government securities to which the Funds may have exposure are:
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direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds;
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notes, bonds, and discount notes issued and guaranteed by U.S. government agencies and instrumentalities supported by the full faith and credit of the United
States;
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notes, bonds, and discount notes of U.S. government agencies or instrumentalities which receive or have access to federal funding;
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notes, bonds, and discount notes of other U.S. government instrumentalities supported only by the credit of the instrumentalities; and
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obligations that are issued by private issuers and guaranteed under the Federal Deposit Insurance Corporation Temporary Liquidity Guarantee Program.
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U.S. Treasury obligations include separately traded interest and principal component parts of such obligations, known
as Separately Traded Registered Interest and Principal Securities (
STRIPS
), which are transferable through the Federal book-entry system. STRIPS are sold as zero coupon securities, which means that they are sold at a substantial
discount and redeemed at face value at their maturity date without interim cash payments of interest or principal. This discount is accreted over the life of the security, and such accretion will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, such securities may be subject to greater interest rate volatility than interest paying U.S. Treasury obligations.
The government securities to which the Funds may have exposure are backed in a variety of ways by the U.S. government or its agencies or instrumentalities. Some of these securities, such as GNMA
mortgage-backed securities, are backed by the full faith and credit of the U.S. government. Other securities, such as obligations of FNMA or FHLMC are backed by the credit of the agency or instrumentality issuing the obligations but not the full
faith and credit of the U.S. government. No assurances can be given that the U.S. government will provide financial support to these other agencies or instrumentalities because it is not obligated to do so. See Mortgage-Backed
Securities above for a description of these securities.
Variable, Floating, and Fixed Rate Debt Obligations
The debt obligations to which the Funds may have exposure may have variable, floating, or fixed interest rates. Variable rate
securities provide for periodic adjustments in the interest rate. Floating rate securities are generally offered at an initial interest rate which is at or above prevailing market rates. The interest rate paid on floating rate securities is then
reset periodically (commonly every 90 days) to an increment over some predetermined interest rate index. Commonly utilized indices include the three-month Treasury bill rate, the 180-day Treasury bill rate, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a bank, the commercial paper rates, or the longer-term rates on U.S. Treasury securities. Variable and floating rate securities are relatively long-term instruments that often carry demand features
permitting the holder to demand payment of principal at any time or at specified intervals prior to maturity. In order to most effectively use these securities, the Adviser must correctly assess probable movements in interest rates. If the Adviser
incorrectly forecasts such movements, a Fund could be adversely affected by use of variable and floating rate securities.
Fixed rate
securities pay a fixed rate of interest and tend to exhibit more price volatility during times of rising or falling interest rates than securities with variable or floating rates of interest. The value of fixed rate securities will tend to fall when
interest rates rise and rise when interest rates fall. The value of variable or floating rate securities, on the other hand, fluctuates much less in response to market interest rate movements than the value of fixed rate securities. This is because
variable and floating rate securities behave like short-term instruments in that the rate of interest they pay is subject to periodic adjustments according to a specified formula, usually with reference to some interest rate index or market interest
rate. Fixed rate securities with short-term characteristics are not subject to the same price volatility as fixed rate securities without such characteristics. Therefore, they behave more like variable or floating rate securities with respect to
price volatility.
S-26
Zero Coupon and Step Coupon Securities
The Funds may have exposure to zero coupon and step coupon securities. Zero coupon securities pay no cash income to their holders until they mature.
When held to maturity, their entire return comes from the difference between their purchase price and their maturity value. Step coupon securities are debt securities that may not pay interest for a specified period of time and then, after the
initial period, may pay interest at a series of different rates. Both zero coupon and step coupon securities are issued at substantial discounts from their value at maturity. Because interest on these securities is not paid on a current basis, the
values of securities of this type are subject to greater fluctuations than are the value of securities that distribute income regularly and may be more speculative than such securities. Accordingly, the values of these securities may be highly
volatile as interest rates rise or fall.
S-27
MANAGEMENT
The management of the Trust, including general supervision of the duties performed for the Funds by the Adviser under the Investment Management Agreement, is the responsibility of the Board of Trustees. The number
of trustees of the Trust is ten, one of whom is an interested person (as the term interested person is defined in the 1940 Act) and nine of whom are not interested persons (referred to herein as
independent
trustees
). None of the independent trustees has ever been a trustee, director or employee of, or consultant to, the Adviser or its affiliates. The names, business addresses and birthdates of the trustees and officers of the Funds, their
principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below. The trustees of the Trust are directors or trustees, as the case may be, of 100
Nuveen-sponsored open-end funds (the
Nuveen Mutual Funds
) and 117 Nuveen-sponsored closed-end funds (collectively with the Nuveen Mutual Funds, the
Nuveen Funds
).
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Name, Business Address
and Birthdate
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Position(s)
Held with
Trust
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Term of Office
and Length of
Time Served with
Trust
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios
in Fund
Complex
Overseen by
Trustee
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Other
Directorships
Held by
Trustee
During Past
Five Years
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Independent Trustees:
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Robert P. Bremner
333 West Wacker Drive
Chicago, IL 60606
(8/22/40)
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Chairman of the Board and Trustee
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TermIndefinite* Length of Service
Since 2003
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Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council affiliated with the Investment Company
Institute.
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217
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None
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Jack B. Evans
333 West Wacker Drive
Chicago, IL 60606
(10/22/48)
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Trustee
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TermIndefinite* Length of Service
Since 2003
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President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Member, Board of Regents for the State of Iowa University System; Director, Source Media Group; Life
Trustee of Coe College and the Iowa College Foundation; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm.
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217
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Director and Chairman, United Fire Group, a publicly held company; formerly, Director, Alliant Energy.
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S-28
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Name, Business Address
and Birthdate
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Position(s)
Held with
Trust
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Term of Office
and Length of
Time Served with
Trust
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios
in Fund
Complex
Overseen by
Trustee
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Other
Directorships
Held by
Trustee
During Past
Five Years
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William C. Hunter
333 West Wacker Drive
Chicago, IL 60606
(3/6/48)
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Trustee
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TermIndefinite* Length of Service
Since 2004
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Dean Emeritus (since June 30, 2012), formerly, Dean (2006-2012), Tippie College of Business, University of Iowa; Director (since 2005) and President (since July 2012), Beta Gamma Sigma,
Inc., The International Honor Society; Director of Wellmark, Inc. (since 2009); formerly, Director (1997-2007), Credit Research Center at Georgetown University; formerly, Dean and Distinguished Professor of Finance, School of Business at the
University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003).
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217
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Director (since 2004) of Xerox Corporation.
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David J. Kundert
333 West Wacker Drive
Chicago, IL 60606
(10/28/42)
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Trustee
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TermIndefinite* Length of Service
Since 2005
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Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors Corporation, and
President, One Group Mutual Funds; prior thereto, Executive Vice President, Bank One Corporation and Chairman and CEO, Banc One Investment Management Group; Member, Board of Regents, Luther College; Member of the Wisconsin Bar Association; Member of
Board of Directors, Friends of Boerner Botanical Gardens; Member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation.
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217
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None
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S-29
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Name, Business Address
and Birthdate
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Position(s)
Held with
Trust
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Term of Office
and Length of
Time Served with
Trust
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios
in Fund
Complex
Overseen by
Trustee
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Other
Directorships
Held by
Trustee
During Past
Five Years
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William J. Schneider
333 West Wacker
Drive
Chicago, IL 60606
(9/24/44)
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Trustee
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TermIndefinite*
Length of Service
Since 2003
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Chairman of Miller-Valentine Partners Ltd., a real estate investment company; Member, Mid-America Health System Board; Member, University of Dayton Business School Advisory Council; formerly,
Senior Partner and Chief Operating Officer (retired, 2004) of Miller-Valentine Group; formerly, Member, Dayton Philharmonic Orchestra Association; formerly, Director, Dayton Development Coalition; formerly, Member, Business Advisory Council,
Cleveland Federal Reserve Bank.
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217
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None
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Judith M. Stockdale
333 West Wacker
Drive
Chicago, IL 60606
(12/29/47)
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Trustee
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TermIndefinite*
Length of Service
Since 2003
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Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994).
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217
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None
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Carole E. Stone
333 West Wacker Drive
Chicago, IL 60606
(6/28/47)
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Trustee
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TermIndefinite*
Length of Service
Since 2007
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Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing
Association Oversight Board (2005-2007).
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217
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Director, Chicago Board Options Exchange (since 2006).
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Virginia L. Stringer
333 West Wacker
Drive
Chicago, IL 60606
(8/16/44)
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Trustee
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TermIndefinite*
Length of Service
Since 2011
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Board Member, Mutual Fund Directors Forum; former Member, Governing Board, Investment Company Institutes Independent Directors Council; Governance consultant and non-profit board
member; former Owner and President, Strategic Management Resources, Inc., a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury Company.
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217
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Previously, Independent Director (1987-2010) and Chair (1997-2010), First American Fund Complex.
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S-30
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Name, Business Address
and Birthdate
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Position(s)
Held with
Trust
|
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Term of Office
and Length of
Time Served with
Trust
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios
in Fund
Complex
Overseen by
Trustee
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Other
Directorships
Held by
Trustee
During Past
Five Years
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Terence J. Toth
333 West Wacker Drive
Chicago, IL 60606
(9/29/59)
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Trustee
|
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TermIndefinite*
Length of Service
Since 2008
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Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust Global Investments
(2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); Member, Chicago Fellowship Board (since 2005), Catalyst Schools of
Chicago Board (since 2008) and Mather Foundation Board (since 2012) and a member of its investment committee; formerly, Member, Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan
Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004).
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217
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None
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Interested Trustees:
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John P. Amboian**
333 West Wacker Drive
Chicago, IL 60606
(6/14/61)
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Trustee
|
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TermIndefinite*
Length of Service
Since 2008
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Chief Executive Officer and Chairman (since 2007) and Director (since 1999) of Nuveen Investments, Inc.; formerly, President (1999-2007); Chief Executive Officer (since 2007) of Nuveen
Investments Advisers Inc.; Director (since 1998), formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, LLC.
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217
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None
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*
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Each trustee serves an indefinite term until his or her successor is elected.
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**
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Mr. Amboian is an interested person of the Trust, as defined in the 1940 Act, by reason of his positions with Nuveen Investments, Inc. (
Nuveen
Investments
) and certain of its subsidiaries.
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S-31
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Name, Business Address
and Birthdate
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Position(s) Held
with Trust
|
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Term of
Office and
Length of
Time Served
with Trust
|
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios
in Fund
Complex
Overseen by
Officer
|
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Officers of the Trust:
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Gifford R. Zimmerman
333 West Wacker
Drive
Chicago, IL 60606
(9/9/56)
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Chief Administrative Officer
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TermUntil August 2013 Length of ServiceSince 1996
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Managing Director (since 2002) and Assistant Secretary of Nuveen Securities, LLC; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of
Nuveen Fund Advisors, LLC; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Vice
President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002); Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Managing Director, Associate General Counsel and Assistant Secretary
of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of Santa Barbara Asset Management, LLC (since 2006) and Winslow Capital Management, LLC (since 2010); Chief Administrative Officer and Chief Compliance Officer
(since 2006) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst.
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217
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Margo L. Cook
333 West Wacker Drive
Chicago, IL 60606
(4/11/64)
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Vice President
|
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TermUntil August 2013 Length of ServiceSince 2009
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Executive Vice President (since 2008) of Nuveen Investments, Inc. and Nuveen Fund Advisors, LLC (since 2011); Managing DirectorInvestment Services of Nuveen Commodities Asset
Management, LLC (since August 2011); previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst.
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217
|
|
|
|
|
|
Lorna C. Ferguson
333 West Wacker Drive
Chicago, IL 60606
(10/24/45)
|
|
Vice President
|
|
TermUntil August 2013 Length of ServiceSince 1998
|
|
Managing Director (since 2004) of Nuveen Securities, LLC; Managing Director (since 2005) of Nuveen Fund Advisors, LLC.
|
|
217
|
|
|
|
|
|
Stephen D. Foy
333 West Wacker Drive
Chicago, IL 60606
(5/31/54)
|
|
Vice President and Controller
|
|
TermUntil August 2013 Length of Service Since 1998
|
|
Senior Vice President (since 2010), formerly, Vice President (2004-2010) and Funds Controller of Nuveen Securities, LLC; Vice President of Nuveen Fund Advisors, LLC (since 2005); Chief
Financial Officer (since 2010) of Nuveen Commodities Asset Management, LLC; Certified Public Accountant.
|
|
217
|
S-32
|
|
|
|
|
|
|
|
|
Name, Business Address
and Birthdate
|
|
Position(s) Held
with Trust
|
|
Term of
Office and
Length of
Time Served
with Trust
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen by
Officer
|
|
|
|
|
|
Scott S. Grace
333 West Wacker Drive
Chicago, IL 60606
(8/20/70)
|
|
Vice President and Treasurer
|
|
TermUntil August 2013 Length of Service Since 2009
|
|
Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Securities, LLC; Managing Director and Treasurer (since 2009) of Nuveen Investments Advisers Inc.,
Nuveen Investments Holdings, Inc., Nuveen Fund Advisors, LLC and (since 2011) Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC and
Winslow Capital Management, LLC; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of Janus Capital Group, Inc.; formerly, Senior
Associate in Morgan Stanleys Global Financial Services Group (2000-2003); Chartered Accountant.
|
|
217
|
|
|
|
|
|
Walter M. Kelly
333 West Wacker Drive
Chicago, IL 60606
(2/24/70)
|
|
Vice President and Chief Compliance Officer
|
|
TermUntil August 2013 Length of Service Since 2003
|
|
Senior Vice President (since 2008) and Assistant Secretary (since 2003) of Nuveen Fund Advisors, LLC; Senior Vice President (since 2008) of Nuveen Investments Holdings, Inc.; formerly, Senior
Vice President (2008-2011) of Nuveen Securities, LLC.
|
|
217
|
|
|
|
|
|
Tina M. Lazar
333 West Wacker Drive
Chicago, IL 60606
(8/27/61)
|
|
Vice President
|
|
TermUntil August 2013 Length of ServiceSince 2002
|
|
Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, LLC.
|
|
217
|
|
|
|
|
|
Kevin J. McCarthy
333 West Wacker Drive
Chicago, IL 60606
(3/26/66)
|
|
Vice President and Secretary
|
|
TermUntil August 2013 Length of ServiceSince 2007
|
|
Managing Director and Assistant Secretary (since 2008), formerly, Vice President (2007-2008) of Nuveen Securities, LLC; Managing Director (since 2008), Vice President and Assistant Secretary
(since 2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, LLC; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Vice President and Assistant Secretary of Nuveen
Investments Advisers Inc., NWQ Investment Management Company, LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC and Winslow Capital Management, LLC (since 2010); Vice President and Secretary (since 2010) of
Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007).
|
|
217
|
S-33
|
|
|
|
|
|
|
|
|
Name, Business Address
and Birthdate
|
|
Position(s) Held
with Trust
|
|
Term of
Office and
Length of
Time Served
with Trust
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen by
Officer
|
|
|
|
|
|
Kathleen L. Prudhomme
901 Marquette
Avenue
Minneapolis, MN 55402
(3/30/53)
|
|
Vice President and Assistant Secretary
|
|
TermUntil August 2013 Length of ServiceSince 2011
|
|
Managing Director and Assistant Secretary of Nuveen Securities, LLC (since 2011); Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors, LLC;
Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; formerly, Deputy General Counsel, FAF Advisors, Inc. (2004-2010).
|
|
217
|
|
|
|
|
|
Jeffery M. Wilson
333 West Wacker Drive
Chicago, IL 60606
(3/13/56)
|
|
Vice President
|
|
TermUntil August 2013 Length of ServiceSince 2011
|
|
Senior Vice President of Nuveen Securities, LLC (since 2011); formerly, Senior Vice President of FAF Advisors, Inc. (2000-2010).
|
|
100
|
S-34
Board Leadership Structure and Risk Oversight
The Board of Directors or the Board of Trustees (as the case may be, each is referred to hereafter as the
Board
or
Board
of Trustees
and the directors or trustees of the Nuveen Funds, as applicable, are each referred to herein as
trustees
) oversees the operations and management of the Nuveen Funds, including the duties performed for the
Nuveen Funds by the Adviser. The Board has adopted a unitary board structure. A unitary board consists of one group of directors who serve on the board of every fund in the complex. In adopting a unitary board structure, the trustees seek to provide
effective governance through establishing a board, the overall composition of which will, as a body, possess the appropriate skills, independence and experience to oversee the Nuveen Funds business. With this overall framework in mind, when
the Board, through its Nominating and Governance Committee discussed below, seeks nominees for the Board, the trustees consider, not only the candidates particular background, skills and experience, among other things, but also whether such
background, skills and experience enhance the Boards diversity and at the same time complement the Board given its current composition and the mix of skills and experiences of the incumbent trustees. The Nominating and Governance Committee
believes that the Board generally benefits from diversity of background, experience and views among its members, and considers this a factor in evaluating the composition of the Board, but has not adopted any specific policy on diversity or any
particular definition of diversity.
The Board believes the unitary board structure enhances good and effective governance, particularly
given the nature of the structure of the investment company complex. Funds in the same complex generally are served by the same service providers and personnel and are governed by the same regulatory scheme which raises common issues that must be
addressed by the directors across the fund complex (such as compliance, valuation, liquidity, brokerage, trade allocation or risk management). The Board believes it is more efficient to have a single board review and oversee common policies and
procedures which increases the Boards knowledge and expertise with respect to the many aspects of fund operations that are complex-wide in nature. The unitary structure also enhances the Boards influence and oversight over the investment
adviser and other service providers.
In an effort to enhance the independence of the Board, the Board also has a Chairman that is an
independent trustee. The Board recognizes that a chairman can perform an important role in setting the agenda for the Board, establishing the boardroom culture, establishing a point person on behalf of the Board for fund management, and reinforcing
the Boards focus on the long-term interests of shareholders. The Board recognizes that a chairman may be able to better perform these functions without any conflicts of interests arising from a position with fund management. Accordingly, the
trustees have elected Robert P. Bremner to serve as the independent Chairman of the Board through June 30, 2013 and William J. Schneider to serve as the independent Chairman of the Board effective July 1, 2013. Specific responsibilities of the
Chairman include: (i) presiding at all meetings of the Board and of the shareholders; (ii) seeing that all orders and resolutions of the trustees are carried into effect; and (iii) maintaining records of and, whenever necessary,
certifying all proceedings of the trustees and the shareholders.
Although the Board has direct responsibility over various matters (such
as advisory contracts, underwriting contracts and fund performance), the Board also exercises certain of its oversight responsibilities through several committees that it has established and which report back to the full Board. The Board believes
that a committee structure is an effective means to permit trustees to focus on particular operations or issues affecting the Nuveen Funds, including risk oversight. More specifically, with respect to risk oversight, the Board has delegated matters
relating to valuation and compliance to certain committees (as summarized below) as well as certain aspects of investment risk. In addition, the Board believes that the periodic rotation of trustees among the different committees allows the trustees
to gain additional and different perspectives of a Nuveen Funds operations. The Board has established six standing committees: the Executive Committee, the Dividend Committee, the Audit Committee, the Compliance, Risk Management and Regulatory
Oversight Committee, the Nominating and Governance Committee and the Open-End Funds Committee. The Board may also from time to time create ad hoc committees to focus on particular issues as the need arises. The membership and functions of the
standing committees are summarized below.
S-35
The Executive Committee, which meets between regular meetings of the Board, is authorized to
exercise all of the powers of the Board. The members of the Executive Committee are Robert P. Bremner, Chair, Judith M. Stockdale and John P. Amboian. During the fiscal year ended August 31, 2012, the Executive Committee did not meet.
The Audit Committee assists the Board in the oversight and monitoring of the accounting and reporting policies, processes and practices of the
Nuveen Funds, and the audits of the financial statements of the Nuveen Funds; the quality and integrity of the financial statements of the Nuveen Funds; the Nuveen Funds compliance with legal and regulatory requirements relating to the Nuveen
Funds financial statements; the independent auditors qualifications, performance and independence; and the pricing procedures of the Nuveen Funds and the Advisers internal valuation group. It is the responsibility of the Audit
Committee to select, evaluate and replace any independent auditors (subject only to Board and, if applicable, shareholder ratification) and to determine their compensation. The Audit Committee is also responsible for, among other things, overseeing
the valuation of securities comprising the Nuveen Funds portfolios. Subject to the Boards general supervision of such actions, the Audit Committee addresses any valuation issues, oversees the Nuveen Funds pricing procedures and
actions taken by the Advisers internal valuation group which provides regular reports to the committee, reviews any issues relating to the valuation of the Nuveen Funds securities brought to its attention and considers the risks to the
Nuveen Funds in assessing the possible resolutions to these matters. The Audit Committee may also consider any financial risk exposures for the Nuveen Funds in conjunction with performing its functions.
To fulfill its oversight duties, the Audit Committee receives annual and semi-annual reports and has regular meetings with the external auditors for
the Nuveen Funds and the Advisers internal audit group. The Audit Committee also may review in a general manner the processes the Board or other Board committees have in place with respect to risk assessment and risk management as well as
compliance with legal and regulatory matters relating to the Nuveen Funds financial statements. The committee operates under a written charter adopted and approved by the Board. Members of the Audit Committee shall be independent (as set forth
in the charter) and free of any relationship that, in the opinion of the trustees, would interfere with their exercise of independent judgment as an Audit Committee member. The members of the Audit Committee are Robert P. Bremner, David J. Kundert,
Chair, William J. Schneider, Carole E. Stone and Terence J. Toth, each of whom is an independent trustee of the Nuveen Funds. During the fiscal period ended August 31, 2012, the Audit Committee met two times.
The Nominating and Governance Committee is responsible for seeking, identifying and recommending to the Board qualified candidates for election or
appointment to the Board. In addition, the Nominating and Governance Committee oversees matters of corporate governance, including the evaluation of Board performance and processes, the assignment and rotation of committee members, and the
establishment of corporate governance guidelines and procedures, to the extent necessary or desirable, and matters related thereto. Although the unitary and committee structure has been developed over the years and the Nominating and Governance
Committee believes the structure has provided efficient and effective governance, the committee recognizes that as demands on the Board evolve over time (such as through an increase in the number of funds overseen or an increase in the complexity of
the issues raised), the committee must continue to evaluate the Board and committee structures and their processes and modify the foregoing as may be necessary or appropriate to continue to provide effective governance. Accordingly, the Nominating
and Governance Committee has a separate meeting each year to, among other things, review the Board and committee structures, their performance and functions, and recommend any modifications thereto or alternative structures or processes that would
enhance the Boards governance of the Nuveen Funds.
In addition, the Nominating and Governance Committee, among other things, makes
recommendations concerning the continuing education of trustees; monitors performance of legal counsel and other service providers; establishes and monitors a process by which security holders are able to communicate in writing with members of the
Board; and periodically reviews and makes recommendations about any appropriate changes to trustee compensation. In the event of a vacancy on the Board, the Nominating and Governance Committee receives suggestions from various sources,
S-36
including shareholders, as to suitable candidates. Suggestions should be sent in writing to Lorna Ferguson, Manager of Fund Board Relations, Nuveen Investments, 333 West Wacker Drive, Chicago, IL
60606. The Nominating and Governance Committee sets appropriate standards and requirements for nominations for new trustees and reserves the right to interview any and all candidates and to make the final selection of any new trustees. In
considering a candidates qualifications, each candidate must meet certain basic requirements, including relevant skills and experience, time availability (including the time requirements for due diligence site visits to sub-advisers and
service providers) and, if qualifying as an independent trustee candidate, independence from the Adviser, sub-advisers, the Distributor and other service providers, including any affiliates of these entities. These skill and experience requirements
may vary depending on the current composition of the Board, since the goal is to ensure an appropriate range of skills, diversity and experience, in the aggregate. Accordingly, the particular factors considered and weight given to these factors will
depend on the composition of the Board and the skills and backgrounds of the incumbent trustees at the time of consideration of the nominees. All candidates, however, must meet high expectations of personal integrity, independence, governance
experience and professional competence. All candidates must be willing to be critical within the Board and with management and yet maintain a collegial and collaborative manner toward other Board members. The committee operates under a written
charter adopted and approved by the Board. This committee is composed of the independent trustees of the Nuveen Funds. Accordingly, the members of the Nominating and Governance Committee are Robert P. Bremner, Chair, Jack B. Evans, William C.
Hunter, David J. Kundert, William J. Schneider, Judith M. Stockdale, Carole E. Stone, Virginia L. Stringer and Terence J. Toth. During the fiscal period ended August 31, 2012, the Nominating and Governance Committee met four times.
The Dividend Committee is authorized to declare distributions on the Nuveen Funds shares, including, but not limited to, regular and special
dividends, capital gains and ordinary income distributions. The members of the Dividend Committee are Jack B. Evans, Chair, Judith M. Stockdale and Terence J. Toth. During the fiscal period ended August 31, 2012, the Dividend Committee met two
times.
The Compliance, Risk Management and Regulatory Oversight Committee (the
Compliance
Committee
) is
responsible for the oversight of compliance issues, risk management and other regulatory matters affecting the Nuveen Funds that are not otherwise the jurisdiction of the other committees. The Board has adopted and periodically reviews policies and
procedures designed to address the Nuveen Funds compliance and risk matters. As part of its duties, the Compliance Committee reviews the policies and procedures relating to compliance matters and recommends modifications thereto as necessary
or appropriate to the full Board; develops new policies and procedures as new regulatory matters affecting the Nuveen Funds arise from time to time; evaluates or considers any comments or reports from examinations from regulatory authorities and
responses thereto; and performs any special reviews, investigations or other oversight responsibilities relating to risk management, compliance and/or regulatory matters as requested by the Board.
In addition, the Compliance Committee is responsible for risk oversight, including, but not limited to, the oversight of risks related to
investments and operations. Such risks include, among other things, exposures to particular issuers, market sectors, or types of securities; risks related to product structure elements, such as leverage; and techniques that may be used to address
those risks, such as hedging and swaps. In assessing issues brought to the committees attention or in reviewing a particular policy, procedure, investment technique or strategy, the Compliance Committee evaluates the risks to the Nuveen Funds
in adopting a particular approach compared to the anticipated benefits to the Nuveen Funds and their shareholders. In fulfilling its obligations, the Compliance Committee meets on a quarterly basis, and at least once a year in person. The Compliance
Committee receives written and oral reports from the Nuveen Funds Chief Compliance Officer (
CCO
) and meets privately with the CCO at each of its quarterly meetings. The CCO also provides an annual report to the full Board
regarding the operations of the Nuveen Funds and other service providers compliance programs as well as any recommendations for modifications thereto. The Compliance Committee also receives reports from the Advisers investment
services group regarding various investment risks. Notwithstanding the foregoing, the full Board also participates in discussions with management regarding certain matters relating to investment risk, such as the use of leverage and hedging. The
investment services group therefore also reports to the full Board at its quarterly meetings regarding,
S-37
among other things, fund performance and the various drivers of such performance. Accordingly, the Board directly and/or in conjunction with the Compliance Committee oversees matters relating to
investment risks. Matters not addressed at the committee level are addressed directly by the full Board. The committee operates under a written charter adopted and approved by the Board. The members of the Compliance Committee are Jack B. Evans,
William C. Hunter, William J. Schneider, Judith M. Stockdale, Chair, and Virginia L. Stringer. During the fiscal period ended August 31, 2012, the Compliance Committee met four times.
Effective January 1, 2012, the Board approved the creation of the Open-End Funds Committee. The Open-End Funds Committee is responsible for
assisting the Board in the oversight and monitoring of the Nuveen Funds that are registered as open-end management investment companies (
Open-End Funds
). The committee may review and evaluate matters related to the formation and
the initial presentation to the Board of any new Open-End Fund and may review and evaluate any matters relating to any existing Open-End Fund. The committee operates under a written charter adopted and approved by the Board. The members of the
Open-End Funds Committee are Robert P. Bremner, David J. Kundert, Judith M. Stockdale, Virginia L. Stringer and Terence J. Toth, Chair. During the fiscal period ended August 31, 2012, the Open-End Funds Committee met two times.
Board Diversification and Trustee Qualifications
In determining that a particular trustee was qualified to serve on the Board, the Board has considered each trustees background, skills, experience and other attributes in light of the composition of the
Board with no particular factor controlling. The Board believes that trustees need to have the ability to critically review, evaluate, question and discuss information provided to them, and to interact effectively with Fund management, service
providers and counsel, in order to exercise effective business judgment in the performance of their duties, and the Board believes each trustee satisfies this standard. An effective trustee may achieve this ability through his or her educational
background; business, professional training or practice; public service or academic positions; experience from service as a board member or executive of investment funds, public companies or significant private or not-for-profit entities or other
organizations; and/or other life experiences. Accordingly, set forth below is a summary of the experiences, qualifications, attributes, and skills that led to the conclusion, as of the date of this document, that each trustee should continue to
serve in that capacity. References to the experiences, qualifications, attributes and skills of trustees are pursuant to requirements of the Securities and Exchange Commission (
SEC
), do not constitute holding out of the Board or
any trustee as having any special expertise or experience and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.
John P. Amboian
Mr. Amboian, an interested trustee of the Nuveen Funds, joined Nuveen
Investments in June 1995 and became Chief Executive Officer in July 2007 and Chairman in November 2007. Prior to this, since 1999, he served as President with responsibility for the firms product, marketing, sales, operations and
administrative activities. Mr. Amboian initially served Nuveen Investments as Executive Vice President and Chief Financial Officer. Prior to joining Nuveen Investments, Mr. Amboian held key management positions with two consumer product
firms affiliated with the Phillip Morris Companies. He served as Senior Vice President of Finance, Strategy and Systems at Miller Brewing Company. Mr. Amboian began his career in corporate and international finance at Kraft Foods, Inc., where
he eventually served as Treasurer. He received a Bachelors degree in economics and a Masters of Business Administration (
MBA
) from the University of Chicago. Mr. Amboian serves on the Board of Directors of Nuveen
Investments and is a Board Member or Trustee of the Investment Company Institute Board of Governors, Boys and Girls Clubs of Chicago, Childrens Memorial Hospital and Foundation, the Council on the Graduate School of Business (University of
Chicago), and the North Shore Country Day School Foundation. He is also a member of the Civic Committee of the Commercial Club of Chicago and the Economic Club of Chicago.
Robert P. Bremner
Mr. Bremner, the Nuveen Funds Independent Chairman, is a private
investor and management consultant in Washington, D.C. His biography of William McChesney Martin, Jr., a former chairman of the Federal Reserve Board, was published by Yale University Press in November 2004. From 1994 to 1997, he was a Senior Vice
President at Samuels International Associates, an international consulting
S-38
firm specializing in governmental policies, where he served in a part-time capacity. Previously, Mr. Bremner was a partner in the LBK Investors Partnership and was chairman and majority
stockholder with ITC Investors Inc., both private investment firms. He currently serves on the Board and as Treasurer of the Humanities Council of Washington D.C. and is a Board Member of the Independent Directors Council affiliated with the
Investment Company Institute. From 1984 to 1996, Mr. Bremner was an independent Trustee of the Flagship Funds, a group of municipal open-end funds. He began his career at the World Bank in Washington D.C. He graduated with a Bachelor of Science
degree from Yale University and received his MBA from Harvard University.
Jack B. Evans
President of the Hall-Perrine Foundation, a private philanthropic corporation, since 1996, Mr. Evans was formerly President and Chief Operating
Officer of the SCI Financial Group, Inc., a regional financial services firm headquartered in Cedar Rapids, Iowa. Formerly, he was a member of the Board of the Federal Reserve Bank of Chicago as well as a Director of Alliant Energy. Mr. Evans
is Chairman of the Board of United Fire Group, sits on the Board of Source Media Group, is a member of the Board of Regents for the State of Iowa University System and is a Life Trustee of Coe College. He has a Bachelor of Arts degree from Coe
College and an MBA from the University of Iowa.
William C. Hunter
Mr. Hunter became Dean Emeritus of the Henry B. Tippie College of Business at the University of Iowa on June 30, 2012. He was appointed Dean of the Henry B. Tippie College of Business at the University of Iowa
on July 1, 2006. He had been Dean and Distinguished Professor of Finance at the University of Connecticut School of Business since June 2003. From 1995 to 2003, he was the Senior Vice President and Director of Research at the Federal Reserve
Bank of Chicago. While there he served as the Banks Chief Economist and was an Associate Economist on the Federal Reserve Systems Federal Open Market Committee (FOMC). In addition to serving as a Vice President in charge of financial
markets and basic research at the Federal Reserve Bank in Atlanta, he held faculty positions at Emory University, Atlanta University, the University of Georgia and Northwestern University. A past Director of the Credit Research Center at Georgetown
University, SS&C Technologies, Inc. (2005) and past President of the Financial Management Association International, he has consulted with numerous foreign central banks and official agencies in Western Europe, Central and Eastern Europe,
Asia, Central America and South America. From 1990 to 1995, he was a U.S. Treasury Advisor to Central and Eastern Europe. He has been a Director of the Xerox Corporation since 2004 and Wellmark, Inc. since 2009. He is a Director and President of
Beta Gamma Sigma, Inc., The International Business Honor Society.
David J. Kundert
Mr. Kundert retired in 2004 as Chairman of JPMorgan Fleming Asset Management, and as President and CEO of Banc One Investment Advisors
Corporation, and as President of One Group Mutual Funds. Prior to the merger between Bank One Corporation and JPMorgan Chase and Co., he was Executive Vice President, Bank One Corporation and, since 1995, the Chairman and CEO, Banc One Investment
Management Group. From 1988 to 1992, he was President and CEO of Bank One Wisconsin Trust Company. Currently, Mr. Kundert is a Director of the Northwestern Mutual Wealth Management Company. He started his career as an attorney for Northwestern
Mutual Life Insurance Company. Mr. Kundert has served on the Board of Governors of the Investment Company Institute and he is currently a member of the Wisconsin Bar Association. He is on the Board of the Greater Milwaukee Foundation and chairs
its Investment Committee. He received his Bachelor of Arts degree from Luther College, and his Juris Doctor from Valparaiso University.
William J.
Schneider
Mr. Schneider is currently Chairman, formerly Senior Partner and Chief Operating Officer (retired, December 2004) of
Miller-Valentine Partners Ltd., a real estate investment company. He was formerly a Director and Past Chair of the Dayton Development Coalition. He was formerly a member of the Community Advisory Board of the National City Bank in Dayton as well as
a former member of the Business Advisory Council of the Cleveland Federal Reserve Bank. Mr. Schneider is a member of the Business Advisory Council for the University of Dayton College of Business. Mr. Schneider was an independent Trustee
of the Flagship Funds, a group of municipal open-end funds. He also served as
S-39
Chair of the Miami Valley Hospital and as Chair of the Finance Committee of its parent holding company. Mr. Schneider has a Bachelor of Science in Community Planning from the University of
Cincinnati and a Masters of Public Administration from the University of Dayton.
Judith M. Stockdale
Ms. Stockdale is currently Executive Director of the Gaylord and Dorothy Donnelley Foundation, a private foundation working in land
conservation and artistic vitality in the Chicago region and the Low country of South Carolina. Her previous positions include Executive Director of the Great Lakes Protection Fund, Executive Director of Openlands, and Senior Staff Associate at the
Chicago Community Trust. She has served on the Boards of the Land Trust Alliance, the National Zoological Park, the Governors Science Advisory Council (Illinois), the Nancy Ryerson Ranney Leadership Grants Program, Friends of Ryerson Woods and
the Donors Forum. Ms. Stockdale, a native of the United Kingdom, has a Bachelor of Science degree in geography from the University of Durham (UK) and a Master of Forest Science degree from Yale University.
Carole E. Stone
Ms. Stone retired from
the New York State Division of the Budget in 2004, having served as its Director for nearly five years and as Deputy Director from 1995 through 1999. Ms. Stone is currently on the Board of Directors of the Chicago Board Options Exchange, CBOE
Holdings, Inc. and C2 Options Exchange, Incorporated. She has also served as the Chair of the New York Racing Association Oversight Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of
Directors of several New York State public authorities. Ms. Stone has a Bachelor of Arts from Skidmore College in Business Administration.
Virginia L. Stringer
Ms. Stringer
served as the independent chair of the Board of the First American Fund Complex from 1997 to 2010, having joined such Board in 1987. Ms. Stringer serves on the board of the Mutual Fund Directors Forum. She is a recipient of the Outstanding
Corporate Director award from Twin Cities Business Monthly and the Minnesota Chapter of the National Association of Corporate Directors. Ms. Stringer is the past board chair of the Oak Leaf Trust, director of the Saint Paul Riverfront
Corporation and also served as President of the Minneapolis Clubs Governing Board. She is a director and former board chair of the Minnesota Opera and a Life Trustee and former board of the Voyageur Outward Bound School. She also served as a
trustee of Outward Bound USA. She was appointed by the Governor of Minnesota to the Board on Judicial Standards and also served on a Minnesota Supreme Court Judicial Advisory Committee to reform the states judicial disciplinary process. She is
a member of the International Womens Forum and attended the London Business School as an International Business Fellow. Ms. Stringer also served as board chair of the Human Resource Planning Society, the Minnesota Womens Campaign
Fund and the Minnesota Womens Economic Roundtable. Ms. Stringer is the retired founder of Strategic Management Resources, a consulting practice focused on corporate governance, strategy and leadership. She has twenty five years of
corporate experience having held executive positions in general management, marketing and human resources with IBM and the Pillsbury Company.
Terence
J. Toth
Mr. Toth is a Director, Legal & General Investment Management America, Inc. (since 2008) and a Managing
Partner, Promus Capital (since 2008). From 2004 to 2007, he was Chief Executive Officer and President of Northern Trust Global Investments, and Executive Vice President of Quantitative Management & Securities Lending from 2000 to 2004. He
also formerly served on the Board of the Northern Trust Mutual Funds. He joined Northern Trust in 1994 after serving as Managing Director and Head of Global Securities Lending at Bankers Trust (1986 to 1994) and Head of Government Trading and Cash
Collateral Investment at Northern Trust from 1982 to 1986. He currently serves on the Board of the Chicago Fellowship and is Chairman of the Board of Catalyst Schools of Chicago. He is on the Mather Foundation Board (since 2012) and is a member of
its investment committee. Mr. Toth graduated with a Bachelor of Science degree from the University of Illinois, and received his MBA from New York University. In 2005, he graduated from the CEO Perspectives Program at Northwestern University.
S-40
Board Compensation
The following table shows, for each independent trustee, (1) the aggregate compensation paid by the Funds for the fiscal period ended August
31, 2012, (2) the amount of total compensation paid by the Funds that has been deferred, and (3) the total compensation paid to each trustee by the Nuveen Funds during the fiscal period ended August 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Trustee
|
|
Aggregate
Compensation
From Funds
1
|
|
|
Amount of Total
Compensation that
Has Been Deferred
2
|
|
|
Total Compensation
From Nuveen Funds
Paid to Trustees
3
|
|
Robert P. Bremner
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
346,643
|
|
Jack B. Evans
|
|
|
2
|
|
|
|
|
|
|
|
266,855
|
|
William C. Hunter
|
|
|
1
|
|
|
|
|
|
|
|
250,787
|
|
David J. Kundert
|
|
|
2
|
|
|
|
|
|
|
|
269,999
|
|
William J. Schneider
|
|
|
2
|
|
|
|
|
|
|
|
284,738
|
|
Judith M. Stockdale
|
|
|
2
|
|
|
|
|
|
|
|
266,866
|
|
Carole E. Stone
|
|
|
2
|
|
|
|
|
|
|
|
266,000
|
|
Virginia L.
Stringer
|
|
|
1
|
|
|
|
|
|
|
|
248,500
|
|
Terence J. Toth
|
|
|
2
|
|
|
|
|
|
|
|
294,750
|
|
1
|
|
The compensation paid, including deferred amounts, to the independent trustees for the fiscal period from May 4, 2012 to August 31, 2012 for services to the
Funds.
|
2
|
|
Pursuant to a deferred compensation agreement with the Funds, deferred amounts are treated as though an equivalent dollar amount has been invested in shares of
one or more eligible Nuveen Funds. The amounts provided are the total deferred fees (including the return from the assumed investment in the eligible Nuveen Funds) payable from the Funds.
|
3
|
|
Based on the compensation paid (including any amounts deferred) to the trustees for the one-year period ended August 31, 2012 for services to the Nuveen Funds.
|
Prior to January 1, 2012, independent trustees received a $120, 000 annual retainer plus (a) a fee of $4,500 per
day for attendance in person or by telephone at regularly scheduled meetings of the Board; (b) a fee of $3,000 per meeting for attendance in person or by telephone at special, non-regularly scheduled Board meetings where in-person attendance
was required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (c) a fee of $2,500 per meeting for attendance in person or by telephone at Audit Committee meetings
where in-person attendance was required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (d) a fee of $2,500 per meeting for attendance in person or by telephone at
Compliance, Risk Management and Regulatory Oversight Committee meetings where in-person attendance was required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (e) a
fee of $1,000 per meeting for attendance in person or by telephone at Dividend Committee meetings; and (f) a fee of $500 per meeting for attendance in person or by telephone at all other committee meetings ($1,000 for shareholder meetings)
where in-person attendance was required and $250 per meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance was not required, and $100 per meeting when the Executive
Committee acted as pricing committee for IPOs, plus, in each case, expenses incurred in attending such meetings, provided that no fees were received for meetings held on days on which regularly scheduled Board meetings were held. In addition to the
payments described above, the Chairman of the Board received $75,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee received $10,000 each and the chairperson of
the Nominating and Governance Committee received $5,000 as additional retainers. Independent trustees also received a fee of $3,000 per day for site visits to entities that provided services to the Nuveen Funds on days on which no Board meeting was
held. When ad hoc committees were organized, the Nominating and Governance Committee at the time of formation determined compensation to be paid to the members of such committee; however, in general, such fees were $1,000 per meeting for attendance
in person or by telephone at ad hoc committee meetings where in-person attendance was required
S-41
and $500 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required. The annual retainer, fees and expenses were allocated among the Nuveen
Funds on the basis of relative net assets, although management might have, in its discretion, established a minimum amount to be allocated to each fund.
Effective January 1, 2012, independent trustees receive a $130,000 annual retainer (increased to $140,000 as of January 1, 2013) plus (a) a fee of $4,500 per day for attendance in person or by telephone
at regularly scheduled meetings of the Board; (b) a fee of $3,000 per meeting for attendance in person or by telephone at special, non-regularly scheduled Board meetings where in-person attendance is required and $2,000 per meeting for
attendance by telephone or in person at such meetings where in-person attendance is not required; (c) a fee of $2,500 per meeting for attendance in person or by telephone at Audit Committee meetings where in-person attendance is required and
$2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (d) a fee of $2,500 per meeting for attendance in person or by telephone at Compliance, Risk Management and Regulatory
Oversight Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (e) a fee of $1,000 per meeting for attendance in
person or by telephone at Dividend Committee meetings; (f) a fee of $500 per meeting for attendance in person or by telephone at all other committee meetings ($1,000 for shareholder meetings) where in-person attendance is required and $250 per
meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance is not required, and $100 per meeting when the Executive Committee acts as pricing committee for IPOs, plus, in
each case, expenses incurred in attending such meetings, provided that no fees are received for meetings held on days on which regularly scheduled Board meetings are held; and (g) a fee of $2,500 per meeting for attendance in person or by
telephone at Open-End Funds Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; provided that no fees are received for
meetings held on days on which regularly scheduled Board meetings are held. In addition to the payments described above, the Chairman of the Board receives $75,000, the chairpersons of the Audit Committee, the Dividend Committee, the Compliance,
Risk Management and Regulatory Oversight Committee and the Open-End Funds Committee receive $12,500 each and the chairperson of the Nominating and Governance Committee receives $5,000 as additional retainers. Independent trustees also receive a fee
of $3,000 per day for site visits to entities that provide services to the Nuveen Funds on days on which no Board meeting is held. When ad hoc committees are organized, the Nominating and Governance Committee will at the time of formation determine
compensation to be paid to the members of such committee; however, in general, such fees will be $1,000 per meeting for attendance in person or by telephone at ad hoc committee meetings where in-person attendance is required and $500 per meeting for
attendance by telephone or in person at such meetings where in-person attendance is not required. The annual retainer, fees and expenses are allocated among the Nuveen Funds on the basis of relative net assets, although management may, in its
discretion, establish a minimum amount to be allocated to each fund.
The Trust does not have a retirement or pension plan. The
Trust has a deferred compensation plan (the
Deferred Compensation Plan
) that permits any independent trustee to elect to defer receipt of all or a portion of his or her compensation as an independent trustee. The deferred
compensation of a participating trustee is credited to a book reserve account of the Trust when the compensation would otherwise have been paid to the trustee. The value of the trustees deferral account at any time is equal to the value that
the account would have had if contributions to the account had been invested and reinvested in shares of one or more of the eligible Nuveen Funds. At the time for commencing distributions from a trustees deferral account, the independent
trustee may elect to receive distributions in a lump sum or over a period of five years. The Trust will not be liable for any other funds obligations to make distributions under the Deferred Compensation Plan.
The Funds have no employees. The officers of the Trust and the trustee of the Trust who is not an independent trustee serve without any compensation
from the Funds.
S-42
Share Ownership
The information in the table below discloses the dollar ranges of (i) each trustees beneficial ownership in each Fund, and (ii) each
trustees aggregate beneficial ownership in all funds within the Nuveen Funds complex, including in each case the value of fund shares elected by the trustee in the trustees deferred compensation plan, based on the value of fund shares as
of December 14, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar Range of Equity
Securities in the
Funds
|
|
|
Aggregate Dollar Range of Equity
Securities in All
Registered
Investment Companies Overseen by
Trustee in Family of Investment
Companies
|
|
Name of Trustee
|
|
Nuveen
Intelligent
Risk
Growth
Allocation
Fund
|
|
|
Nuveen
Intelligent
Risk
Moderate
Allocation
Fund
|
|
|
Nuveen
Intelligent
Risk
Conservative
Allocation
Fund
|
|
|
John P. Amboian
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Robert P. Bremner
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Jack B. Evans
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
William C. Hunter
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
David J. Kundert
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
William J. Schneider
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Judith M. Stockdale
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Carole E. Stone
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Virginia L.
Stringer
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Terence J. Toth
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
As of December 3, 2012, the officers and trustees of the Funds, in the aggregate, owned less than 1% of the
shares of the Funds.
As of December 3, 2012, none of the independent trustees or their immediate family members owned, beneficially, or
of record, any securities in (i) an investment adviser or principal underwriter of the Funds or (ii) a person (other than a registered investment company) directly or indirectly controlling, controlled by, or under common control with an
investment adviser or principal underwriter of the Funds.
Sales Loads
Trustees of the Funds and certain other Fund affiliates may purchase the Funds Class I shares. See the Funds Prospectus for details.
SERVICE PROVIDERS
Investment Adviser
Nuveen Fund Advisors, located at 333 West Wacker Drive, Chicago, Illinois 60606, serves as the investment
adviser of each Fund, with responsibility for the overall management of each Fund. The Adviser is also responsible for managing the Funds business affairs and providing day-to-day administrative services to the Funds. The Adviser has selected
its affiliate, Nuveen Asset Management, located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to manage the investment portfolios of the Funds. For additional information regarding the management services performed by
the Adviser and Nuveen Asset Management, see Who Manages the Funds in the Prospectus.
The Adviser is an affiliate of
the Distributor, which is located at 333 West Wacker Drive, Chicago, Illinois 60606. The Distributor is the principal underwriter for the Nuveen Mutual Funds, and has served as co-managing underwriter for the shares of the Nuveen Closed-End Funds.
The Adviser and the Distributor are subsidiaries of Nuveen Investments.
On November 13, 2007, Nuveen Investments was acquired by
investors led by Madison Dearborn Partners, LLC, which is a private equity investment firm based in Chicago, Illinois.
S-43
For the management services and facilities furnished by the Adviser, each of the Funds has agreed to
pay an annual management fee at a rate set forth in the Prospectus under Who Manages the Funds. In addition, the Adviser has agreed to waive all or a portion of its management fee or reimburse certain expenses of the Funds. The
Prospectus includes current fee waivers and expense reimbursements for the Funds.
Each Funds management fee is divided into two
componentsa complex-level fee based on the aggregate amount of all eligible Nuveen Fund assets and a specific fund-level fee based only on the amount of assets within each individual Fund. This pricing structure enables Fund shareholders to
benefit from growth in the assets within each individual Fund as well as from growth in the amount of complex-wide assets managed by the Adviser. Under no circumstances will this pricing structure result in a Fund paying management fees at a rate
higher than would otherwise have been applicable had the complex-wide management fee structure not been implemented.
Each Fund has
agreed to pay an annual fund-level management fee, payable monthly, based upon the average daily net assets of each Fund as set forth in the Prospectus.
The annual complex-level management fee for each Fund, payable monthly, which is additive to the fund-level fee, is based on the aggregate amount of total eligible assets managed for all Nuveen Funds as stated in
the table below:
|
|
|
|
|
Complex-Level Asset
Breakpoint Level*
|
|
Effective Rate at
Breakpoint Level
|
|
$55 billion
|
|
|
0.2000
|
%
|
$56 billion
|
|
|
0.1996
|
%
|
$57 billion
|
|
|
0.1989
|
%
|
$60 billion
|
|
|
0.1961
|
%
|
$63 billion
|
|
|
0.1931
|
%
|
$66 billion
|
|
|
0.1900
|
%
|
$71 billion
|
|
|
0.1851
|
%
|
$76 billion
|
|
|
0.1806
|
%
|
$80 billion
|
|
|
0.1773
|
%
|
$91 billion
|
|
|
0.1691
|
%
|
$125 billion
|
|
|
0.1599
|
%
|
$200 billion
|
|
|
0.1505
|
%
|
$250 billion
|
|
|
0.1469
|
%
|
$300 billion
|
|
|
0.1445
|
%
|
*
|
|
The complex-level fee is calculated based upon the aggregate daily eligible assets of all Nuveen Funds. Except as described below, eligible assets include the net
assets of all Nuveen-branded closed-end and open-end registered investment companies organized in the United States. Eligible assets do not include assets attributable to investments in other Nuveen Funds or assets in excess of a determined
amount (originally $2 billion) added to the Nuveen Fund complex in connection with Nuveen Fund Advisors assumption of the management of the former First American Funds effective January 1, 2011. Eligible assets include closed-end fund
assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the closed-end funds use of preferred stock and borrowings and certain investments in the residual interest certificates
(also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trusts issuance of floating rate securities, subject to an
agreement by the Adviser as to certain funds to limit the amount of such assets for determining eligible assets in certain circumstances. As of September 30, 2012, the complex-level fee rate was 0.1695%.
|
S-44
The following table sets forth the management fees (net of fee waivers and expense reimbursements)
paid by the Funds and the fees waived and expenses reimbursed by the Adviser for the specified period.
|
|
|
|
|
|
|
Fund
|
|
Amount of Management Fees (Net
of Fee Waivers and
Expense
Reimbursements by the Adviser)
|
|
Amount of Fees Waived and
Expenses Reimbursed by the
Adviser
|
|
|
|
5/4/12-
8/31/12
|
|
5/4/12-
8/31/12
|
|
Nuveen Intelligent Risk Growth Allocation Fund
|
|
$
|
|
$
|
20,697
|
|
Nuveen Intelligent Risk Moderate Allocation Fund
|
|
|
|
|
20,703
|
|
Nuveen Intelligent Risk Conservative Allocation Fund
|
|
|
|
|
20,732
|
|
In addition to the Advisers management fee, each Fund also pays a portion of the Trusts general
administrative expenses allocated in proportion to the net assets of each Fund. All fees and expenses are accrued daily and deducted before payment of dividends to investors.
Sub-Adviser
The Adviser has selected its affiliate, Nuveen Asset
Management, to serve as sub-adviser to manage the investment portfolio of each Fund. The Adviser pays Nuveen Asset Management a portfolio management fee equal to 50% of the advisory fee paid to the Adviser for its services to the Funds (net of any
waivers, reimbursement payments, supermarket fees and alliance fees waived, reimbursed or paid by the Adviser in respect of the Funds).
The following table sets forth the fees paid by the Adviser to Nuveen Asset Management for its services for the specified period:
|
|
|
|
|
Fund
|
|
Amount Paid by the Adviser to Nuveen
Asset Management
|
|
|
5/4/12-
8/31/12
|
Nuveen Intelligent Risk Growth Allocation Fund
|
|
$
|
Nuveen Intelligent Risk Moderate Allocation Fund
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund
|
|
|
Portfolio Managers
James A. Colon, CFA, and Derek B. Bloom, CFA, have primary responsibility for the day-to-day implementation of the investment strategies of the Funds.
Compensation
Portfolio manager compensation consists primarily of base pay, an annual cash
bonus and long-term incentive payments.
Base pay
. Base pay is determined based upon an analysis of the portfolio managers
general performance, experience, and market levels of base pay for such position.
Annual cash bonus
. The Funds portfolio
managers are eligible for an annual cash bonus based on investment performance, qualitative evaluation and financial performance of Nuveen Asset Management.
A portion of each portfolio managers annual cash bonus is based on the Funds investment performance, generally measured over the past one- and three or five-year periods unless the portfolio
managers tenure is shorter. Investment performance for the Fund generally is determined by evaluating the Funds performance relative to its benchmark(s) and/or Lipper industry peer group.
S-45
A portion of the cash bonus is based on a qualitative evaluation made by each portfolio managers
supervisor taking into consideration a number of factors, including the portfolio managers team collaboration, expense management, support of personnel responsible for asset growth, and his or her compliance with Nuveen Asset Managements
policies and procedures.
The final factor influencing a portfolio managers cash bonus is the financial performance of Nuveen Asset
Management based on its operating earnings.
Long-term incentive compensation.
Certain key employees of Nuveen Investments and
its affiliates, including certain portfolio managers, have received equity interests in the parent company of Nuveen Investments which entitle their holders to participate in the appreciation in the value of Nuveen Investments. In addition, certain
key employees of Nuveen Asset Management, including certain portfolio managers, have received profits interests in Nuveen Asset Management which entitle their holders to participate in the firms cash flow and earnings growth over time.
There are generally no differences between the methods used to determine compensation with respect to the Fund and the Other
Accounts shown in the table below.
Other Accounts Managed
In addition to the Funds, as of August 31, 2012, the portfolio managers were also primarily responsible for the day-to-day portfolio management of the following accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
Type of Account Managed
|
|
Number of
Accounts
|
|
|
Assets
|
|
|
Number of
Accounts
with
Performance-
Based Fees
|
|
|
Assets of
Accounts
with
Performance-
Based Fees
|
|
James A. Colon
|
|
Registered Investment Companies Other Pooled Investment Vehicles Other Accounts
|
|
|
10
0
5
|
|
|
|
$2.3 billion
0
$1.6 million
|
|
|
|
0
0
0
|
|
|
|
0
0
0
|
|
Derek B. Bloom
|
|
Registered Investment Companies Other Pooled Investment Vehicles Other Accounts
|
|
|
3
0
3
|
|
|
|
$792.5 million
0
$1.1 million
|
|
|
|
0
0
0
|
|
|
|
0
0
0
|
|
Conflicts of Interest
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage
multiple accounts are presented a number of potential conflicts, including, among others, those discussed below.
The management of
multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Nuveen Asset Management seeks to manage such competing interests for the time and attention of portfolio managers by having
portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models.
If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to
take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, Nuveen Asset Management has adopted procedures for allocating limited opportunities across
multiple accounts.
With respect to many of its clients accounts, Nuveen Asset Management determines which broker to use to execute
transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, Nuveen Asset Management may be limited by the client with respect to the selection of brokers or may be
instructed to direct trades through a particular broker. In these cases, Nuveen Asset Management may place separate, non-simultaneous, transactions for a Fund and other accounts which may temporarily affect the market price of the security or the
execution of the transaction, or both, to the detriment of the Fund or the other accounts.
S-46
Some clients are subject to different regulations. As a consequence of this difference in regulatory
requirements, some clients may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a
conflict of interest may arise where Nuveen Asset Management has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management
responsibilities.
Nuveen Asset Management has adopted certain compliance procedures which are designed to address these types of
conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
Beneficial Ownership of Securities
The following table indicates as of August 31, 2012 the
value, within the indicated range, of shares beneficially owned by the portfolio managers in the Funds they manage. For purposes of this table, the following letters indicate the range listed next to each letter:
|
|
|
|
|
|
|
A
|
|
|
-
|
|
|
$0
|
B
|
|
|
-
|
|
|
$1 - $10,000
|
C
|
|
|
-
|
|
|
$10,001 - $50,000
|
D
|
|
|
-
|
|
|
$50,001 - $100,000
|
E
|
|
|
-
|
|
|
$100,001 - $500,000
|
F
|
|
|
-
|
|
|
$500,001 - $1,000,000
|
G
|
|
|
-
|
|
|
More than $1 million
|
|
|
|
|
|
|
|
Name of Portfolio Manager
|
|
Fund
|
|
Dollar Range of
Equity Securities
Beneficially Owned
in Fund
Managed
|
|
James A. Colon
|
|
Nuveen Intelligent Risk Growth Allocation Fund
|
|
|
A
|
|
|
|
Nuveen Intelligent Risk Moderate Allocation Fund
|
|
|
C
|
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund
|
|
|
C
|
|
Derek B. Bloom
|
|
Nuveen Intelligent Risk Growth Allocation Fund
|
|
|
A
|
|
|
|
Nuveen Intelligent Risk Moderate Allocation Fund
|
|
|
A
|
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund
|
|
|
A
|
|
Distributor
Nuveen Securities, LLC, 333 West Wacker Drive, Chicago, Illinois 60606, serves as the distributor for the Funds shares pursuant to a best efforts arrangement as provided by a Distribution
Agreement dated August 1, 1998 (the
Distribution Agreement
). Pursuant to the Distribution Agreement, the Funds appointed the Distributor to be their agent for the distribution of the Funds shares on a continuous offering
basis.
Independent Registered Public Accounting Firm, Custodian and Transfer Agent
PricewaterhouseCoopers LLP (
PwC
), One North Wacker Drive, Chicago, Illinois 60606, independent registered public accounting firm,
has been selected as auditors for the Trust. In addition to audit services, PwC provides assistance on accounting, tax and related matters.
The custodian of the assets of the Funds is U.S. Bank, 60 Livingston Avenue, St. Paul, MN 55101. The custodian performs custodial, fund accounting and portfolio accounting services.
The Funds transfer, shareholder services, and dividend paying agent is Boston Financial Data Services, Inc. (
BFDS
), P.O.
Box 8530, Boston, Massachusetts 02266-8530.
S-47
CODES OF ETHICS
The Funds, the Adviser, the Sub-Adviser and the Distributor have adopted codes of ethics pursuant to Rule 17j-1 under the 1940 Act and with respect to the Adviser and Sub-Adviser, Rule 204A-1 under the
Investment Advisers Acts of 1940, as amended, addressing personal securities transactions and other conduct by investment personnel and access persons who may have access to information about the Funds securities transactions. The codes are
intended to address potential conflicts of interest that can arise in connection with personal trading activities of such persons. Persons subject to the codes are generally permitted to engage in personal securities transactions, including
investing in securities eligible for investment by the Funds, subject to certain prohibitions, which may include prohibitions on investing in certain types of securities, pre-clearance requirements, blackout periods, annual and quarterly reporting
of personal securities holdings and limitations on personal trading of initial public offerings. Violations of the codes are subject to review by the Board of Trustees and could result in severe penalties.
PROXY VOTING POLICIES
The Funds Board of Trustees has delegated to the Adviser the responsibility for voting proxies on behalf of each Fund, and has determined that
the Adviser will vote proxies with respect to the Funds portfolio securities. The Adviser has delegated proxy voting responsibility to the Sub-Adviser. The proxy voting policies and procedures for the Funds are set forth in Appendix A.
Each Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. Each Funds Form N-PX filings are available (i) without charge, upon request, by
calling toll-free at (800) 437-9912 and (ii) on the SECs website (http://www.sec.gov).
PORTFOLIO TRANSACTIONS
Nuveen Asset Management is responsible for decisions to buy and sell securities for the Funds and for the placement of the Funds
securities business, the negotiation of the commissions to be paid on brokered transactions, the prices for principal trades in securities, and the allocation of portfolio brokerage and principal business. It is the policy of Nuveen Asset Management
to seek the best execution at the best security price available with respect to each transaction, and with respect to brokered transactions, in light of the overall quality of brokerage and research services provided to the adviser and its advisees.
The best price to the Funds means the best net price without regard to the mix between purchase or sale price and commission, if any. Purchases may be made from underwriters, dealers, and, on occasion, the issuers. Commissions will be paid on the
Funds futures and options transactions, if any. The purchase price of portfolio securities purchased from an underwriter or dealer may include underwriting commissions and dealer spreads. The Funds may pay mark-ups on principal transactions.
In selecting broker-dealers and in negotiating commissions, the portfolio managers consider, among other things, the firms reliability, the quality of its execution services on a continuing basis and its financial condition. Brokerage will not
be allocated based on the sale of a Funds shares.
Section 28(e) of the Securities Exchange Act of 1934 permits an investment
adviser, under certain circumstances, to cause an account to pay a broker or dealer who supplies brokerage and research services a commission for effecting the transaction in excess of the amount of commission another broker or dealer would have
charged for effecting the transaction. Brokerage and research services include, but are not limited to, (a) furnishing advice as to the value of securities, the advisability of investing, purchasing or selling securities, and the availability
of securities or purchasers or sellers of securities; (b) furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts; and (c) effecting
securities transactions and performing functions incidental thereto (such as clearance, settlement, and custody).
In light of the above,
in selecting brokers, the portfolio managers consider investment and market information and other research, such as economic, securities and performance measurement research, provided by such brokers, and the quality and reliability of brokerage
services, including execution
S-48
capability, performance and financial responsibility. Accordingly, the commissions charged by any such broker may be greater than the amount another firm might charge if the portfolio managers
determine in good faith that the amount of such commissions is reasonable in relation to the value of the research information and brokerage services provided by such broker to Nuveen Asset Management or a Fund. Nuveen Asset Management believes that
the research information received in this manner provides a Fund with benefits by supplementing the research otherwise available to the Fund. The Investment Management Agreement and the Sub-Advisory Agreement provide that such higher commissions
will not be paid by a Fund unless Nuveen Asset Management determines in good faith that the amount is reasonable in relation to the services provided. The investment advisory fees paid by a Fund to the Adviser under the Investment Management
Agreement and the sub-advisory fees paid by the Adviser to Nuveen Asset Management under the Sub-Advisory Agreement are not reduced as a result of receipt by either the Adviser or Nuveen Asset Management of research services.
Nuveen Asset Management places portfolio transactions for other advisory accounts managed by it. Research services furnished by firms through which
the Funds effect their securities transactions may be used by Nuveen Asset Management in servicing all of its accounts; not all of such services may be used by Nuveen Asset Management in connection with the Funds. Nuveen Asset Management believes it
is not possible to measure separately the benefits from research services to each of the accounts (including the Funds) managed by it. Because the volume and nature of the trading activities of the accounts are not uniform, the amount of commissions
in excess of those charged by another broker paid by each account for brokerage and research services will vary. However, Nuveen Asset Management believes such costs to the Funds will not be disproportionate to the benefits received by the Funds on
a continuing basis. Nuveen Asset Management seeks to allocate portfolio transactions equitably whenever concurrent decisions are made to purchase or sell securities by the Funds and another advisory account. In some cases, this procedure could have
an adverse effect on the price or the amount of securities available to the Funds. In making such allocations between the Funds and other advisory accounts, the main factors considered by Nuveen Asset Management are the respective investment
objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment and the size of investment commitments generally held.
The following table sets forth the aggregate amount of brokerage commissions paid by the Funds for the specified period:
|
|
|
|
|
Fund
|
|
Aggregate Amount of
Brokerage Commissions
|
|
|
|
5/4/12-
8/31/12
|
|
Nuveen Intelligent Risk Growth Allocation Fund
|
|
$
|
580
|
|
Nuveen Intelligent Risk Moderate Allocation Fund
|
|
|
500
|
|
Nuveen Intelligent Risk Conservative Allocation Fund
|
|
|
459
|
|
During the fiscal period ended August 31, 2012, the Funds did not pay commissions to brokers in return for
research services.
The Funds did not acquire during the fiscal period ended August 31, 2012 any securities of their regular brokers or
dealers as defined in Rule 10b-1 under the 1940 Act or of the parents of the brokers or dealers.
Under the 1940 Act, a Fund may not
purchase portfolio securities from any underwriting syndicate of which the Distributor is a member except under certain limited conditions set forth in Rule 10f-3. The Rule sets forth requirements relating to, among other things, the terms of a
security purchased by a Fund, the amount of securities that may be purchased in any one issue and the assets of a Fund that may be invested in a particular issue. In addition, purchases of securities made pursuant to the terms of the Rule must be
approved at least quarterly by the Board of Trustees, including a majority of the independent trustees.
Portfolio Trading
and Turnover
The Funds will make changes in their investment portfolios from time to time in order to seek to take advantage of
opportunities in the market and to limit exposure to market risk. Changes in the Funds investments are known as portfolio turnover.
S-49
DISCLOSURE OF PORTFOLIO HOLDINGS
The Nuveen Mutual Funds have adopted a portfolio holdings disclosure policy which governs the dissemination of the Funds portfolio holdings.
In accordance with this policy, the Funds may provide portfolio holdings information to third parties no earlier than the time a report is filed with the SEC that is required to contain such information or one day after the information is posted on
the Funds publicly accessible website, www.nuveen.com. Currently, the Funds generally make available complete portfolio holdings information on the Funds website ten business days following the end of each month. Additionally, the Funds
publish on the website a list of their top ten holdings as of the end of each month, approximately two to five business days after the end of the month for which the information is current. This information will remain available on the website at
least until the Funds file with the SEC their Forms N-CSR or Forms N-Q for the period that includes the date as of which the website information is current.
Additionally, the Funds may disclose portfolio holdings information that has not been included in a filing with the SEC or posted on the Funds website (i.e., non-public portfolio holdings information) only if
there is a legitimate business purpose for doing so and if the recipient is required, either by explicit agreement or by virtue of the recipients duties to the Funds as an agent or service provider, to maintain the confidentiality of the
information and to not use the information in an improper manner (e.g., personal trading). In this connection, the Funds may disclose on an ongoing basis non-public portfolio holdings information in the normal course of their investment and
administrative operations to various service providers, including the Adviser and/or sub-adviser, independent registered public accounting firm, custodian, financial printer (R.R. Donnelley Financial and Financial Graphic Services), proxy voting
service(s) (including ISS, ADP Investor Communication Services, and Glass, Lewis & Co.), and to the legal counsel for the Funds independent trustees (Chapman and Cutler LLP). Also, the Adviser may transmit to Vestek Systems, Inc.
daily non-public portfolio holdings information on a next-day basis to enable the Adviser to perform portfolio attribution analysis using Vesteks systems and software programs. Vestek is also provided with non-public portfolio holdings
information on a monthly basis approximately 2-3 business days after the end of each month so that Vestek may calculate and provide certain statistical information (but not the non-public holdings information itself) to its clients (including
retirement plan sponsors or their consultants). The Adviser and/or sub-adviser may also provide certain portfolio holdings information to broker-dealers from time to time in connection with the purchase or sale of securities or requests for price
quotations or bids on one or more securities. In providing this information, reasonable precautions are taken in an effort to avoid potential misuse of the disclosed information, including limitations on the scope of the portfolio holdings
information disclosed, when appropriate.
Non-public portfolio holdings information may be provided to other persons if approved by the
Funds Chief Administrative Officer or Secretary upon a determination that there is a legitimate business purpose for doing so, the disclosure is consistent with the interests of the Funds, and the recipient is obligated to maintain the
confidentiality of the information and not misuse it.
Compliance officers of the Funds and the Adviser and sub-adviser periodically
monitor overall compliance with the policy to ascertain whether portfolio holdings information is disclosed in a manner that is consistent with the Funds policy. Reports are made to the Funds Board of Trustees on an annual basis.
There is no assurance that the Funds policies on portfolio holdings information will protect the Funds from the potential misuse
of portfolio holdings information by individuals or firms in possession of such information.
The following parties currently receive
non-public portfolio holdings information regarding one or more of the Nuveen Mutual Funds on an ongoing basis pursuant to the various arrangements described above:
ADP Investor Communications Services
Altrinsic Global Advisors, LLC
Barclays Capital, Inc.
Barra
Bloomberg
BNP Paribas Prime Brokerage, Inc.
S-50
BNP Paribas Securities Corp.
Broadridge Systems
Cantor Fitzgerald & Co.
Chapman and Cutler LLP
Commerz Markets LLC
Credit Agricole Securities (USA) Inc.
Credit Suisse Securities (USA), LLC
Deutsche Bank Securities, Inc.
Dresdner Kleinwort Securities, LLC
Ernst & Young LLP
FactSet Research Systems
Financial Graphic Services
First Clearing, LLC
Forbes
Glass, Lewis & Co.
Goldman Sachs & Co.
Hansberger Global Investors, LLC
HSBC Securities (USA), Inc.
ING Financial Markets, LLC
The Investment Company Institute
ISS
Jefferies & Company, Inc.
J.P. Morgan Clearing Corp.
J.P. Morgan Securities, Inc.
Lazard Asset Management, Inc.
Lipper Inc.
Merrill Lynch, Pierce, Fenner & Smith
Moodys
Morgan Stanley & Co., Inc.
Morningstar, Inc.
MS Securities Services, Inc.
Newedge USA, LLC
Nuveen Asset Management, LLC
Nuveen Fund Advisors, LLC
Pershing, LLC
PricewaterhouseCoopers LLP
Raymond James & Associates, Inc.
RBC Capital Markets Corporation
RBS Securities, Inc.
R.R. Donnelley & Sons Company
R.R. Donnelley Financial
Scotia Capital (USA), Inc.
SG Ameritas Securities, LLC
Societe Generale, New York Branch
Standard & Poors
State Street Bank & Trust Co.
Strategic Insight
TD Ameritrade Clearing, Inc.
ThomsonReuters LLC
UBS Securities, LLC
U.S. Bancorp Fund Services, LLC
U.S. Bank N.A.
Value Line
Vestek Systems, Inc.
Vickers
Wells Fargo Securities, LLC
Wilshire Associates Incorporated
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NET ASSET VALUE
Each Funds net asset value is determined as set forth in the Prospectus under General InformationNet Asset Value.
SHARES OF BENEFICIAL INTEREST
The Board of Trustees of the Trust is
authorized to issue an unlimited number of shares in one or more series, which may be divided into classes of shares. Currently, there are 11 series authorized and outstanding, each of which may be generally divided into different classes of shares
designated as Class A shares, Class B shares, Class C shares, Class R3 shares and Class I shares. Each class of shares represents an interest in the same portfolio of investments of a Fund. Each class of shares has equal
rights as to voting, redemption, dividends and liquidation, except that each bears different class expenses, including different distribution and service fees, and each has exclusive voting rights with respect to any distribution or service plan
applicable to its shares. There are no conversion, preemptive or other subscription rights, except that Class B shares (available in only certain series and not available in the Funds) automatically convert into Class A shares. The Board
of Trustees of the Trust has the right to establish additional series and classes of shares in the future, to change those series or classes and to determine the preferences, voting powers, rights and privileges thereof.
The Trust is not required and does not intend to hold annual meetings of shareholders. Shareholders owning more than 10% of the outstanding shares
of a 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 Trusts 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 a Fund itself was unable to meet its obligations. The Trust believes the likelihood of the occurrence of these circumstances is remote.
As of December 3, 2012, Nuveen Investments owned a considerable portion of each Fund and, accordingly, has controlled the Funds. A
party that controls a Fund may be able to significantly influence the outcome of any item presented to shareholders for approval.
The
following table sets forth the percentage ownership of each person, who, as of December 3,
2012, owned of record, or is known by the Trust to have owned
of record or beneficially, 5% or more of any class of a Funds shares.
|
|
|
|
|
|
|
Name of Fund and Class
|
|
Name and Address of Owner
|
|
Percentage
of
Ownership
|
|
Nuveen Intelligent Risk Growth Allocation Fund Class A Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
100.00%
|
|
|
|
|
Nuveen Intelligent Risk Growth Allocation Fund Class C Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
100.00%
|
|
S-52
|
|
|
|
|
|
|
Name of Fund and Class
|
|
Name and Address of Owner
|
|
Percentage
of
Ownership
|
|
Nuveen Intelligent Risk Growth Allocation Fund Class R3 Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
100.00%
|
|
Nuveen Intelligent Risk Growth Allocation Fund Class I Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
98.18%
|
|
|
|
|
Nuveen Intelligent Risk Moderate Allocation Fund Class A Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
57.45%
|
|
|
|
|
|
|
C/O ID
SEI Private Trust Co
One Freedom Valley Drive
Oaks PA 19456-9989
|
|
|
38.62%
|
|
|
|
|
Nuveen Intelligent Risk Moderate Allocation Fund Class C Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
83.08%
|
|
|
|
|
|
|
Pershing LLC
One Pershing Plaza
Jersey City NJ 07399-0002
|
|
|
16.92%
|
|
|
|
|
Nuveen Intelligent Risk Moderate Allocation Fund Class R3 Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
100.00%
|
|
|
|
|
Nuveen Intelligent Risk Moderate Allocation Fund Class I Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
84.95%
|
|
|
|
|
|
|
Wells Fargo Bank FBO
Various Retirement
Plans
1525 West Wt Harris Blvd
Charlotte NC
28288-1076
|
|
|
13.54%
|
|
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund Class A Shares
|
|
Edward D Jones & Co
Attn:Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts MO 63043-3009
|
|
|
50.83%
|
|
S-53
|
|
|
|
|
|
|
Name of Fund and Class
|
|
Name and Address of Owner
|
|
Percentage
of
Ownership
|
|
|
|
Nuveen Investments Inc
Attn Darlene
Cramer
333 W Wacker Dr
Chicago IL
60606-1220
|
|
|
35.19%
|
|
|
|
|
|
|
U.S. Bancorp Investments Inc.
60 Livingston
Ave
Saint Paul MN 55107-2292
|
|
|
13.98%
|
|
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund Class C Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
100.00%
|
|
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund Class R3 Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
100.00%
|
|
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund Class I Shares
|
|
Nuveen Investments Inc
Attn Darlene Cramer
333 W Wacker Dr
Chicago IL 60606-1220
|
|
|
98.25%
|
|
TAX MATTERS
Federal Income Tax Matters
This section summarizes some of the main
U.S. federal income tax consequences of owning shares of a Fund. This section is current as of the date of this SAI. Tax laws and interpretations change frequently, and this summary does not describe all of the tax consequences to all taxpayers. For
example, this summary generally does not describe your situation if you are a corporation, a non-U.S. person, a broker-dealer or other investor with special circumstances, or if you are investing through a tax-deferred account such as an IRA or
401(k) plan. In addition, this section does not describe your state, local or non-U.S. tax consequences. This federal income tax summary is based in part on the advice of counsel to the Funds. The Internal Revenue Service could disagree with any
conclusions set forth in this section. In addition, Funds counsel was not asked to review, and has not reached a conclusion with respect to the federal income tax treatment of the assets to be deposited in the Funds. Consequently, this summary
may not be sufficient for you to use for the purpose of avoiding penalties under federal tax law. As with any investment, you should seek advice based on your individual circumstances from your own tax professional.
Fund Status
Each Fund intends to qualify as a regulated investment company under the federal tax laws. If a Fund qualifies as a regulated investment
company and distributes its income as required by the tax law, the Fund generally will not pay federal income taxes. If a Fund fails for any taxable year to qualify as a regulated investment company for federal income tax purposes, the Fund itself
will generally be subject to federal income taxation (which will reduce the amount of Fund income available for distribution) and your tax consequences will be different from those described in this section (for example, all distributions to you
will generally be taxed as ordinary income, even if those distributions are derived from capital gains realized by a Fund).
S-54
Qualification as a Regulated Investment Company
As a regulated investment company, a Fund generally will not be subject to federal income tax on its investment company taxable income (as that term
is defined in the Internal Revenue Code (
Code
), but without regard to the deduction for dividends paid) and net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss), if any, that it
distributes to shareholders, provided that it distributes at least 90% of its investment company taxable income and 90% of its net tax-exempt interest income for the year (the
Distribution Requirement
) and satisfies certain other
requirements of the Code that are generally described below. Each Fund also intends to make such distributions as are necessary to avoid the otherwise applicable 4% non-deductible excise tax on certain undistributed earnings.
In addition to satisfying the Distribution Requirement, each Fund must, among other things, derive in each taxable year at least 90% of its gross
income from (1) dividends, interest, certain payments with respect to loans of stock and securities, gains from the sale or disposition of stock, securities or non-U.S. currencies and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (2) net income derived from an interest in a qualified publicly traded partnership (as such term
is defined in the Code). Each Fund must also satisfy an asset diversification test in order to qualify as a regulated investment company. Under this test, at the close of each quarter of a Funds taxable year, (1) 50% or more of the value
of the Funds assets must be represented by cash, and cash items (including receivables), United States government securities, securities of other regulated investment companies, and other securities, with such other securities limited, in
respect of any one issuer, to an amount not greater than 5% of the value of the Funds assets and not greater than 10% of the outstanding voting securities of such issuer and (2) not more than 25% of the value of the Funds assets may
be invested in securities of (a) any one issuer (other than U.S. government securities or securities of other regulated investment companies), or of two or more issuers which the Fund controls and which are engaged in the same, similar or
related trades or businesses or (b) in the securities of one or more qualified publicly traded partnerships (as such term is defined in the Code). There are certain exceptions for failure to qualify if the failure is for reasonable
cause or is de minimis and certain corrective action is taken and certain tax payments are made by a Fund.
Distributions
Fund distributions are generally taxable. After the end of each year, you will receive a tax statement that separates your
Funds distributions into two categories, ordinary income distributions and capital gains dividends. Ordinary income distributions are generally taxed at your ordinary tax rate, however, as further discussed below, certain ordinary income
distributions received from the Fund may be taxed at the capital gains tax rates. Generally, you will treat all capital gains dividends as long-term capital gains regardless of how long you have owned your shares. To determine your actual tax
liability for your capital gains dividends, you must calculate your total net capital gain or loss for the tax year after considering all of your other taxable transactions, as described below. In addition, a Fund may make distributions that
represent a return of capital for tax purposes and thus will generally not be taxable to you. The tax status of your distributions from your Fund is not affected by whether you reinvest your distributions in additional shares or receive them in
cash. The income from your Fund that you must take into account for federal income tax purposes is not reduced by amounts used to pay a deferred sales fee, if any. The tax laws may require you to treat distributions made to you in January as if you
had received them on December 31 of the previous year. Under the Health Care and Education Reconciliation Act of 2010, income from the Fund may also be subject to a new 3.8 percent medicare tax imposed for taxable years
beginning after 2012. This tax will generally apply to your net investment income if your adjusted gross income exceeds certain threshold amounts, which are $250,000 in the case of married couples filing joint returns and $200,000 in the case of
single individuals.
Dividends Received Deduction
A corporation that owns shares generally will not be entitled to the dividends received deduction with respect to many dividends received from the
Funds, because the dividends received deduction is generally not available for distributions from regulated investment companies. However, certain ordinary
S-55
income dividends on shares that are attributable to qualifying dividends received by a Fund from certain corporations may be reported by the Fund as being eligible for the dividends received
deduction.
If You Sell or Redeem Shares
If you sell or redeem your shares, you will generally recognize a taxable gain or loss. To determine the amount of this gain or loss, you must subtract your tax basis in your shares from the amount you receive in
the transaction. Your tax basis in your shares is generally equal to the cost of your shares, generally including sales charges. In some cases, however, you may have to adjust your tax basis after you purchase your shares.
Taxation of Capital Gains and Losses
If you are an individual, the maximum marginal federal tax rate for net capital gain is generally 15% (generally 0% for certain taxpayers in the 10% and 15% tax brackets). These capital gains rates are generally
effective for taxable years beginning before January 1, 2013. Under current law, for taxable years beginning on or after January 1, 2013, if you are an individual, the maximum marginal federal tax rate for net capital gain is generally 20% (10%
for certain taxpayers in the 10% and 15% tax brackets). The 20% rate is reduced to 18% for net capital gains from most property acquired after December 31, 2000, with a holding period of more than five years and the 10% rate is reduced to 8%
for net capital gains from most property (regardless of when acquired) with a holding period of more than five years. There are currently a variety of proposals being considered that would result in a different maximum capital gains tax rates. Net
capital gain equals net long-term capital gain minus net short-term capital loss for the taxable year. Capital gain or loss is long-term if the holding period for the asset is more than one year and is short-term if the holding period for the asset
is one year or less. You must exclude the date you purchase your shares to determine your holding period. However, if you receive a capital gain dividend from your Fund and sell your share at a loss after holding it for six months or less, the loss
will be recharacterized as long-term capital loss to the extent of the capital gain dividend received. The tax rates for capital gains realized from assets held for one year or less are generally the same as for ordinary income. The Code treats
certain capital gains as ordinary income in special situations.
Taxation of Certain Ordinary Income Dividends
Ordinary income dividends received by an individual shareholder from a regulated investment company such as the Fund are
generally taxed at the same rates that apply to net capital gain (as discussed above), provided certain holding period requirements are satisfied and provided the dividends are attributable to qualifying dividends received by the Fund itself. These
special rules relating to the taxation of ordinary income dividends from regulated investment companies generally apply to taxable years beginning before January 1, 2013. For years beginning after December 31, 2012, ordinary income dividends
would be subject to ordinary income tax rates. There are currently a variety of proposals being considered as to what such rates will be. The Fund will provide notice to its shareholders of the amount of any distribution which may be taken into
account as a dividend which is eligible for the capital gains tax rates.
In-Kind Distributions
Under certain circumstances, as described in the Prospectus, you may receive an in-kind distribution of Fund securities when you redeem shares or
when a Fund terminates. This distribution will be treated as a sale for federal income tax purposes and you will generally recognize gain or loss, generally based on the value at that time of the securities and the amount of cash received. The
Internal Revenue Service could, however, assert that a loss may not be currently deducted.
Exchanges
If you exchange shares of a Fund for shares of another Nuveen Mutual Fund, the exchange would generally be considered a sale for federal income tax
purposes.
Deductibility of Fund Expenses
Expenses incurred and deducted by your Fund will generally not be treated as income taxable to you. In some cases, however, you may be required to treat your portion of these Fund expenses as income. In these cases
you may be able to take a deduction for these expenses. However, certain
S-56
miscellaneous itemized deductions, such as investment expenses, may be deducted by individuals only to the extent that all of these deductions exceed 2% of the individuals adjusted gross
income.
Non-U.S. Tax Credit
If your Fund invests in any non-U.S. securities, the tax statement that you receive may include an item showing non-U.S. taxes your Fund paid to other countries. In this case, dividends taxed to you will include
your share of the taxes your Fund paid to other countries. You may be able to deduct or receive a tax credit for your share of these taxes.
Non-U.S. Investors
If you are a non-U.S. investor (i.e., an investor other than a U.S. citizen or resident or a U.S.
corporation, partnership, estate or trust), you should be aware that, generally, subject to applicable tax treaties, distributions from a Fund will be characterized as dividends for federal income tax purposes (other than dividends which a Fund
properly reports as capital gain dividends) and will be subject to U.S. income taxes, including withholding taxes, subject to certain exceptions described below. However, distributions received by a non-U.S. investor from a Fund that are properly
reported by a Fund as capital gain dividends may not be subject to U.S. federal income taxes, including withholding taxes, provided that a Fund makes certain elections and certain other conditions are met. Distributions in respect of interests in
the Fund after December 31, 2013 may be subject to a U.S. withholding tax of 30% in the case of distributions to (i) certain non-U.S. financial institutions that have not entered into an agreement with the U.S. Treasury to collect and
disclose certain information and (ii) certain other non-U.S. entities that do not provide certain certifications and information about the entitys U.S. owners. Dispositions of shares by such persons may be subject to such withholding
after December 31, 2016.
PURCHASE AND REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways of purchasing Fund shares based upon your individual investment needs
and preferences.
Each class of shares of a Fund represents an interest in the same portfolio of investments. Each class of shares is
identical in all respects except that each class bears its own class expenses, including distribution and administration expenses, and each class has exclusive voting rights with respect to any distribution or service plan applicable to its shares.
As a result of the differences in the expenses borne by each class of shares, net income per share, dividends per share and net asset value per share will vary among a Funds classes of shares. There are no conversion, preemptive or other
subscription rights.
Shareholders of each class will share expenses proportionately for services that are received equally by all
shareholders. A particular class of shares will bear only those expenses that are directly attributable to that class, where the type or amount of services received by a class varies from one class to another. For example, class-specific expenses
generally will include distribution and service fees for those classes that pay such fees.
The expenses to be borne by specific classes
of shares may include (i) transfer agency fees attributable to a specific class of shares, (ii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy statements to
current shareholders of a specific class of shares, (iii) SEC and state securities registration fees incurred by a specific class of shares, (iv) the expense of administrative personnel and services required to support the shareholders of
a specific class of shares, (v) litigation or other legal expenses relating to a specific class of shares, (vi) trustees fees or expenses incurred as a result of issues relating to a specific class of shares, (vii) accounting
expenses relating to a specific class of shares and (viii) any additional incremental expenses subsequently identified and determined to be properly allocated to one or more classes of shares.
Class A Shares
Class A shares may be purchased at a public offering price equal to the applicable net asset value per share plus an up-front sales charge
imposed at the time of purchase as set forth in the Prospectus. Shareholders may qualify for a reduced sales charge, or the sales charge may be waived in its entirety, as described below. Class A shares are also subject to an annual service fee
of 0.25%. See Distribution
S-57
and Service Plan. Set forth below is an example of the method of computing the offering price of the Class A shares of each of the Funds. The example assumes a purchase on
August 31, 2012 of Class A shares of a Fund aggregating less than $50,000 subject to the schedule of sales charges set forth in the Prospectus at a price based upon the net asset value of the Class A shares.
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Nuveen
Intelligent
Risk Growth
Allocation
Fund
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Nuveen
Intelligent
Risk
Moderate
Allocation
Fund
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Nuveen
Intelligent Risk
Conservative
Allocation
Fund
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Net Asset Value per share
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$
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20.16
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$
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20.66
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$
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20.33
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Per Share Sales Charge5.75% of public offering price (6.10%, 6.10%, and 6.10% respectively, of net asset value per
share)
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$
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1.23
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$
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1.26
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$
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1.24
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Per Share Offering Price to the Public
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$
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21.39
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$
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21.92
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$
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21.57
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Each Fund receives the entire net asset value of all Class A shares that are sold. The Distributor
retains the full applicable sales charge from which it pays the uniform reallowances shown in the Prospectus to financial intermediaries.
Reduction or Elimination of Up-Front Sales Charge on Class A Shares
Rights of Accumulation.
You may qualify for a
reduced sales charge on a purchase of Class A shares of a Fund if the amount of your purchase, when added to the value that day of all of your shares of any Nuveen Mutual Fund, falls within the amounts stated in the Class A Sales Charges
and Commissions table in How You Can Buy and Sell Shares in the Prospectus. You or your financial advisor must notify the Distributor or the Funds transfer agent of any cumulative discount whenever you plan to purchase Class A
shares of a Fund that you wish to qualify for a reduced sales charge.
Letter of Intent.
You may qualify for a reduced sales
charge on a purchase of Class A shares of a Fund if you plan to purchase Class A shares of Nuveen Mutual Funds over the next 13 months and the total amount of your purchases would, if purchased at one time, qualify you for one of the
reduced sales charges shown in the Class A Sales Charges and Commissions table in How You Can Buy and Sell Shares in the Prospectus. In order to take advantage of this option, you must complete the applicable section of the
Application Form or sign and deliver to your financial advisor or other financial intermediary or to the Funds transfer agent a written Letter of Intent in a form acceptable to the Distributor. A Letter of Intent states that you intend, but
are not obligated, to purchase over the next 13 months a stated total amount of Class A shares that would qualify you for a reduced sales charge shown above. You may count shares of all Nuveen Mutual Funds that you already own and any
Class C and Class I shares of a Nuveen Mutual Fund that you purchase over the next 13 months towards completion of your investment program, but you will receive a reduced sales charge only on new Class A shares you purchase with a
sales charge over the 13 months. You cannot count towards completion of your investment program Class A shares that you purchase without a sales charge through investment of distributions from a Nuveen Mutual Fund or a Nuveen Defined Portfolio,
or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class A shares of a Fund following
execution of the Letter of Intent will be at least 5% of the total amount of your intended purchases. You further agree that shares representing 5% of the total amount of your intended purchases will be held in escrow pending completion of these
purchases. All dividends and capital gains distributions on Class A shares held in escrow will be credited to your account. If total purchases, less redemptions, prior to the expiration of the 13 month period equal or exceed the amount
specified in your Letter of Intent, the Class A shares held in escrow will be transferred to your account. If the total purchases, less redemptions, are less than the amount specified, you must pay the Distributor an amount equal to the
difference between the amounts paid for these purchases and the amounts which would have been paid if the higher sales charge had been applied. If you do not pay the additional amount within 20 days after written request by the Distributor or your
financial advisor, the Distributor will redeem an appropriate number of your escrowed Class A shares to meet the
S-58
required payment. By establishing a Letter of Intent, you irrevocably appoint the Distributor as attorney to give instructions to redeem any or all of your escrowed shares, with full power of
substitution in the premises.
You or your financial advisor must notify the Distributor or the Funds transfer agent whenever you
make a purchase of Fund shares that you wish to be covered under the Letter of Intent option.
For purposes of determining whether you
qualify for a reduced sales charge as described under Rights of Accumulation and Letter of Intent, you may include together with your own purchases those made by your spouse or domestic partner and your children under the age of 21 years, whether
these purchases are made through a taxable or non-taxable account. You may also include purchases made by a corporation, partnership or sole proprietorship which is 100% owned, either alone or in combination, by any of the foregoing. In addition, a
trustee or other fiduciary can count all shares purchased for a single trust, estate or other single fiduciary account that has multiple accounts (including one or more employee benefit plans of the same employer).
Elimination of Sales Charge on Class A Shares.
Class A shares of a Fund may be purchased at net asset value without a sales charge
by the following categories of investors:
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investors purchasing $1,000,000 or more;
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current and former trustees/directors of the Nuveen Funds;
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full-time and retired employees and directors of Nuveen Investments, and subsidiaries thereof, or their immediate family members (immediate family members are
defined as their spouses or domestic partners, parents, children, grandparents, grandchildren, parents-in-law, sons-in-law and daughters-in-law, siblings, a siblings spouse and a spouses siblings);
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any person who, for at least the last 90 days, has been an officer, director or employee of any financial intermediary, or their immediate family members;
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bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a
fiduciary, agency, advisory, custodial or similar capacity;
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investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program;
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clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services;
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employer-sponsored retirement plans except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans; and
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investors purchasing through a financial intermediary that has entered into an agreement with the Distributor to offer the Funds shares to self-directed
investment brokerage accounts and that may or may not charge a transaction fee to its customers.
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Any Class A
shares purchased pursuant to a special sales charge waiver must be acquired for investment purposes and on the condition that they will not be transferred or resold except through redemption by the Funds. You or your financial advisor must notify
the Distributor or your Funds transfer agent whenever you make a purchase of Class A shares of any Fund that you wish to be covered under these special sales charge waivers.
Class A shares of any Fund may be issued at net asset value without a sales charge in connection with the acquisition by a Fund of another
investment company. All purchases under the special sales charge waivers will be subject to minimum purchase requirements as established by the Funds.
The reduced sales charge programs may be modified or discontinued by the Funds at any time. For more information about the purchase of Class A shares or the reduced sales charge program, or to obtain the
required application forms, call Nuveen Investor Services toll-free at (800) 257-8787.
S-59
Class C Shares
You may purchase Class C shares at a public offering price equal to the applicable net asset value per share without any up-front sales charge.
Class C shares are subject to an annual distribution fee of 0.75% to compensate the Distributor for paying your financial advisor or other financial intermediary an ongoing sales commission. Class C shares are also subject to an annual
service fee of 0.25% to compensate financial intermediaries for providing you with ongoing financial advice and other account services. The Distributor compensates financial intermediaries for sales of Class C shares at the time of the sale at
a rate of 1% of the amount of Class C shares purchased, which represents an advance of the first years distribution fee of 0.75% plus an advance on the first years annual service fee of 0.25%. See Distribution and Service
Plan.
Class C share purchase orders equaling or exceeding $1,000,000 will not be accepted. In addition, purchase orders
for a single purchaser that, when added to the value that day of all of such purchasers shares of any class of any Nuveen Mutual Fund, cause the purchasers cumulative total of shares in Nuveen Mutual Funds to equal or exceed the
aforementioned limit will not be accepted. Purchase orders for a single purchaser equal to or exceeding the foregoing limit should be placed only for Class A shares, unless such purchase has been reviewed and approved as suitable for the client
by the appropriate compliance personnel of the financial intermediary, and the Fund receives written confirmation of such approval.
Redemption of Class C shares within 12 months of purchase may be subject to a contingent deferred sales charge (
CDSC
) of 1%
of the lower of the purchase price or redemption proceeds. Because Class C shares do not convert to Class A shares and continue to pay an annual distribution fee indefinitely, Class C shares should normally not be purchased by an
investor who expects to hold shares for significantly longer than eight years.
Reduction or Elimination of Contingent
Deferred Sales Charge
Class A shares are normally redeemed at net asset value, without any CDSC. However, in the case of
Class A shares purchased at net asset value without a sales charge because the purchase amount exceeded $1 million, a CDSC is imposed on any redemption within 12 months of purchase. Class C shares are redeemed at net asset value, without
any CDSC, except that a CDSC of 1% is imposed upon any redemption within 12 months of purchase (except in cases where a shareholder is eligible for a waiver).
In determining whether a CDSC is payable, each Fund will first redeem shares not subject to any charge and then will redeem shares held for the longest period, unless the shareholder specifies another order. No
CDSC is charged on shares purchased as a result of automatic reinvestment of dividends or capital gains paid. In addition, no CDSC will be charged on exchanges of shares into another Nuveen Mutual Fund. The holding period is calculated on a monthly
basis and begins on the first day of the month in which the purchase was made. The CDSC is assessed on an amount equal to the lower of the then current market value or the cost of the shares being redeemed. Accordingly, no sales charge is imposed on
increases of net asset value above the initial purchase price. The Distributor receives the amount of any CDSC shareholders pay.
The
CDSC may be waived or reduced under the following circumstances: (i) in the event of total disability (as evidenced by a determination by the federal Social Security Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed; (ii) in the event of the death of the shareholder (including a registered joint owner); (iii) for redemptions made pursuant to a systematic withdrawal plan, up to 1% monthly, 3%
quarterly, 6% semiannually or 12% annually of an accounts net asset value depending on the frequency of the plan as designated by the shareholder; (iv) involuntary redemptions caused by operation of law; (v) redemptions in connection
with a payment of account or plan fees; (vi) redemptions in connection with the exercise of a reinstatement privilege whereby the proceeds of a redemption of a Funds shares subject to a sales charge are reinvested in shares of certain
Funds within a specified number of days; (vii) redemptions in connection with the exercise of a Funds right to redeem all shares in an account that does not maintain a certain minimum balance or that the Board of Trustees has determined
may have material adverse consequences to the shareholders of a Fund; (viii) in whole or in part for redemptions of shares by shareholders with accounts in excess of specified breakpoints that correspond to the breakpoints under
S-60
which the up-front sales charge on Class A shares is reduced pursuant to Rule 22d-1 under the Act; (ix) redemptions of shares purchased under circumstances or by a category of investors
for which Class A shares could be purchased at net asset value without a sales charge; (x) redemptions of Class A or Class C shares if the proceeds are transferred to an account managed by the Adviser and the Adviser refunds the
advanced service and distribution fees to the Distributor; (xi) redemptions of Class C shares in cases where the Distributor did not advance the first years service and distribution fees when such shares were purchased; and
(xii) redemptions of Class A shares where the Distributor did not pay a sales commission when such shares were purchased. If a Fund waives or reduces the CDSC, such waiver or reduction would be uniformly applied to all Fund shares in the
particular category. In waiving or reducing a CDSC, the Funds will comply with the requirements of Rule 22d-1 under the 1940 Act.
In addition, the CDSC will be waived in connection with the following redemptions of shares held by an employer-sponsored qualified defined contribution retirement plan: (i) partial or complete redemptions in
connection with a distribution without penalty under Section 72(t) of the Code from a retirement plan: (a) upon attaining age 59
1
/
2
, (b) as part of a series of substantially equal periodic payments, or (c) upon
separation from service and attaining age 55; (ii) partial or complete redemptions in connection with a qualifying loan or hardship withdrawal; (iii) complete redemptions in connection with termination of employment, plan termination or
transfer to another employers plan or IRA; and (iv) redemptions resulting from the return of an excess contribution. The CDSC will also be waived in connection with the following redemptions of shares held in an IRA account: (i) for
redemptions made pursuant to an IRA systematic withdrawal based on the shareholders life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 59
1
/
2
; and
(ii) for redemptions to satisfy required minimum distributions after age 70
1
/
2
from an IRA account (with the maximum amount subject to this waiver being based only upon the shareholders Nuveen IRA
accounts).
Class R3 Shares
Class R3 shares are available for purchase at the offering price, which is the net asset value per share without any up-front sales charge.
Class R3 shares are subject to annual distribution and service fees of 0.50% of the Funds average daily net assets. The annual 0.25% service fee compensates your financial advisor or other financial intermediary for providing ongoing
service to you. The annual 0.25% distribution fee compensates the Distributor for paying your financial advisor or other financial intermediary an ongoing sales commission.
Class R3 shares are only available for purchase by eligible retirement plans. Eligible retirement plans include, but are not limited to, 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing
and money purchase pension plans, defined benefit plans, non-qualified deferred compensation plans and health care benefit funding plans. In addition, Class R3 shares are available only to retirement plans where Class R3 shares are held on
the books of the Funds through omnibus accounts (either at the retirement plan level or at the level of the retirement plans financial intermediary). Class R3 shares are not available to traditional and Roth IRAs, Coverdell Education
Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs or individual 403(b) plans.
The administrator of a retirement plan or employee benefits
office can provide plan participants with detailed information on how to participate in the retirement plan and how to elect a Fund as an investment option. Retirement plan participants may be permitted to elect different investment options, alter
the amounts contributed to the retirement plan, or change how contributions are allocated among investment options in accordance with the retirement plans specific provisions. The retirement plan administrator or employee benefits office
should be consulted for details. For questions about their accounts, participants should contact their employee benefits office, the retirement plan administrator, or the organization that provides recordkeeping services for the retirement plan.
Eligible retirement plans may open an account and purchase Class R3 shares directly from the Funds or by contacting any financial
intermediary authorized to sell Class R3 shares of the Funds. Financial intermediaries may provide or arrange for the provision of some or all of the shareholder servicing and account maintenance services required by retirement plan accounts
and their retirement plan participants, including, without limitation, transfers of registration and dividend payee changes. Financial intermediaries may also perform other functions, including generating confirmation statements, and may arrange
with retirement plan administrators for other investment or
S-61
administrative services. Financial intermediaries may independently establish and charge retirement plans and retirement plan participants transaction fees and/or other additional amounts for
such services, which may change over time. Similarly, retirement plans may charge retirement plan participants for certain expenses. These fees and additional amounts could reduce investment returns in Class R3 shares of the Funds.
Financial intermediaries and retirement plans may have omnibus accounts and similar arrangements with a Fund and may be paid for providing
shareholder servicing and other services. A financial intermediary or retirement plan may be paid for its services directly or indirectly by the Funds or the Distributor. The Distributor may pay a financial intermediary an additional amount for
sub-transfer agency or other administrative services. Such sub-transfer agency or other administrative services may include, but are not limited to, the following: processing and mailing trade confirmations, monthly statements, prospectuses, annual
reports, semiannual reports and shareholder notices and other required communications; capturing and processing tax data; issuing and mailing dividend checks to shareholders who have selected cash distributions; preparing record date shareholder
lists for proxy solicitations; collecting and posting distributions to shareholder accounts; and establishing and maintaining systematic withdrawals, automated investment plans and shareholder account registrations. Your retirement plan may
establish various minimum investment requirements for Class R3 shares of the Funds and may also establish certain privileges with respect to purchases, redemptions and exchanges of Class R3 shares or the reinvestment of dividends.
Retirement plan participants should contact their retirement plan administrator with respect to these issues. This SAI should be read in conjunction with the retirement plans and/or the financial intermediarys materials regarding their
fees and services.
Class I Shares
Class I shares are available for purchase by clients of financial intermediaries who charge such clients an ongoing fee for advisory, investment, consulting or related services. Such clients may include
individuals, corporations, endowments and foundations. The minimum initial investment for such clients is $100,000, but this minimum will be lowered to $250 for clients of financial intermediaries that have accounts holding Class I shares with
an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of financial intermediaries anticipated to reach this Class I share holdings level.
Class I shares are also available for purchase by family offices and their clients. A family office is a company that provides certain
financial and other services to a high net worth family or families. The minimum initial investment for family offices and their clients is $100,000, but this minimum will be lowered to $250 for clients of family offices that have accounts holding
Class I shares with an aggregate value of at least $100,000. The Distributor may also lower the minimum to $250 for clients of family offices anticipated to reach this Class I share holdings level.
Class I shares also are available for purchase, with no minimum initial investment, by the following categories of investors:
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employer-sponsored retirement plans, except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans;
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bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a
fiduciary, agency, advisory, custodial or similar capacity;
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advisory accounts of Nuveen Fund Advisors and its affiliates, including other Nuveen Mutual Funds whose investment policies permit investments in other
investment companies;
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any registered investment company that is not affiliated with the Nuveen Funds and which invests in securities of other investment companies;
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any plan organized under section 529 under the Code (i.e., a 529 plan);
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current and former trustees/directors of any Nuveen Fund, and their immediate family members (immediate family members are defined as spouses or
domestic partners, parents, children, grandparents, grandchildren, parents-in-law, sons-in-law and daughters-in-law, siblings, a siblings spouse and a spouses siblings);
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S-62
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officers, directors and former directors of Nuveen Investments and its affiliates, and their immediate family members;
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full-time and retired employees of Nuveen Investments and its affiliates, and their immediate family members; and
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any person who, for at least the last 90 days, has been an officer, director or employee of any financial intermediary, and their immediate family members.
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Any shares purchased by investors falling within any of the last four categories listed above must be acquired for
investment purposes and on the condition that they will not be transferred or resold except through redemption by a Fund.
Holders of
Class I shares may purchase additional Class I shares using dividends and capital gains distributions on their shares.
If
you are eligible to purchase either Class I shares or Class A shares without a sales charge at net asset value, you should be aware of the differences between these two classes of shares. Class A shares are subject to an annual
service fee to compensate financial intermediaries for providing you with ongoing account services. Class I shares are not subject to a distribution or service fee and, consequently, holders of Class I shares may not receive the same types
or levels of services from financial intermediaries. In choosing between Class A shares and Class I shares, you should weigh the benefits of the services to be provided by financial intermediaries against the annual service fee imposed
upon the Class A shares.
Shareholder Programs
Exchange Privilege
You may exchange Fund shares into an identically registered account for
the same class of another Nuveen Mutual Fund available in your state. Your exchange must meet the minimum purchase requirements of the fund into which you are exchanging. You may also, under certain limited circumstances, exchange between certain
classes of shares of the same Fund. An exchange between classes of shares of the same Fund may not be considered a taxable event; please consult your own tax advisor for further information.
If you hold your shares directly with the Fund, you may exchange your shares by either sending a written request to the applicable Fund, c/o Nuveen
Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530 or by calling Nuveen Investor Services toll free at (800) 257-8787.
If you exchange shares between different Nuveen Mutual Funds and your shares are subject to a CDSC, no CDSC will be charged at the time of the exchange. However, if you subsequently redeem the shares acquired
through the exchange, the redemption may be subject to a CDSC, depending on when you purchased your original shares and the CDSC schedule of the fund from which you exchanged your shares. If you exchange between classes of shares of the same Fund
and your original shares are subject to a CDSC, the CDSC will be assessed at the time of the exchange.
For federal income tax
purposes, an exchange between different Nuveen Mutual Funds constitutes a sale and purchase of shares and may result in capital gain or loss. Before making any exchange, you should obtain the Prospectus for the Nuveen Mutual Fund you are purchasing
and read it carefully. If the registration of the account for the Fund you are purchasing is not exactly the same as that of the fund account from which the exchange is made, written instructions from all holders of the account from which the
exchange is being made must be received, with signatures guaranteed by a member of an approved Medallion Signature Guarantee Program or in such other manner as may be acceptable to the Fund. You may also exchange shares by telephone if you authorize
telephone exchanges by checking the applicable box on the Application Form or by calling Nuveen Investor Services toll-free at (800) 257-8787 to obtain an authorization form. Each Fund reserves the right to revise or suspend the exchange
privilege, limit the amount or number of exchanges, or reject any exchange. Shareholders will be provided with at least 60 days notice of any material revision to or termination of the exchange privilege.
S-63
The exchange privilege is not intended to permit a Fund to be used as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio management, raise expenses and otherwise have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Fund management
believes doing so would be in the best interest of the Fund, each Fund reserves the right to revise or terminate the exchange privilege, or limit the amount or number of exchanges or reject any exchange. Shareholders would be notified of any such
action to the extent required by law. See Frequent Trading Policy below.
Reinstatement Privilege
If you redeemed Class A or Class C shares of a Fund or any other Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you
have up to one year to reinvest all or part of the full amount of the redemption in the same class of shares of the Fund at net asset value. This reinstatement privilege can be exercised only once for any redemption, and reinvestment will be made at
the net asset value next calculated after reinstatement of the appropriate class of Fund shares. If you reinstate shares that were subject to a CDSC, your holding period as of the redemption date also will be reinstated for purposes of calculating a
CDSC and the CDSC paid at redemption will be refunded. The federal income tax consequences of any capital gain realized on a redemption will not be affected by reinstatement, but a capital loss may be disallowed in whole or in part depending on the
timing, the amount of the reinvestment and the fund from which the redemption occurred.
Suspension of Right of Redemption
Each Fund may suspend the right of redemption of Fund shares or delay payment more than seven days (a) during any period when the New York
Stock Exchange (the
NYSE
) is closed (other than customary weekend and holiday closings), (b) when trading in the markets the Fund normally utilizes is restricted or an emergency exists as determined by the SEC so that trading
of the Funds investments or determination of its net asset value is not reasonably practicable, or (c) for any other periods that the SEC by order may permit for protection of Fund shareholders.
Redemption In-Kind
The Funds have
reserved the right to redeem in-kind (that is, to pay redemption requests in cash and portfolio securities, or wholly in portfolio securities). The Funds voluntarily have committed to pay in cash all requests for redemption by any shareholder,
limited as to each shareholder during any 90-day period to the lesser of $250,000 or 1% of the net asset value of a Fund at the beginning of the 90-day period.
Frequent Trading Policy
The Funds Frequent Trading Policy is
as follows:
Nuveen Mutual Funds are intended as long-term investments and not as short-term trading vehicles. At the same time, the
Funds recognize the need of investors to periodically make purchases and redemptions of Fund shares when rebalancing their portfolios and as their financial needs or circumstances change. Nuveen Mutual Funds have adopted the following Frequent
Trading Policy that seeks to balance these needs against the potential for higher operating costs, portfolio management disruption and other inefficiencies that can be caused by excessive trading of Fund shares.
1. Definition of Round Trip
A Round
Trip trade is the purchase and subsequent redemption of Fund shares, including by exchange. Each side of a Round Trip trade may be comprised of either a single transaction or a series of closely-spaced transactions.
2. Round Trip Trade Limitations
Nuveen Mutual Funds limit the frequency of Round Trip trades that may be placed in a Fund. Subject to certain exceptions noted below, the Funds
limit an investor to two Round Trips per trailing 60-day period.
S-64
3. Enforcement
Trades placed in violation of the foregoing policies are subject to rejection or cancellation by Nuveen Mutual Funds. Nuveen Mutual Funds may also bar an investor (and/or the investors financial advisor) who
has violated these policies from opening new accounts with the Funds and may restrict the investors existing account(s) to redemptions only. Nuveen Mutual Funds reserve the right, in their sole discretion, to (a) interpret the terms and
application of these policies, (b) waive unintentional or minor violations (including transactions below certain dollar thresholds) if Nuveen Mutual Funds determine that doing so does not harm the interests of Fund shareholders, and
(c) exclude certain classes of redemptions from the application of the trading restrictions set forth above.
Nuveen Mutual Funds
reserve the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if they determine, in their sole discretion, that a proposed transaction or series of transactions involve market timing or
excessive trading that is likely to be detrimental to the Funds. The Funds may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
The ability of Nuveen Mutual Funds to implement the Frequent Trading Policy for omnibus accounts at certain financial intermediaries may be
dependent on receiving from those intermediaries sufficient shareholder information to permit monitoring of trade activity and enforcement of the Funds Frequent Trading Policy. In addition, the Funds may rely on a financial intermediarys
policy to restrict market timing and excessive trading if the Funds believe that the policy is reasonably designed to prevent market timing that is detrimental to the Funds. Such policy may be more or less restrictive than the Funds Policy.
The Funds cannot ensure that these financial intermediaries will in all cases apply the Funds policy or their own policies, as the case may be, to accounts under their control.
Exclusions from the Frequent Trading Policy
As stated above, certain redemptions are
eligible for exclusion from the Frequent Trading Policy, including: (i) redemptions or exchanges by shareholders investing through the fee-based platforms of certain financial intermediaries (where the intermediary charges an asset-based or
comprehensive wrap fee for its services) that are effected by the financial intermediaries in connection with systematic portfolio rebalancing; (ii) when there is a verified trade error correction, which occurs when a dealer firm
sends a trade to correct an earlier trade made in error and then the firm sends an explanation to the Nuveen Mutual Funds confirming that the trade is actually an error correction; (iii) in the event of total disability (as evidenced by a
determination by the federal Social Security Administration) of the shareholder (including a registered joint owner) occurring after the purchase of the shares being redeemed; (iv) in the event of the death of the shareholder (including a
registered joint owner); (v) redemptions made pursuant to a systematic withdrawal plan, up to 1% monthly, 3% quarterly, 6% semiannually or 12% annually of an accounts net asset value depending on the frequency of the plan as designated by
the shareholder; (vi) redemptions of shares that were purchased through a systematic investment program; (vii) involuntary redemptions caused by operation of law; (viii) redemptions in connection with a payment of account or plan
fees; (ix) redemptions or exchanges by any fund of funds advised by the Adviser; and (x) redemptions in connection with the exercise of a Funds right to redeem all shares in an account that does not maintain a certain
minimum balance or that the board has determined may have material adverse consequences to the shareholders of a Fund.
In addition, the following redemptions of shares by an employer-sponsored qualified defined contribution retirement plan are excluded from the Frequent Trading Policy: (i) partial or complete redemptions in
connection with a distribution without penalty under Section 72(t) of the Code from a retirement plan: (a) upon attaining age 59
1
/
2
; (b) as part of a series of substantially equal periodic payments; or (c) upon
separation from service and attaining age 55; (ii) partial or complete redemptions in connection with a qualifying loan or hardship withdrawal; (iii) complete redemptions in connection with termination of employment, plan termination,
transfer to another employers plan or IRA or changes in a plans recordkeeper; and (iv) redemptions resulting from the return of an excess contribution. Also, the following redemptions of shares held in an IRA account are excluded
from the application of the Frequent Trading Policy: (i) redemptions made pursuant to an IRA systematic withdrawal based on the shareholders life expectancy including, but not limited to, substantially equal periodic payments described in
Code Section 72(t)(A)(iv) prior to age 59
1
/
2
; and (ii) redemptions to satisfy required minimum distributions after age 70
1
/
2
from
an IRA account.
S-65
Distribution and Service Plan
The Funds have adopted a plan (the
Plan
) pursuant to Rule 12b-1 under the 1940 Act, pursuant to which Class C and
Class R3 shares are subject to an annual distribution fee and Class A, Class C and Class R3 shares are subject to an annual service fee. Each Fund may spend up to 0.25% per year of the average daily net assets of
Class A shares as a service fee under the Plan as applicable to Class A shares. Each Fund may spend up to 0.75% per year of the average daily net assets of Class C shares and 0.25% per year of the average daily net assets of
Class R3 shares as a distribution fee and up to 0.25% per year of the average daily net assets of each of the Class C and Class R3 shares as a service fee under the Plan as applicable to such classes. Class I shares are not
subject to either distribution or service fees. Distribution and service fees collectively are referred to herein as
12b-1 fees
.
The distribution fee applicable to Class C and Class R3 shares under each Funds Plan compensates the Distributor for expenses incurred in connection with the distribution of Class C and
Class R3 shares, respectively. These expenses include payments to financial intermediaries, including the Distributor, who are brokers of record with respect to the Class C and Class R3 shares, as well as, without limitation, expenses
of printing and distributing Prospectuses to persons other than shareholders of each Fund, expenses of preparing, printing and distributing advertising and sales literature and reports to shareholders used in connection with the sale of Class C
and Class R3 shares, certain other expenses associated with the distribution of Class C and Class R3 shares, and any other distribution-related expenses that may be authorized from time to time by the Board of Trustees.
The service fee applicable to Class A, Class C and Class R3 shares under each Funds Plan is used to compensate financial
intermediaries in connection with the provision of ongoing account services to shareholders. These services may include establishing and maintaining shareholder accounts, answering shareholder inquiries and providing other personal services to
shareholders.
During the fiscal period ended August 31, 2012, the Funds incurred 12b-1 fees pursuant to their respective Plan in the
amounts set forth in the table below. For this period, substantially all of the 12b-1 service fees on Class A shares were paid out as compensation to financial intermediaries for providing services to shareholders relating to their investments. To
compensate for commissions advanced to financial intermediaries, all 12b-1 fees on Class C shares during the first year following a purchase are retained by the Distributor. After the first year following a purchase, 12b-1 fees on Class C
shares are paid to financial intermediaries.
|
|
|
|
|
|
|
12b-1 Fees
Incurred by
each Fund for
the Fiscal
Period May
4,
2012 through
August 31, 2012
|
|
Nuveen Intelligent Risk Growth Allocation Fund
|
|
|
|
|
Class A
|
|
$
|
40
|
|
Class C
|
|
|
159
|
|
Class R3
|
|
|
79
|
|
|
|
|
|
|
Total
|
|
$
|
278
|
|
|
|
|
|
|
Nuveen Intelligent Risk Moderate Allocation Fund
|
|
|
|
|
Class A
|
|
$
|
46
|
|
Class C
|
|
|
163
|
|
Class R3
|
|
|
81
|
|
|
|
|
|
|
Total
|
|
$
|
290
|
|
|
|
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund
|
|
|
|
|
Class A
|
|
$
|
41
|
|
Class C
|
|
|
163
|
|
Class R3
|
|
|
81
|
|
|
|
|
|
|
Total
|
|
$
|
285
|
|
|
|
|
|
|
S-66
Under each Funds Plan, the Fund will report quarterly to the Board of Trustees for its
review all amounts expended per class of shares under the Plan. The Plan may be terminated at any time with respect to any class of shares, without the payment of any penalty, by a vote of a majority of the independent trustees who have no direct or
indirect financial interest in the Plan or by vote of a majority of the outstanding voting securities of such class. The Plan may be renewed from year to year if approved by a vote of the Board of Trustees and a vote of the independent trustees who
have no direct or indirect financial interest in the Plan cast in person at a meeting called for the purpose of voting on the Plan. The Plan may be continued only if the trustees who vote to approve such continuance conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under applicable law, that there is a reasonable likelihood that the Plan will benefit the Fund and its shareholders. The Plan may not be amended to increase materially the cost
which a class of shares may bear under the Plan without the approval of the shareholders of the affected class, and any other material amendments of the Plan must be approved by the independent trustees by a vote cast in person at a meeting called
for the purpose of considering such amendments. During the continuance of the Plan, the selection and nomination of the independent trustees of the Trust will be committed to the discretion of the independent trustees then in office. With the
exception of the Distributor and its affiliates, no interested person of the Funds, as that term is defined in the 1940 Act, and no trustee of the Funds has a direct or indirect financial interest in the operation of the Plan or any
related agreement.
General Matters
The Funds have authorized one or more brokers to accept on their behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the
Funds behalf. The Funds will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a brokers authorized designee accepts the order. Customer orders received by such broker (or their
designee) will be priced at the applicable Funds net asset value next computed after they are accepted by an authorized broker (or their designee). Orders accepted by an authorized broker (or their designee) before the close of regular trading
on the NYSE will receive that days share price; orders accepted after the close of trading will receive the next business days share price.
If you choose to invest in a Fund, an account will be opened and maintained for you by BFDS, the Funds shareholder services agent. Shares will be registered in the name of the investor or the investors
financial advisor. A change in registration or transfer of shares held in the name of a financial advisor may only be made by an order in good standing form from the financial advisor acting on the investors behalf. Each Fund reserves the
right to reject any purchase order and to waive or increase minimum investment requirements.
The Funds do not issue share
certificates.
Distribution Arrangements
The Distributor sells shares to or through brokers, dealers, banks or other qualified financial intermediaries (collectively referred to as
Dealers
), or others, in a manner consistent with the
then effective registration statement of the Trust. Pursuant to the Distribution Agreement, the Distributor, at its own expense, finances certain activities incident to the sale and distribution of the Funds shares, including printing and
distributing of prospectuses and statements of additional information to other than existing shareholders, the printing and distributing of sales literature, advertising and payment of compensation and giving of concessions to Dealers.
The Distributor receives for its services the excess, if any, of the sales price of a Funds shares less the net asset value of those shares,
and reallows a majority or all of such amounts to the Dealers who sold the shares. The Distributor also receives distribution fees pursuant to a distribution plan adopted by the Trust pursuant to Rule 12b-1 and described herein under
Distribution and Service Plan. The Distributor also receives any CDSCs imposed on redemptions of shares, but any amounts as to which a reinstatement privilege is not exercised are set off against and reduce amounts otherwise payable to
the Distributor pursuant to the distribution plan. The Distributor may also act as a Dealer.
The following table sets forth the
aggregate amounts of underwriting commissions with respect to the sale of Fund shares, the amount thereof retained by the Distributor and the compensation on
S-67
redemptions and repurchases received by the Distributor for the Funds for the specified period. All figures are expressed in thousands and are to the nearest thousand.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Amount of Underwriting
Commissions
|
|
Amount Retained by the
Distributor
|
|
Amount of Compensation on
Redemptions and
Repurchases
|
|
|
5/4/12-
8/31/12
|
|
5/4/12-
8/31/12
|
|
5/4/12-
8/31/12
|
Nuveen Intelligent Risk Growth Allocation Fund
|
|
$
|
|
$
|
|
$
|
Nuveen Intelligent Risk Moderate Allocation Fund
|
|
3
|
|
|
|
|
Nuveen Intelligent Risk Conservative Allocation Fund
|
|
|
|
|
|
|
To help financial advisors and investors better understand and more efficiently use the Funds to reach their
investment goals, the Distributor may advertise and create specific investment programs and systems. For example, this may include information on how to use the Funds to accumulate assets for future education needs or periodic payments such as
insurance premiums. The Distributor may produce software, electronic information sites or additional sales literature to promote the advantages of using the Funds to meet these and other specific investor needs. In addition, wholesale
representatives of the Distributor may visit financial advisors on a regular basis to educate them about the Funds and to encourage the sale of Fund shares to their clients. The costs and expenses associated with these efforts may include travel,
lodging, sponsorship at educational seminars and conferences, entertainment and meals to the extent permitted by law. Nuveen wholesalers may receive additional compensation if they meet certain targets for sales of one or more Nuveen Mutual Funds.
Additional Payments to Financial Intermediaries and Other Payments
In addition to the sales charge payments and the distribution, service and transfer agency fees described in the Prospectus and elsewhere in this
SAI, the Adviser and/or the Distributor may make additional payments out of its own assets to selected intermediaries that sell shares of the Nuveen Mutual Funds (such as brokers, dealers, banks, registered investment advisers, retirement plan
administrators and other intermediaries; hereinafter, individually,
Intermediary
, and collectively,
Intermediaries
) under the categories described below for the purposes of promoting the sale of Fund shares,
maintaining share balances and/or for sub-accounting, administrative or shareholder processing services.
The amounts of these payments
could be significant and may create an incentive for an Intermediary or its representatives to recommend or offer shares of the Nuveen Mutual Funds to its customers. The Intermediary may elevate the prominence or profile of the Funds within the
Intermediarys organization by, for example, placing the Funds on a list of preferred or recommended funds and/or granting the Adviser and/or the Distributor preferential or enhanced opportunities to promote the Funds in various ways within the
Intermediarys organization.
These payments are made pursuant to negotiated agreements with Intermediaries. The payments do not
change the price paid by investors for the purchase of a share or the amount a Fund will receive as proceeds from such sales. Furthermore, these payments are not reflected in the fees and expenses listed in the fee table section of the Funds
Prospectus and described above because they are not paid by the Funds.
S-68
The categories of payments described below are not mutually exclusive, and a single Intermediary may
receive payments under all categories.
The Adviser and/or the Distributor may also make other additional payments out of its own
assets as described under Other Payments below.
Marketing Support Payments and Program Servicing Payments
The Adviser and/or the Distributor may make payments for marketing support and/or program servicing to selected Intermediaries that are registered
as holders or dealers of record for accounts invested in one or more of the Nuveen Mutual Funds or that make Nuveen Mutual Fund shares available through employee benefit plans or fee-based advisory programs to compensate them for the variety of
services they provide.
Marketing Support Payments.
Services for which an Intermediary receives marketing support payments may
include business planning assistance, advertising, educating the Intermediarys personnel about the Nuveen Mutual Funds in connection with shareholder financial planning needs, placement on the Intermediarys preferred or recommended fund
company list, and access to sales meetings, sales representatives and management representatives of the Intermediary. In addition, Intermediaries may be compensated for enabling representatives of the Adviser and/or the Distributor to participate in
and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client and investor events and other events sponsored by the Intermediary.
The Adviser and/or the Distributor compensate Intermediaries differently depending upon, among other factors, the number or value of Nuveen Mutual
Funds shares that the Intermediary sells or may sell, the value of the assets invested in the Nuveen Mutual Funds by the Intermediarys customers, redemption rates, ability to attract and retain assets, reputation in the industry and the level
and/or type of marketing assistance and educational activities provided by the Intermediary. Such payments are generally asset-based but also may include the payment of a lump sum.
Program Servicing Payments.
Services for which an Intermediary receives program servicing payments typically include recordkeeping,
reporting, or transaction processing, but may also include services rendered in connection with fund/investment selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services. An
Intermediary may perform program services itself or may arrange with a third party to perform program services.
Program servicing
payments typically apply to employee benefit plans, such as retirement plans, or fee-based advisory programs but may apply to retail sales and assets in certain situations. The payments are based on such factors as the type and nature of services or
support furnished by the Intermediary and are generally asset-based.
Marketing Support and Program Servicing Payment
Guidelines.
In the case of any one Intermediary, marketing support and program servicing payments are not expected, with certain limited exceptions, to exceed, in the aggregate, 0.35% of the average net assets of Fund shares attributable to that
Intermediary on an annual basis. In connection with the sale of a business by U.S. Bank N.A. to Great-West Life & Annuity Insurance Company (
Great-West
), the Adviser and/or the Distributor has a services agreement with
GWFS Equities, Inc., an affiliate of Great-West, which provides for payments of up to 0.60% of the average net assets of Fund shares attributable to GWFS Equities, Inc. on an annual basis.
Other Payments
From time to time, the
Adviser and/or the Distributor, at its expense, may provide other compensation to Intermediaries that sell or arrange for the sale of shares of the Funds, which may be in addition to marketing support and program servicing payments described above.
For example, the Adviser and/or the Distributor may: (i) compensate Intermediaries for National Securities Clearing Corporation networking system services (e.g., shareholder communication, account statements, trade confirmations, and tax
reporting) on an asset-based or per account basis; (ii) compensate Intermediaries for providing Fund shareholder trading information; (iii) make one-time or periodic payments to reimburse selected Intermediaries for items such as ticket
charges (i.e., fees that an Intermediary charges its representatives for effecting transactions in Fund shares) of up to $25 per
S-69
purchase or exchange order, operational charges (e.g., fees that an Intermediary charges for establishing a Fund on its trading system), and literature printing and/or distribution costs;
(iv) at the direction of a retirement plans sponsor, reimburse or pay direct expenses of an employee benefit plan that would otherwise be payable by the plan; and (v) provide payments to broker-dealers to help defray their technology or
infrastructure costs.
When not provided for in a marketing support or program servicing agreement, the Adviser and/or the Distributor
may pay Intermediaries for enabling the Adviser and/or the Distributor to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other Intermediary employees, client and
investor events and other Intermediary-sponsored events, and for travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, asset retention and due diligence trips. These payments
may vary depending upon the nature of the event. The Adviser and/or the Distributor make payments for such events as it deems appropriate, subject to its internal guidelines and applicable law.
The Adviser and/or the Distributor occasionally sponsors due diligence meetings for registered representatives during which they receive updates on
various Nuveen Mutual Funds and are afforded the opportunity to speak with portfolio managers. Although invitations to these meetings are not conditioned on selling a specific number of shares, those who have shown an interest in Nuveen Mutual Funds
are more likely to be considered. To the extent permitted by their firms policies and procedures, all or a portion of registered representatives expenses in attending these meetings may be covered by the Adviser and/or the Distributor.
Representatives of the Distributor or its affiliates may receive additional compensation from the Adviser and/or the Distributor if
certain targets are met for sales of one or more Nuveen Mutual Funds. Such compensation may vary by Fund and by Intermediary.
Other
compensation may be offered to the extent not prohibited by state laws or any self-regulatory agency, such as FINRA. Investors can ask their Intermediary for information about any payments it receives from the Adviser and/or the Distributor and the
services it provides for those payments.
Investors may wish to take Intermediary payment arrangements into account when considering and
evaluating any recommendations relating to Fund shares.
Intermediaries Receiving Additional Payments
The following is a list of Intermediaries receiving one or more of the types of payments discussed above as of December 14, 2012:
ADP Broker-Dealer, Inc.
Alliance Fund Distributors
American United Life Insurance Company
Ameriprise Financial Services, Inc.
Ascensus (formerly BISYS Retirement Services, Inc.)
Benefit Plans
Administrative Services, Inc.
Benefit Trust Company
Charles Schwab & Co., Inc.
Chase Investment Services
Citigroup Global Markets Inc.
Commonwealth Equity Services, LLP, DBA Commonwealth Financial Network
CPI Qualified Plan Consultants, Inc.
Digital Retirement Solutions, Inc.
Dyatech, LLC
Edward Jones
ExpertPlan, Inc.
Fidelity Brokerage Services LLC/National Financial Services LLC
Fidelity Investments Institutional Operations Company, Inc. (FIIOC)/Fidelity Advisors
Retirement
Genesis Employee Benefits, Inc. DBA Americas VEBA Solution
Great West Life
and Annuity Insurance Co.
GWFS Equities, Inc.
S-70
Hartford Life Insurance Company
Hartford Securities Distribution Company, Inc.
Hewitt Associates LLC
ICMA Retirement Corporation
ING Life Insurance and Annuity Company/ING
Institutional Plan Services LLC/ING Financial Advisors, LLC (formerly CitiStreet LLC/CitiStreet Advisors LLC)
J.P.
Morgan Retirement Plan Services, LLC
Janney Montgomery Scott LLC
Lincoln Retirement Services Company LLC/AMG Service Corp.
Linsco/Private Ledger Corp.
Marshall & Ilsley Trust Company, N.A.
Massachusetts Mutual Life Insurance
Company
Mercer HR Outsourcing LLC
Merrill Lynch, Pierce, Fenner & Smith Inc.
Mid Atlantic Capital Corporation
Morgan Stanley & Co., Incorporated/Morgan Stanley Smith Barney LLC
MSCS
Financial Services, LLC
Nationwide Financial Services, Inc.
Newport Retirement Services, Inc.
NYLife Distributors LLC
Pershing LLC
Princeton Retirement Group/GPC Securities, Inc.
Principal Life Insurance Company
Prudential Insurance Company of America (The)
Prudential Investment Management
Services, LLC/Prudential Investments LLC
Raymond James & Associates/Raymond James Financial Services, Inc.
RBC Capital Markets, LLC
Reliance Trust Company
Retirement Plan Company, LLC (The)
Robert W. Baird & Co., Inc.
Savings Institute and Bank
Smith Barney
Stifel, Nicolaus & Co., Inc.
T. Rowe Price Investment Services, Inc./T. Rowe Price Retirement Plan Services, Inc.
TD Ameritrade, Inc.
TD Ameritrade Trust Company (formerly Fiserv Trust Company/International Clearing Trust Company)
TIAA-CREF Individual & Institutional Services, LLC
U.S. Bancorp Investments,
Inc.
U.S. Bank N.A.
UBS Financial Services, Inc.
Unified Trust Company, N.A.
VALIC Retirement Services Company (formerly AIG Retirement Services Company)
Vanguard Group, Inc.
Wells Fargo Advisors, LLC
Wells Fargo Bank, N.A.
Wilmington Trust Company
Wilmington Trust Retirement and Institutional Services Company (formerly AST Capital Trust Company)
Any additions, modifications or deletions to the list of Intermediaries identified above that have occurred since December 14, 2012 are not
reflected in the list.
FINANCIAL STATEMENTS
The audited financial statements for each Funds most recent fiscal period appear in each Funds Annual Report dated August 31, 2012.
Each Funds Annual Report is incorporated by reference into this SAI and is available without charge by calling (800) 257-8787.
S-71