As filed with the Securities and Exchange Commission on July 19, 2011
File No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
¨ Pre-Effective Amendment No.
¨ Post-Effective Amendment No.
NUVEEN INVESTMENT FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
333 West Wacker Drive
Chicago, Illinois 60606
(Address of Principal Executive Offices, Zip Code)
Registrant’s Telephone Number, including Area Code (312) 917-7700
Kevin J. McCarthy
Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
(Name and Address of Agent for Service)
Copy to:
Deborah Bielicke Eades Vedder Price P.C. 222 North LaSalle Street Chicago, Illinois 60601 | Eric F. Fess Chapman and Cutler LLP 111 West Monroe Street Chicago, Illinois 60603 |
Approximate date of proposed public offering: As soon as practicable after the effective date of this Registration Statement.
TITLE OF SECURITIES BEING REGISTERED: Shares of Common Stock (par value $0.0001 per share) of the Registrant.
No filing fee is required because of reliance on Section 24(f) and an indefinite number of shares have previously been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.
It is proposed that this filing will become effective on August 18, 2011 pursuant to Rule 488 under the Securities Act of 1933.
Important Information for
Nuveen Short Duration Bond Fund Shareholders
At a Special Meeting of shareholders of Nuveen Short Duration Bond Fund (the “Acquired Fund”), a series of Nuveen Investment Trust III (the “Trust”), you will be asked to vote upon an important change affecting your fund. The purpose of the Special Meeting is to allow you to vote on a reorganization of your fund into Nuveen Short Term Bond Fund (the “Acquiring Fund”). If the reorganization is approved and completed, you will become a shareholder of the Acquiring Fund. The Acquired Fund and the Acquiring Fund are collectively referred to herein as the “Funds.”
Although we recommend that you read the complete Proxy Statement/Prospectus, for your convenience, we have provided the following brief overview of the issue to be voted on.
Q. | Why am I receiving this Proxy Statement/Prospectus? |
A. | In December of 2010, Nuveen Investments, Inc. and certain of its affiliates (“Nuveen”) completed a strategic combination with U.S. Bank National Association and its wholly-owned subsidiary, FAF Advisors, Inc., the investment adviser to the First American Funds. Pursuant to this transaction, Nuveen acquired a portion of the investment advisory business of FAF Advisors, Inc., including assets related to the non-money market open-end funds in the First American family of funds. Effective January 1, 2011, these former First American Funds became part of the Nuveen family of funds and were re-branded as Nuveen Funds. As part of its efforts to integrate the portfolio management teams and investment products it offers following the closing of the transaction, Nuveen has recommended a number of reorganizations between funds with similar investment objectives and policies. The reorganization of the Acquired Fund into the Acquiring Fund has been proposed as part of this initiative. |
Q. | What advantages will the reorganization produce for Acquired Fund shareholders? |
A. | The investment adviser and the Board of Trustees of the Trust (the “Board”) believe that shareholders of the Acquired Fund will benefit from operational efficiencies and economies of scale that are expected to arise as a result of the larger net asset size, and expected continued growth in net assets, of the Acquiring Fund following the reorganization. These operational efficiencies and economies of scale, together with fee reductions and caps resulting from the reorganization (described in further detail below), are expected to result in lower gross and net expenses for all shareholders. |
Q. | What are the similarities between the investment policies of the Funds? |
A. | The investment objective of the Acquired Fund is to provide high current income consistent with minimal fluctuations of principal, and the investment objective of the Acquiring Fund is to provide investors with current income while maintaining a high degree of principal stability. Each Fund currently has substantially similar principal investment strategies and risks. Prior to March 2011, the strategies of the Acquiring Fund were more restrictive than those of the Acquired Fund. While there are differences in the current portfolio compositions of the Funds because they were formerly managed by different investment advisers and because, until recently, the Acquiring Fund had more restrictive strategies than the Acquired Fund, the Funds |
currently have the same portfolio managers and are expected to be managed in substantially the same manner going forward. A more detailed comparison of the investment objectives, policies and risks of the Funds is contained in the Proxy Statement/Prospectus. |
Q. | What will happen if shareholders do not approve the reorganization? |
A. | If the reorganization is not approved by shareholders, the Board will take such actions as it deems to be in the best interests of the Acquired Fund. |
Q. | Will Acquired Fund shareholders receive new shares in exchange for their current shares? |
A. | Yes. If shareholders approve the reorganization and it is completed, each Acquired Fund shareholder will receive shares of the Acquiring Fund in an amount equal in total value to the total value of the Acquired Fund shares surrendered by such shareholder. |
Q. | Will this reorganization create a taxable event for me? |
A. | No. The reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes. It is expected that you will recognize no gain or loss for federal income tax purposes as a result of the reorganization. |
Q. | How do total operating expenses compare between the two Funds? |
A. | If the reorganization is completed, Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”) has agreed to a 0.02% reduction in the fund-level management fee at each breakpoint for the Acquiring Fund. With this reduction, even though the management fees of the Acquiring Fund will be higher than the management fees of the Acquired Fund, the gross and net expenses of the Acquiring Fund immediately following the reorganization are expected to be lower than the gross and net expenses of the Acquired Fund. In addition, in connection with the reorganization, Nuveen Fund Advisors has agreed to maintain the current expense caps of the Acquiring Fund through October 31, 2012, except that the current 0.10% waiver of Rule 12b-1 fees for Class A shares will end March 31, 2012, resulting in a corresponding 0.10% expense cap increase for that share class. |
Q. | Who will bear the costs of the reorganization? |
A. | The reorganization is expected to result in cost savings for each Fund. In light of these anticipated cost savings, the costs of the reorganization will be allocated between the Funds ratably up to each Fund’s projected annual cost savings. Nuveen Fund Advisors estimates that reorganization costs will be approximately $145,000 and that the annual benefit of the reorganization will be approximately $75,000 to the Acquired Fund and approximately $82,000 to the Acquiring Fund. As a result, the Acquired Fund is expected to be charged approximately 48% of the reorganization expenses or approximately $69,000 and the Acquiring Fund is expected to be charged approximately 52% of the reorganization expenses or approximately $76,000. To the extent that the payment of these expenses would cause either Fund’s expenses to exceed the expense caps then in effect, Nuveen Fund Advisors would reimburse the portion of expenses necessary for the Fund to operate within its cap. Based on current expense levels, it is anticipated that Nuveen Fund Advisors will reimburse all expenses charged to the Acquired Fund and none of the expenses charged to the Acquiring Fund. If the reorganization is not approved or completed, Nuveen will pay all such reorganization expenses. |
Q. | What is the timetable for the reorganization? |
A. | If approved by shareholders on October 3, 2011, the reorganization is expected to occur at the close of business on October 7, 2011. |
Q. | Whom do I call if I have questions? |
A. | If you need any assistance, or have any questions regarding the proposal or how to vote your shares, please call Computershare Fund Services, your proxy solicitor, at ( ) - . Please have your proxy material available when you call. |
Q. | How do I vote my shares? |
A. | You may vote by mail, telephone or over the Internet: |
— | To vote by mail, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States. |
— | To vote by telephone, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as a guide. |
— | To vote over the Internet, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide. |
Q. | Will Nuveen contact me? |
A. | You may receive a call from representatives of Computershare Fund Services, the proxy solicitation firm retained by Nuveen, to verify that you received your proxy materials and to answer any questions you may have about the reorganization. |
Q. | How does the Board suggest that I vote? |
A. | After careful consideration, the Board has agreed unanimously that the reorganization is in the best interests of your Fund and recommends that you vote “FOR” the reorganization. |
, 2011
Dear Shareholders:
We are pleased to invite you to the special meeting of shareholders of Nuveen Short Duration Bond Fund (the “Special Meeting”). The Special Meeting is scheduled for October 3, 2011, at 3:00 p.m., Central time, in the 31st floor conference room of Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606.
At the Special Meeting, you will be asked to consider and approve a very important proposal. Subject to shareholder approval, Nuveen Short Term Bond Fund (the “Acquiring Fund”) will acquire all the assets and liabilities of Nuveen Short Duration Bond Fund (the “Acquired Fund”) in exchange solely for shares of the Acquiring Fund, which will be distributed in complete liquidation of the Acquired Fund to the shareholders of the Acquired Fund (the “Reorganization”).
Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”), each Fund’s investment adviser, has proposed the Reorganization involving the Acquired Fund, as well as a number of other reorganizations involving other funds advised by Nuveen Fund Advisors, to eliminate certain redundancies among the products it offers and in an effort to achieve certain operating efficiencies.
The Reorganization is being proposed because Nuveen Fund Advisors and the Board of Trustees of Nuveen Investment Trust III (the “Board”) believe that the shareholders of the Acquired Fund will benefit from potential operating efficiencies and economies of scale that may be achieved by combining the funds pursuant to the Reorganization. Following the Reorganization, the Acquiring Fund is expected to have lower gross and net expenses than the Acquired Fund had prior to the Reorganization. The Board believes the Reorganization is in the best interests of the Acquired Fund, and recommends that you vote “For” the proposed Reorganization.
The attached Proxy Statement/Prospectus has been prepared to give you information about this proposal.
All shareholders are cordially invited to attend the Special Meeting. In order to avoid delay and additional expense for the Acquired Fund, and to assure that your shares are represented, please vote as promptly as possible, whether or not you plan to attend the Special Meeting. You may vote by mail, telephone or over the Internet.
— | To vote by mail, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States. |
— | To vote by telephone, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as a guide. |
— | To vote over the Internet, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide. |
We appreciate your continued support and confidence in Nuveen and our family of funds.
Very truly yours,
Kevin J. McCarthy
Vice President and Secretary
, 2011
NUVEEN SHORT DURATION BOND FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 3, 2011
To the Shareholders:
Notice is hereby given that a special meeting of shareholders of Nuveen Short Duration Bond Fund (the “Acquired Fund”), a series of the Nuveen Investment Trust III (the “Trust”), a Massachusetts business trust, will be held in the 31st floor conference room of Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606, on October 3, 2011 at 3:00 p.m., Central time (the “Special Meeting”), for the following purposes:
1. To approve an Agreement and Plan of Reorganization (and the related transactions) which provides for (i) the transfer of all the assets of the Acquired Fund to Nuveen Short Term Bond Fund (the “Acquiring Fund”) in exchange solely for voting shares of common stock of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund; and (ii) the distribution by the Acquired Fund of all the shares of each class of the Acquiring Fund to the holders of shares of the corresponding class of the Acquired Fund in complete liquidation and termination of the Acquired Fund.
2. To transact such other business as may properly come before the Special Meeting.
Only shareholders of record as of the close of business on August 4, 2011 are entitled to vote at the Special Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Special Meeting. In order to avoid delay and additional expense for the Acquired Fund, and to assure that your shares are represented, please vote as promptly as possible, whether or not you plan to attend the Special Meeting. You may vote by mail, telephone or over the Internet.
— | To vote by mail, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States. |
— | To vote by telephone, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as a guide. |
— | To vote over the Internet, go the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide. |
Kevin J. McCarthy
Vice President and Secretary
Proxy Statement/Prospectus
Dated , 2011
Relating to the Acquisition of the Assets and Liabilities of
NUVEEN SHORT DURATION BOND FUND
by NUVEEN SHORT TERM BOND FUND
This Proxy Statement/Prospectus is being furnished to shareholders of Nuveen Short Duration Bond Fund (the “Acquired Fund”), a series of the Nuveen Investment Trust III (the “Trust”), a Massachusetts business trust and an open-end investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and relates to the special meeting of shareholders of the Acquired Fund to be held in the 31st floor conference room of Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois 60606, on October 3, 2011 at 3:00 p.m., Central time and at any and all adjournments thereof (the “Special Meeting”). This Proxy Statement/Prospectus is provided in connection with the solicitation by the Board of Trustees of the Trust of proxies to be voted at the Special Meeting, and any and all adjournments thereof. The purpose of the Special Meeting is to consider the proposed reorganization (the “Reorganization”) of the Acquired Fund into Nuveen Short Term Bond Fund (the “Acquiring Fund”), a series of Nuveen Investment Funds, Inc. (the “Corporation”), a Maryland corporation and an open-end investment company registered under the 1940 Act. The Acquired Fund and the Acquiring Fund are referred to herein collectively as the “Funds” and individually as a “Fund.” The Board of Trustees of the Trust and the Board of Directors of the Corporation, which are made up of the same individuals, are referred to herein as the “Board.” If shareholders approve the Reorganization and it is completed, shareholders of the Acquired Fund will receive shares of the corresponding class of the Acquiring Fund with the same total value as the total value of the Acquired Fund shares surrendered by such shareholders. The Board has determined that the Reorganization is in the best interest of the Acquired Fund. The address, principal executive office and telephone number of the Funds, the Trust and the Corporation is 333 West Wacker Drive, Chicago, Illinois 60606, (800) 257-8787.
The enclosed proxy and this Proxy Statement/Prospectus are first being sent to shareholders of the Acquired Fund on or about , 2011. Shareholders of record as of the close of business on August 4, 2011 are entitled to vote at the Special Meeting and any adjournment thereof.
The Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this Proxy Statement/Prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
This Proxy Statement/Prospectus concisely sets forth the information shareholders of the Acquired Fund should know before voting on the Reorganization (in effect, investing in Class A, Class C, Class I and Class R3 shares of the Acquiring Fund) and constitutes an offering of Class A, Class C, Class I and Class R3 shares of common stock, par value $0.0001 per share, of the Acquiring Fund. Please read it carefully and retain it for future reference.
The following documents have been filed with the Securities and Exchange Commission (“SEC”) and are incorporated into this Proxy Statement/Prospectus by reference and also accompany this Proxy Statement/Prospectus:
(i) | the Corporation’s prospectus dated July 12, 2011, as supplemented from time to time, relating to the Acquiring Fund; and |
(ii) | the audited financial statements contained in the Corporation’s Annual Report relating to the Acquiring Fund for the fiscal year ended June 30, 2010 and the unaudited financial statements contained in the Corporation’s Semi-Annual Report relating to the Acquiring Fund for the six-month period ended December 31, 2010. |
The following documents contain additional information about the Acquired Fund and Acquiring Fund, have been filed with the SEC and are incorporated into this Proxy Statement/Prospectus by reference:
(i) | the Statement of Additional Information relating to the proposed Reorganization, dated , 2011 (the “Reorganization SAI”); |
(ii) | the Trust’s prospectus dated January 18, 2011, as supplemented from time to time, relating to the Acquired Fund; |
(iii) | the Trust’s statement of additional information dated January 18, 2011, as supplemented from time to time, relating to the Acquired Fund; |
(iv) | the audited financial statements contained in the Trust’s Annual Report relating to the Acquired Fund for the fiscal year ended September 30, 2010 and the unaudited financial statements contained in the Trust’s Semi-Annual Report relating to the Acquired Fund for the six-month period ended March 31, 2011; and |
(v) | the Corporation’s statement of additional information dated July 12, 2011, as supplemented from time to time, relating to the Acquiring Fund. |
No other parts of the documents referenced to above are incorporated by reference herein.
Copies of the foregoing may be obtained without charge by calling or writing the Funds at the telephone number or address shown above. If you wish to request the Reorganization SAI, please ask for the “Reorganization SAI.” In addition, the Acquiring Fund will furnish, without charge, a copy of its most recent annual report and subsequent semi-annual report to a shareholder upon request. Any such request should be directed to the Acquiring Fund by calling (800) 257-8787 or by writing the Acquiring Fund at 333 West Wacker Drive, Chicago, Illinois 60606.
The Trust and the Corporation are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act, and in accordance therewith file reports and other information with the SEC. Reports, proxy statements, registration statements and other information filed by the Trust or the Corporation (including the Registration Statement relating to the Acquiring Fund on Form N-14 of which this Proxy Statement/Prospectus is a part) may be inspected without charge and copied (for a duplication fee at prescribed rates) at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or at the SEC’s Northeast Regional Office (3 World Financial Center, New York, New York 10281) or Midwest Regional Office (175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604). You may call the SEC at (202) 551-8090 for information about the operation of the Public Reference Room. You may obtain copies of this information, with payment of a duplication fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549. You may also access reports and other information about the Funds on the EDGAR database on the SEC’s Internet site at http://www.sec.gov.
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Distribution, Purchase, Redemption, Exchange of Shares and Dividends | 3 | |||
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Distribution, Purchase, Redemption, Exchange of Shares and Dividends | 15 | |||
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Payments to Broker-Dealers and Other Financial Intermediaries | 16 | |||
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Continuation of Shareholder Accounts and Plans; Share Certificates | 19 | |||
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Comparison of Maryland Corporations and Massachusetts Business Trusts | 21 | |||
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Information Filed with the Securities and Exchange Commission | 27 | |||
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The following is a summary of, and is qualified by reference to, the more complete information contained in this Proxy Statement/Prospectus and the information attached hereto or incorporated herein by reference, including the Agreement and Plan of Reorganization. As discussed more fully below and elsewhere in this Proxy Statement/Prospectus, the Board believes the proposed Reorganization is in the best interests of each Fund and that the interests of each Fund’s existing shareholders would not be diluted as a result of the Reorganization. If the Reorganization is approved and completed, shareholders of the Acquired Fund will become shareholders of the Acquiring Fund and will cease to be shareholders of the Acquired Fund.
Shareholders should read the entire Proxy Statement/Prospectus carefully together with the Acquiring Fund’s Prospectus that accompanies this Proxy Statement/Prospectus and is incorporated herein by reference. This Proxy Statement/Prospectus constitutes an offering of Class A, Class C, Class I and Class R3 shares of the Acquiring Fund only.
On December 31, 2010, Nuveen Investments, Inc. and certain of its affiliates (“Nuveen”) completed a strategic combination with U.S. Bank National Association (“U.S. Bank”) and its wholly owned subsidiary, FAF Advisors, Inc. (“FAF Advisors”), the investment adviser to the First American Funds. As part of that transaction, U.S. Bank received a 9.5% ownership interest in Nuveen and cash consideration in exchange for Nuveen’s acquisition of a portion of FAF Advisors’ investment advisory business, including assets relating to the non-money market open-end funds in the First American family of funds (the “FAF Transaction”). Shareholders of these funds received a proxy statement in connection with the FAF Transaction pursuant to which Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors” or the “Adviser”) was appointed as the investment adviser to the funds and Nuveen Asset Management, LLC (“Nuveen Asset Management”) was appointed as the subadviser to the funds. Effective January 1, 2011, these former First American Funds became part of the Nuveen family of funds, and were re-branded as Nuveen Funds. Key investment and other personnel of FAF Advisors have become employees of Nuveen Fund Advisors and Nuveen Asset Management. The Reorganization is one of several reorganizations being proposed as part of Nuveen’s ongoing efforts to integrate the portfolio management teams and investment products it offers following the FAF Transaction. The proposed reorganizations seek to combine portfolios with similar objectives and investment strategies within the combined organization.
This Proxy Statement/Prospectus is being furnished to shareholders of the Acquired Fund in connection with the proposed combination of the Acquired Fund with and into the Acquiring Fund pursuant to the terms and conditions of the Agreement and Plan of Reorganization dated June 17, 2011 by the Trust on behalf of the Acquired Fund and the Corporation on behalf of the Acquiring Fund (the “Agreement”). The Agreement provides for (i) the transfer of all the assets of the Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class C, Class I and Class R3 voting shares of common stock, par value $0.0001 per share, of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund; and (ii) the distribution by the Acquired Fund of all the shares of each class of the Acquiring Fund to the shareholders of the corresponding class of the Acquired Fund in complete liquidation and termination of the Acquired Fund as soon as practicable following the Closing Date (as defined herein).
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If shareholders approve the Reorganization and it is completed, Acquired Fund shareholders will become shareholders of the Acquiring Fund. The Board has determined that the Reorganization is in the best interests of the Acquired Fund and that the interests of existing shareholders will not be diluted as a result of the Reorganization. The Board unanimously approved the Reorganization and the Agreement on June 16, 2011. The Board recommends a vote “FOR” the Reorganization.
If shareholders approve the Reorganization, each of the Acquired Fund and Acquiring Fund will be charged for expenses incurred in connection with the Reorganization based on its portion of the projected annual cost savings to the Funds resulting from the Reorganization. These reorganization expense charges are estimated to be approximately $69,000 for the Acquired Fund and approximately $76,000 for the Acquiring Fund. To the extent that the payment of these expenses would cause either Fund’s expenses to exceed the expense caps then in effect, Nuveen Fund Advisors would reimburse such expenses to the extent necessary to operate within the cap. Based on current expense levels, it is anticipated that Nuveen Fund Advisors will reimburse all expenses charged to the Acquired Fund and none of the expenses charged to the Acquiring Fund. If the Reorganization is not approved or completed, Nuveen will pay all such Reorganization expenses.
The Board is asking shareholders of the Acquired Fund to approve the Reorganization at the Special Meeting to be held on October 3, 2011. Approval of the Reorganization requires the favorable vote of the holders of a majority of the outstanding voting securities entitled to vote, as defined by the 1940 Act. See “Voting Information and Requirements” below.
If shareholders of the Acquired Fund approve the Reorganization, it is expected that the Reorganization will occur at the close of business on October 7, 2011 (the “Closing Date”), but it may be at a different time as described herein. If the Reorganization is not approved, the Board will take such action as it deems to be in the best interests of the Acquired Fund. The Closing Date may be delayed and the Reorganization may be abandoned at any time by the mutual agreement of the parties. In addition, either Fund may at its option terminate the Agreement at or before the Closing Date due to (i) a breach by any other party of any representation, warranty, or agreement contained in the Agreement to be performed at or before the Closing Date, if not cured within 30 days, (ii) a condition precedent to the obligations of the terminating party that has not been met and it reasonably appears that it will not or cannot be met, or (iii) a determination by the Board that the consummation of the transactions contemplated by the Agreement is not in the best interests of a Fund.
Reasons for the Proposed Reorganization
The Board believes that the proposed Reorganization would be in the best interests of each Fund. In approving the Reorganization, the Board considered a number of principal factors in reaching its determination, including the following:
— | the similarities and differences in the Funds’ investment objectives and principal investment strategies; |
— | the Funds’ relative risks; |
— | the Funds’ relative sizes; |
— | the relative investment performance of the Funds and portfolio managers; |
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— | the relative fees and expenses of the Funds, including caps on the Funds’ expenses agreed to by Nuveen Fund Advisors; |
— | the anticipated tax-free nature of the Reorganization; |
— | the expected costs of the Reorganization and the extent to which the Funds would bear any such costs; |
— | the terms of the Reorganization and whether the Reorganization would dilute the interests of shareholders of the Funds; |
— | the effect of the Reorganization on shareholder services and shareholder rights; |
— | alternatives to the Reorganization; and |
— | any potential benefits of the Reorganization to Nuveen Fund Advisors and its affiliates as a result of the Reorganization. |
For a more detailed discussion of the Board’s considerations regarding the approval of the Reorganization, see “The Board’s Approval of the Reorganization.”
Distribution, Purchase, Redemption, Exchange of Shares and Dividends
The Funds have identical procedures for purchasing, exchanging and redeeming shares, and for making distributions. Both Funds offer four classes of shares: Class A, Class C, Class I and Class R3 shares. The classes of each Fund have the same investment eligibility criteria. See “Distribution, Purchase, Redemption, Exchange of Shares and Dividends” below for a more detailed discussion.
Federal Income Tax Consequences of the Reorganization
The Reorganization is intended to qualify as a reorganization for federal income tax purposes. If the Reorganization so qualifies, neither the Acquired Fund nor its shareholders will recognize any gain or loss as a direct result of the transfers contemplated by the Reorganization. In connection with the Reorganization, a portion of the Acquired Fund’s portfolio assets may be sold prior to the Reorganization, which could result in the Acquired Fund declaring taxable distributions to its shareholders on or prior to the Closing Date. However, it is not expected that any significant portfolio sales will occur in connection with the Reorganization. For a more detailed discussion of the federal income tax consequences of the Reorganization, please see “The Proposed Reorganization—Certain Federal Income Tax Consequences” below.
The investment objective of the Acquired Fund is to provide high current income consistent with minimal fluctuations of principal. The investment objective of the Acquiring Fund is to provide investors with current income while maintaining a high degree of principal stability. The investment objective of the Acquired Fund may not be changed without shareholder approval. The Acquiring
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Fund’s investment objective may be changed without shareholder approval upon providing notice at least 60 days in advance.
The Acquired Fund and the Acquiring Fund have substantially similar principal investment strategies and risks. The similarities and differences of the principal investment strategies of the Funds are:
Acquired Fund | Acquiring Fund | |
— Under normal market conditions, the Fund invests at least 80% of its net assets in short duration securities using a risk-controlled, multi-strategy approach that invests across multiple sectors of the taxable fixed income market. The Fund principally invests in corporate debt securities, including bonds, notes and debentures; U.S. government securities; mortgage-related securities issued by governments, their agencies or instrumentalities, or corporations; asset-backed securities; and non-U.S. debt securities. | — Under normal market conditions, the Fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in bonds, such as: residential and commercial mortgage-backed securities; asset-backed securities; corporate debt obligations, including obligations issued by special-purpose entities that are backed by corporate debt obligations; U.S. government securities, which are securities issued or guaranteed by the U.S. government or its agencies or instrumentalities; and municipal securities. | |
— The Fund normally invests at least 80% of its net assets in securities rated investment grade (AAA/Aaa to BBB/Baa) at the time of purchase by at least one independent rating agency and unrated securities judged to be of comparable quality by the Fund’s portfolio managers. | ||
— The Fund may invest up to 20% of its net assets in securities rated below investment grade (BB/Ba or lower) at the time of purchase, which are commonly referred to as “high yield” or “junk bonds”. | — Up to 20% of the Fund’s total assets may be invested in securities that are rated lower than investment grade at the time of purchase or that are unrated and of comparable quality. The Fund will not invest in securities rated lower than CCC at the time of purchase or in unrated securities of equivalent quality. Unrated securities will not exceed 5% of the Fund’s total assets. | |
— The Fund may invest up to 35% of its net assets in debt securities issued by non-U.S. companies. | — The Fund may invest up to 35% of its total assets in debt obligations of foreign corporations and foreign governments. However, no more than 10% of the Fund’s total assets may be invested in debt obligations of corporations and governments that are located in emerging market countries. | |
— The Fund may invest up to 10% of its net assets in securities of issuers located in emerging markets. |
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Acquired Fund | Acquiring Fund | |
— Up to 20% of the Fund’s net assets may have non-U.S. dollar currency exposure from non-U.S. dollar-denominated securities and currency derivatives, calculated on an absolute notional basis (i.e., adding together the absolute value of net long and net short exposures to individual non-U.S. dollar currencies). On a net basis (netting out long and short non-U.S. currency exposures in the aggregate), the Fund’s non-U.S. dollar exposure will not exceed 5% of net assets. | — Up to 10% of the Fund’s total assets may have non-U.S. dollar currency exposure from non-U.S. dollar denominated securities and currency derivatives, calculated on an absolute notional basis (i.e., adding together the absolute value of net long and net short exposures to non-U.S. dollar currencies). | |
— Typically, the Fund’s average duration will be between approximately one and two years but it will not exceed three years. | — Under normal market conditions, the Fund attempts to maintain a weighted average effective maturity and an average effective duration for its portfolio securities of one to three years. | |
— In an effort to enhance returns and manage risk, the Fund’s portfolio managers employ a variety of strategies, which may include the use of futures, options, swaps, credit derivatives and other derivative instruments, to create debt or non-U.S. currency exposures which reflect their outlook for the global economic environment and the expected relative performance of different sectors of and securities in the fixed income market.
— The Fund may engage in repurchase, reverse repurchase and forward purchase agreements. | — The Fund may utilize the following derivatives: options; futures contracts; options on futures contracts; interest rate caps, collars, and floors; foreign currency contracts; options on foreign currencies; swap agreements, including swap agreements on interest rates, currency rates, security indexes and specific securities, and credit default swap agreements; and options on the foregoing types of swap agreements. The 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 over-the-counter market. The Fund may use these derivatives in an attempt to manage market risk, currency risk, credit risk and yield curve risk, to manage the effective maturity or duration of securities in the Fund’s portfolio or for speculative purposes in an effort to increase the Fund’s yield or to enhance returns. The Fund may also use derivatives to gain exposure to non-dollar denominated securities markets to the extent it does not do so through direct investments. The Fund may not use any derivative to gain exposure to a security or type of security that it would be prohibited by its investment restrictions from purchasing directly. |
5
The Acquired Fund and the Acquiring Fund currently have substantially similar principal investment strategies and risks. However, there are some differences. The Acquired Fund has a limit of 20% of its net assets with respect to non-U.S. dollar currency exposure from non-U.S. dollar denominated securities and currency derivatives, while the Acquiring Fund has a limit of 10% of its total assets with respect to non-U.S. dollar exposure. In addition, the Acquired Fund may invest in repurchase, reverse repurchase and forward purchase agreements as a principal investment strategy and the Acquiring Fund may not as a principal investment strategy. Also, the average duration of the Acquiring Fund portfolio is one to three years, whereas the average duration of the Acquired Fund portfolio is one to two years, and the Acquired Fund’s policy provides that no security will have a duration which exceeds three years. Notwithstanding these differences, the Funds currently are managed by the same portfolio managers and are expected to be managed in substantially the same manner going forward.
In evaluating the Reorganization, each Acquired Fund shareholder should consider the risks of investing in the Acquiring Fund, which are described in the section below entitled “Risk Factors.”
The Reorganization may result in one-time brokerage costs for the Acquired Fund to the extent it is necessary for the Acquired Fund to sell securities prior to the Reorganization so that the Acquiring Fund’s portfolio immediately following the Reorganization remains in compliance with its investment policies and restrictions. However, it is not expected that any significant portfolio sales of the Acquired Fund will occur in connection with the Reorganization.
The tables below provide information about the fees and expenses attributable to each class of shares of the Funds, and the pro forma fees and expenses of the combined fund. You may qualify for sales charge discounts on purchases of Class A shares if you and your family invest, or agree to invest in the future, at least $50,000 in other Nuveen mutual funds. Shareholder fees reflect the fees currently in effect for each Fund. Annual Fund Operating Expenses reflect the fees and expenses for the Acquired Fund as of its fiscal year ended September 30, 2010, adjusted to reflect current expense caps. Annual Fund Operating Expenses for the Acquiring Fund have been restated to take into account the new fee and expense structure adopted by the Fund as of January 1, 2011 following the closing of the FAF Transaction but do not reflect the current waiver of Class A share Rule 12b-1 fees to 0.15%, which expires March 31, 2012. The fees and expenses for the Acquiring Fund are estimated based on the actual fees and expenses incurred by the Fund from January 1, 2011 through April 30, 2011, which have been annualized. The pro forma fees and expenses are based on the amounts shown in the table for each Fund, assuming the Reorganization occurred as of April 30, 2011.
Shareholder Fees
(paid directly from your investment)
Acquired Fund | Acquiring Fund | Combined Fund Pro Forma | ||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | ||||||
Class A | 2.25% | 2.25% | 2.25% | |||
Class C | None | None | None | |||
Class I | None | None | None | |||
Class R3 | None | None | None |
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Acquired Fund | Acquiring Fund | Combined Fund Pro Forma | ||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | ||||||
Class A | None | None | None | |||
Class C1 | 1.00% | 1.00% | 1.00% | |||
Class I | None | None | None | |||
Class R3 | None | None | None | |||
Maximum Sales Charge (Load) Imposed on Reinvested Dividends | ||||||
Class A | None | None | None | |||
Class C | None | None | None | |||
Class I | None | None | None | |||
Class R3 | None | None | None | |||
Exchange Fees | ||||||
Class A | None | None | None | |||
Class C | None | None | None | |||
Class I | None | None | None | |||
Class R3 | None | None | None | |||
Annual Low Balance Account Fee (for accounts under $1,000)2 | ||||||
Class A | $15 | $15 | $15 | |||
Class C | $15 | $15 | $15 | |||
Class I | $15 | $15 | $15 | |||
Class R3 | $15 | None | None |
1 | The CDSC on Class C shares applies only to redemptions within 12 months of purchase. |
2 | Fee applies to the following types of accounts held directly with the Fund: individual retirement accounts (IRAs), Coverdell Education Savings Accounts, and accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Acquired Fund | Acquiring Fund | Combined Fund Pro Forma1 | ||||||||||
Management Fees | ||||||||||||
Class A | 0.38 | % | 0.47 | % | 0.45 | %2 | ||||||
Class C | 0.38 | % | 0.47 | % | 0.45 | %2 | ||||||
Class I | 0.38 | % | 0.47 | % | 0.45 | %2 | ||||||
Class R3 | 0.38 | % | 0.47 | %3 | 0.45 | %2 | ||||||
Distribution and Service (12b-1 ) Fees | ||||||||||||
Class A | 0.25 | % | 0.25 | % | 0.25 | % | ||||||
Class C | 1.00 | % | 1.00 | % | 1.00 | % | ||||||
Class I | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Class R3 | 0.50 | % | 0.50 | %3 | 0.50 | % | ||||||
Other Expenses | ||||||||||||
Class A | 0.27 | % | 0.08 | % | 0.09 | % | ||||||
Class C | 0.27 | % | 0.08 | % | 0.09 | % | ||||||
Class I | 0.27 | % | 0.08 | % | 0.09 | % | ||||||
Class R3 | 0.27 | % | 0.08 | %3 | 0.09 | % |
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Acquired Fund | Acquiring Fund | Combined Fund Pro Forma1 | ||||||||||
Total Annual Fund Operating Expenses | ||||||||||||
Class A | 0.90 | % | 0.80 | % | 0.79 | % | ||||||
Class C | 1.65 | % | 1.55 | % | 1.54 | % | ||||||
Class I | 0.65 | % | 0.55 | % | 0.54 | % | ||||||
Class R3 | 1.15 | % | 1.05 | %3 | 1.04 | % | ||||||
Fee Waivers and/or Expense Reimbursements | ||||||||||||
Class A | (0.07 | %)4 | 0.00 | % | 0.00 | % | ||||||
Class C | (0.07 | %)4 | 0.00 | % | 0.00 | % | ||||||
Class I | (0.07 | %)4 | 0.00 | % | 0.00 | % | ||||||
Class R3 | (0.07 | %)4 | 0.00 | %3 | 0.00 | % | ||||||
Total Annual Fund Operating Expenses–After Fee Waivers and/or Expense Reimbursements | ||||||||||||
Class A | 0.83 | % | 0.80 | % | 0.79 | % | ||||||
Class C | 1.58 | % | 1.55 | % | 1.54 | % | ||||||
Class I | 0.58 | % | 0.55 | % | 0.54 | % | ||||||
Class R3 | 1.08 | % | 1.05 | %3 | 1.04 | % |
1 | Pro forma expenses do not include the expenses to be charged to the Funds in connection with the Reorganization. See “The Proposed Reorganization—Reorganization Expenses” for additional information about these expenses. |
2 | The pro forma management fee has been adjusted to take into account the reduced management fee applicable upon the closing of the Reorganization. See “Advisory and Other Fees” for additional details about management fees. |
3 | Class R3 shares of the Acquiring Fund were established on July 12, 2011. Other Expenses are estimated for the first fiscal year. |
4 | Nuveen Fund Advisors has agreed to waive fees and reimburse expenses for the Acquired Fund through October 31, 2012, so that Total Annual Fund Operating Expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed 0.60% of the average daily net assets of any class of Fund shares. The expense limitation may be terminated or modified prior to that date only with the approval of the Board. |
Example
The example below is intended to help you compare the cost of investing in each Fund and the pro forma cost of investing in the combined fund. The example assumes you invest $10,000 in a Fund for the time periods indicated (based on information in the tables above) and then either redeem or do not redeem your shares at the end of a period. The example assumes that your investment has a 5% return each year and that a Fund’s expenses remain at the level shown in the table above. Expense caps are taken into account for the period stated in the table above. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Acquired Fund | Acquiring Fund | Combined Fund Pro Forma | ||||||||||
1 Year | ||||||||||||
Assuming you sold your shares at the end of each period | ||||||||||||
Class A | $ | 308 | $ | 305 | $ | 304 | ||||||
Class C | $ | 161 | $ | 158 | $ | 157 | ||||||
Class I | $ | 59 | $ | 56 | $ | 55 | ||||||
Class R3 | $ | 110 | $ | 107 | $ | 106 |
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Acquired Fund | Acquiring Fund | Combined Fund Pro Forma | ||||||||||
Assuming you kept your shares | ||||||||||||
Class A | $ | 308 | $ | 305 | $ | 304 | ||||||
Class C | $ | 161 | $ | 158 | $ | 157 | ||||||
Class I | $ | 59 | $ | 56 | $ | 55 | ||||||
Class R3 | $ | 110 | $ | 107 | $ | 106 | ||||||
3 Years | ||||||||||||
Assuming you sold your shares at the end of each period | ||||||||||||
Class A | $ | 499 | $ | 475 | $ | 472 | ||||||
Class C | $ | 514 | $ | 490 | $ | 486 | ||||||
Class I | $ | 201 | $ | 176 | $ | 173 | ||||||
Class R3 | $ | 358 | $ | 334 | $ | 331 | ||||||
Assuming you kept your shares | ||||||||||||
Class A | $ | 499 | $ | 475 | $ | 472 | ||||||
Class C | $ | 514 | $ | 490 | $ | 486 | ||||||
Class I | $ | 201 | $ | 176 | $ | 173 | ||||||
Class R3 | $ | 358 | $ | 334 | $ | 331 | ||||||
5 Years | ||||||||||||
Assuming you sold your shares at the end of each period | ||||||||||||
Class A | $ | 706 | $ | 659 | $ | 654 | ||||||
Class C | $ | 890 | $ | 845 | $ | 839 | ||||||
Class I | $ | 355 | $ | 307 | $ | 302 | ||||||
Class R3 | $ | 626 | $ | 579 | $ | 574 | ||||||
Assuming you kept your shares | ||||||||||||
Class A | $ | 706 | $ | 659 | $ | 654 | ||||||
Class C | $ | 890 | $ | 845 | $ | 839 | ||||||
Class I | $ | 355 | $ | 307 | $ | 302 | ||||||
Class R3 | $ | 626 | $ | 579 | $ | 574 | ||||||
10 Years | ||||||||||||
Assuming you sold your shares at the end of each period | ||||||||||||
Class A | $ | 1,302 | $ | 1,193 | $ | 1,181 | ||||||
Class C | $ | 1,949 | $ | 1,845 | $ | 1,834 | ||||||
Class I | $ | 804 | $ | 689 | $ | 677 | ||||||
Class R3 | $ | 1,391 | $ | 1,283 | $ | 1,271 | ||||||
Assuming you kept your shares | ||||||||||||
Class A | $ | 1,302 | $ | 1,193 | $ | 1,181 | ||||||
Class C | $ | 1,949 | $ | 1,845 | $ | 1,834 | ||||||
Class I | $ | 804 | $ | 689 | $ | 677 | ||||||
Class R3 | $ | 1,391 | $ | 1,283 | $ | 1,271 |
Each Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect a Fund’s performance. During its most recent fiscal year for which audited financial statements are available, each Fund had the following portfolio turnover rate:
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Fund | Fiscal Year End | Rate | ||||
Acquired Fund | 9/30/10 | 72% | ||||
Acquiring Fund | 6/30/10 | 44% |
After the Reorganization is completed, the portfolio managers of the Acquiring Fund may, in their discretion, sell securities acquired from the Acquired Fund. To the extent that the portfolio managers choose to sell a significant percentage of such securities, the Acquiring Fund’s portfolio turnover rate and brokerage costs may be higher than they otherwise would have been.
In evaluating the Reorganization, you should consider carefully the risks of the Acquiring Fund to which you will be subject if the Reorganization is approved and completed. 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. Because of these and other risks, you should consider an investment in the Acquiring Fund to be a long-term investment. An investment in the Acquiring Fund may not be appropriate for all shareholders. For a complete description of the risks of an investment in the Acquiring Fund, see the section in the Acquiring Fund’s Prospectus entitled “Principal Risks.”
Because the Funds have substantially similar investment strategies, the principal risks of each Fund are substantially similar, except to the extent that the Acquired Fund’s investments in repurchase, reverse repurchase and forward purchase agreements as a principal investment strategy subject the Fund to any additional risks. The principal risks of investing in the Acquiring Fund are described below. An investment in the Acquired Fund is also subject to each of these principal risks. Other than the Acquired Fund’s investments in repurchase, reverse repurchase and forward purchase agreements, to the extent that there are differences between the principal risks disclosed in each Fund’s current prospectus, these are due to differences in the disclosure practices between the former First American Funds and the Nuveen Funds, rather than actual differences in risk exposure.
Active Management Risk. Because the Fund is actively managed, the Fund could underperform its benchmark or other mutual funds with similar investment objectives.
Call Risk. If an issuer calls higher-yielding bonds held by the Fund, performance could be adversely impacted.
Credit Risk. The issuer of a debt security could suffer adverse changes in financial condition that result in a payment default or a downgrade of the security. Parties to contracts with the Fund could default on their obligations.
Currency Risk. Changes in currency exchange rates may affect the Fund’s net asset value, the value of dividends and interest earned, and gains and losses realized on the sale of securities.
Derivatives Risk. The use of derivative instruments involves additional risks and transaction costs which could leave the Fund in a worse position than if it had not used these instruments. 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 performance. When the Fund invests in a derivative for speculative purposes, the Fund will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost.
High-Yield Securities Risk. High-yield securities generally are less liquid, have more volatile prices, and have greater credit risk than investment grade securities.
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Income Risk. The Fund’s income could decline during periods of falling interest rates.
Interest Rate Risk. Interest rate increases can cause the value of debt securities to decrease.
Liquidity Risk. Trading opportunities are more limited for debt securities that have received ratings below investment grade.
Mortgage- and Asset-Backed Securities Risk. These securities generally can be prepaid at any time. Prepayments that occur either more quickly or more slowly than expected can adversely impact the Fund.
Non-U.S. Investment Risk/Emerging Market Risk. Non-U.S. companies or U.S. companies with significant non-U.S. operations may be subject to risks in addition to those of companies that principally operate in the United States as a result of, among other things, political, social and economic developments abroad and different legal, regulatory and tax environments. These additional risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries.
Fundamental Investment Restrictions
The Funds have substantially similar investment restrictions that cannot be changed without shareholder approval. Both Funds are diversified funds and have adopted a policy of not concentrating their investments in any industry.
A comparison of the total returns of the Funds for the periods ended December 31, 2010, based on historical fees and expenses for each period, is set forth in the chart and tables below.
The bar chart below illustrates annual calendar year returns for each Fund’s Class A shares. The bar chart does not reflect sales charges, and if these charges were reflected, the returns would be less than those shown. The tables below illustrate average annual returns for periods ended December 31, 2010 specified for each Fund. The tables also show how each Fund’s performance compares with the returns of a broad measure of market performance and, for the Acquired Fund, a peer group of funds with similar investment objectives. This information is intended to help you assess the variability of Fund returns (and consequently, the potential rewards and risks of a Fund investment).
Returns before taxes do not reflect the effects of any income or capital gains taxes. All after-tax returns are calculated using the highest historical marginal individual federal income tax rates and do not reflect the impact of any state or local tax. After-tax returns are shown for Class A shares only; after-tax returns for Class C, Class I and Class R3 shares will vary. Returns after taxes on distributions reflect the taxed return on the payment of dividends and capital gains. Returns after taxes on distributions and sale of shares assume you sold your shares at period end, and, therefore, are also adjusted for any capital gains or losses incurred on the sale of Fund shares. Returns for market indices do not include expenses, which are deducted from Fund returns, or taxes.
Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here. After-tax returns are not relevant to investors who hold Fund shares in tax-deferred accounts such as individual retirement accounts (IRAs) or employer-sponsored retirement plans.
Past performance does not necessarily indicate future performance. Updated performance information is available at www.nuveen.com or by calling (800) 257-8787.
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Class A Annual Total Return
During the periods shown in the bar chart, the Acquired Fund’s highest and lowest calendar quarter returns were 2.99% and -0.55%, respectively, for the quarters ended June 30, 2009 and June 30, 2008. The Acquired Fund’s year-to-date return through June 30, 2011 was 0.59%.
Class A Annual Total Return
During the periods shown in the bar chart, the Acquiring Fund’s highest and lowest calendar quarter returns were 5.45% and -3.37%, respectively, for the quarters ended June 30, 2009 and December 31, 2008. The Acquiring Fund’s year-to-date return through June 30, 2011 was 1.51%.
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||
Acquired Fund | 1 Year | 5 Years | Since Inception (December 20, 2004) | |||
Class A (return before taxes) | 1.99% | 4.38% | 3.88% | |||
Class A (return after taxes on distributions) | 0.78% | 2.87% | 2.37% | |||
Class A (return after taxes on distributions and sale of fund shares) | 1.27% | 2.85% | 2.42% | |||
Class C (return before taxes) | 3.55% | 4.10% | 3.52% | |||
Class I (return before taxes) | 4.57% | 5.10% | 4.50% | |||
Class R3 (return before taxes) | 4.06% | 4.62% | 4.02% | |||
Citigroup 1-3 Year Treasury Index (reflects no deduction for fees, expenses or taxes) | 2.33% | 4.13% | 3.71% | |||
Lipper Short Investment Grade Debt Funds Category Average (reflects no deduction for taxes or certain expenses) | 3.89% | 3.61% | 3.28% |
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Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||
Acquiring Fund | 1 Year | 5 Years | 10 Years | Since Inception | ||||
Class A (return before taxes) | 0.99% | 3.62% | 3.54% | N/A | ||||
Class A (return after taxes on distributions) | 0.12% | 2.28% | 2.19% | N/A | ||||
Class A (return after taxes on distributions and sale of fund shares) | 0.64% | 2.30% | 2.20% | N/A | ||||
Class C (return before taxes) (Inception Date 10/28/09) | 2.45% | N/A | N/A | 2.58% | ||||
Class I (return before taxes) | 3.48% | 4.27% | 3.94% | N/A | ||||
Class R3 (return before taxes) | N/A | N/A | N/A | N/A | ||||
Barclays Capital 1-3 Year Gov’t/Credit Bond Index (reflects no deduction for fees, expenses or taxes) | 2.80% | 4.53% | 4.34% | 2.47% |
Investment Adviser and Sub-Adviser
Both Funds are managed by Nuveen Fund Advisors, which 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, IL 60606. Nuveen Fund Advisors is a subsidiary 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. The Nuveen family of advisers has been providing advice to investment companies since 1976.
Nuveen Fund Advisors has selected its affiliate, Nuveen Asset Management, located at 333 West Wacker Drive, Chicago, IL 60606, to serve as a sub-adviser to each of the Funds. Nuveen Asset Management manages the investment of the Funds’ assets on a discretionary basis, subject to the supervision of Nuveen Fund Advisors.
Prior to the FAF Transaction, the Acquiring Fund was advised by FAF Advisors, a wholly-owned subsidiary of U.S. Bank National Association.
The Funds have been managed by the same team of portfolio managers since the FAF Transaction. The portfolio managers primarily responsible for the Funds’ management are:
— | Chris J. Neuharth, CFA, Managing Director of Nuveen Asset Management. Mr. Neuharth has been a portfolio manager of the Acquiring Fund since March 2004 and of the Acquired Fund since January 2011. He entered the financial services industry in 1983 and rejoined FAF Advisors in 2000. Mr. Neuharth joined Nuveen Asset Management on January 1, 2011, in connection with the FAF Transaction. |
— | Peter L. Agrimson, CFA, Assistant Vice President of Nuveen Asset Management. Mr. Agrimson has been a portfolio manager of the Acquiring Fund since October 2010 and of the Acquired Fund since January 2011. He began working in the financial services industry in 2005 and joined FAF Advisors in 2009. Prior to that he served as credit analyst at Long Lake Partners, LLC. Mr. Agrimson joined Nuveen Asset Management on January 1, 2011, in connection with the FAF Transaction. |
13
For a complete description of the advisory services provided to the Acquiring Fund, see the section of the Fund’s Prospectus entitled “Who Manages the Funds” and the section of the Fund’s Statement of Additional Information entitled “Adviser and Sub-Adviser.”
Pursuant to investment management agreements between Nuveen Fund Advisors and the Trust, on behalf of the Acquired Fund, and Nuveen Fund Advisors and the Corporation, on behalf of the Acquiring Fund, each Fund pays Nuveen Fund Advisors fund-level fees, payable monthly, at the annual rates set forth below:
Management Fee | ||||
Average Daily Net Assets | Acquired Fund | Acquiring Fund | ||
For the first $125 million | 0.2000% | 0.3000% | ||
For the next $125 million | 0.1875% | 0.2875% | ||
For the next $250 million | 0.1750% | 0.2750% | ||
For the next $500 million | 0.1625% | 0.2625% | ||
For the next $1 billion | 0.1500% | 0.2500% | ||
For net assets over $2 billion | 0.1250% | 0.2250% |
If the Reorganization is approved by shareholders and completed, Nuveen Fund Advisors has agreed to a permanent 0.02% reduction in the Acquiring Fund’s fund-level management fee at each breakpoint level. As a result, the Acquiring Fund would pay Nuveen Fund Advisors fund-level fees, payable monthly, at the annual rates set forth below:
Average Daily Net Assets | Management Fee | |
For the first $125 million | 0.2800% | |
For the next $125 million | 0.2675% | |
For the next $250 million | 0.2550% | |
For the next $500 million | 0.2425% | |
For the next $1 billion | 0.2300% | |
For net assets over $2 billion | 0.2050% |
In addition, in connection with the Reorganization, Nuveen Fund Advisors also has agreed to continue the current expense cap for the Acquiring Fund (excluding the fees and expenses of other investment companies in which the Acquiring Fund invests) of 0.75% for Class A shares, 1.60% for Class C shares, 1.10% for Class R3 shares, and 0.60% for Class I shares. These expense caps will remain in place through October 31, 2012, except that the Class A share expense cap will increase to 85 basis points after March 31, 2012 due to the discontinuation on that date of a 0.10% Class A share Rule 12b-1 fee waiver that is currently in place.
In addition to the fund-level fee, each Fund pays a complex-level fee. The maximum complex-level fee is 0.20% of the Fund’s net assets, based upon complex-level “eligible assets” of $55 billion. Therefore, the maximum management fee rate for each Fund is the fund-level fee rate plus 0.20%. As complex-level eligible assets increase, the complex-level fee rate decreases pursuant to a breakpoint schedule. Each Fund’s individual complex-level fee rate is determined by taking the current overall complex-level fee rate, which is based on the aggregate amount of the “eligible assets” of all Nuveen funds, and making an upward adjustment to that rate (subject to the maximum 0.20% rate noted above) based upon the percentage of the Fund’s assets, if any, that are not “eligible assets.”
14
For the Acquired Fund’s fiscal year ended September 30, 2010 and the Acquiring Fund’s annualized four month period ended April 30, 2011, each Fund paid Nuveen Fund Advisors the following management fees (net of fee waivers and expense reimbursements, where applicable) as a percentage of average net assets:
Management Fee Rate | ||
Acquired Fund | 0.27% | |
Acquiring Fund | 0.47% |
Each Fund has adopted a distribution and service plan (the “Plans”) pursuant to Rule 12b-1 under the 1940 Act. The Plans provide that Class C shares and Class R3 shares are subject to a distribution fee, and that Class A shares, Class C shares and Class R3 shares are all subject to a service fee. Class I shares are not subject to either distribution or service fees.
Each Fund is authorized to pay an annual rate not to exceed 0.25% of the average daily net assets of Class A shares as a service fee under the Plan (for the Acquiring Fund, 0.15% through March 31, 2012). Each Fund is authorized to pay an annual rate not to exceed 0.75% of the average daily net assets of Class C shares as a distribution fee which constitutes an asset-based sales charge whose purpose is the same as an up-front sales charge and an annual rate not to exceed 0.25% of the average daily net assets of Class C shares as a service fee under the Plan as applicable to such classes. Each Fund is authorized to pay an annual rate not to exceed 0.25% of the average daily net assets of Class R3 shares as a distribution fee and an annual rate not to exceed 0.25% of the average daily net assets of Class R3 shares as a service fee under the Plan as applicable to Class R3 shares. For a complete description of these arrangements for the Acquiring Fund, see the section of the Fund’s Prospectus entitled “What Share Classes We Offer” and the section of the Fund’s Statement of Additional Information entitled “Distributor.”
As of the closing of the FAF Transaction, the same individuals constitute the Board of each Fund and the Trust and the Corporation have the same officers. The management of each Fund, including general oversight of the duties performed by Nuveen Fund Advisors under the Investment Management Agreement for each Fund, is the responsibility of the Board. There are currently ten members of the Board, one of whom is an “interested person” (as defined in the 1940 Act) and nine of whom are not interested persons (the “independent board members”). The names and business addresses of the board members and officers of the Acquiring Fund and their principal occupations and other affiliations during the past five years are set forth under “Directors and Executive Officers” in the Statement of Additional Information for the Acquiring Fund incorporated herein by reference.
Distribution, Purchase, Redemption, Exchange of Shares and Dividends
Each Fund has four classes of shares: Class A, Class C, Class I and Class R3 shares. Class R3 shares of the Acquiring Fund currently are not offered and will not be offered until sometime prior to the closing of the Reorganization. You may purchase, redeem or exchange shares of the Funds 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 each Fund through a financial advisor or other financial intermediary or directly from such Fund. Each Fund’s initial and subsequent investment minimums generally are as follows, although each Fund may reduce or waive the minimums in some cases:
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Class A and Class C | Class R3 | Class I | ||||
Eligibility and Minimum Initial Investment | $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. | Available only through certain retirement plans.
No minimum. | 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 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. | |||
Minimum Additional Investment | $100 | No minimum | No minimum. |
For a complete description of purchase, redemption and exchange options, see the section of the Fund’s Prospectus entitled “How You Can Buy and Sell Shares,” “General Information” and “How to Sell Shares,” and the section of the Acquiring Fund’s Statement of Additional Information entitled “Purchase and Redemption of Fund Shares.”
No initial sales charge or contingent deferred sales charges will be imposed on shares of the Acquiring Fund received or shares of the Acquired Fund exchanged in connection with the Reorganization. The holding period for Class C shares of the Acquiring Fund received in connection with the Reorganization will include the period during which the Acquired Fund shares exchanged were held by such shareholder.
The Funds intend to pay income dividends on a monthly basis. The Acquired Fund pays any taxable capital gains once a year at year end and the Acquiring Fund distributes capital gains at least once a year. If the Reorganization is approved by the shareholders of the Acquired Fund, the Acquired Fund intends to distribute to its shareholders, prior to the closing of the Reorganization, all its net investment income and net capital gains, if any, for the period ending on the Closing Date.
The Funds’ distributions are taxable and will generally be taxed as ordinary income or capital gains.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of a 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
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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 intermediary’s website for more information.
Additional information concerning the Acquiring Fund and Acquired Fund is contained in this Proxy Statement/Prospectus and additional information regarding the Acquiring Fund is contained in the accompanying Acquiring Fund Prospectus. The cover page of this Proxy Statement/Prospectus describes how you may obtain further information.
The proposed Reorganization will be governed by the Agreement, which is attached as Appendix I. The Agreement provides that the Acquired Fund will transfer all its assets to the Acquiring Fund solely in exchange for the issuance of full and fractional voting shares of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund. The closing of the Reorganization will take place at the close of business on the Closing Date. The following discussion of the Agreement is qualified in its entirety by the full text of the Agreement.
The Acquired Fund will transfer all its assets to the Acquiring Fund, and in exchange, the Acquiring Fund will assume all the liabilities of the Acquired Fund and deliver to the Acquired Fund a number of full and fractional shares of the Acquiring Fund having a net asset value equal to the value of the assets of the Acquired Fund less the liabilities of the Acquired Fund assumed by the Acquiring Fund. On or as soon after the Closing Date as is practicable, but in no event later than 12 months after the Closing Date, the Acquired Fund will distribute in complete liquidation of the Acquired Fund, pro rata to its shareholders of record, all Acquiring Fund shares received by the Acquired Fund. This distribution will be accomplished by the transfer of the Acquiring Fund shares credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the name of the Acquired Fund shareholders, and representing the respective pro rata number of Acquiring Fund shares due such shareholders. All issued and outstanding shares of the Acquired Fund will simultaneously be canceled on the books of the Acquired Fund. As a result of the proposed Reorganization, each Acquired Fund shareholder will receive a number of Acquiring Fund shares of the same class and equal in value, as of the close of regular trading on the New York Stock Exchange on the Closing Date, to the value of the Acquired Fund shares of the corresponding class surrendered by such shareholder.
The Board has determined that the proposed Reorganization is in the best interests of each Fund and that the interests of shareholders will not be diluted as a result of the transactions contemplated by the Agreement.
The consummation of the Reorganization is subject to the terms and conditions of, and the representations and warranties being true as set forth in, the Agreement. The Agreement may be terminated by mutual agreement of the Funds. In addition, either Fund may at its option terminate the Agreement at or before the Closing Date due to (i) a breach by any other party of any representation, warranty, or agreement to be performed at or before the Closing Date, if not cured within 30 days, (ii) a condition precedent to the obligations of the terminating party that has not been met and it reasonably
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appears that it will not or cannot be met, or (iii) a determination by the Board that the consummation of the transactions contemplated by the Agreement is not in the best interests of a Fund.
The Acquired Fund will, within a reasonable period of time before the Closing Date, furnish the Acquiring Fund with a list of the Acquired Fund’s portfolio securities and other investments. The Acquiring Fund will, within a reasonable period of time before the Closing Date, furnish the Acquired Fund with a list of the securities, if any, on the Acquired Fund’s list referred to above that do not conform to the Acquiring Fund’s investment objective, policies, and restrictions. The Acquired Fund, if requested by the Acquiring Fund, will dispose of securities on the Acquiring Fund’s list before the Closing Date. In addition, if it is determined that the portfolios of the Funds, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Acquired Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. The sale of such investments could result in taxable distributions to shareholders of the Acquired Fund prior to the Reorganization. Notwithstanding the foregoing, nothing herein will require the Acquired Fund to dispose of any investments or securities if, in the reasonable judgment of the Board or the Adviser, such disposition would adversely affect the tax-free nature of the Reorganization for federal income tax purposes or would otherwise not be in the best interests of the Acquired Fund. See “Certain Federal Income Tax Consequences” below. However, it is not expected that any significant portfolio sales will occur in connection with the Reorganization.
If the Reorganization is approved, each of the Acquired Fund and Acquiring Fund will be charged expenses incurred in connection with the Reorganization ratably up to each Fund’s projected annual cost savings. See “Reorganization Expenses” below. In addition, the Reorganization may result in one-time brokerage costs for the Acquired Fund to the extent it is necessary for the Acquired Fund to sell securities prior to the Reorganization so that the Acquiring Fund’s portfolio immediately following the Reorganization remains in compliance with its investment policies and restrictions.
After the Reorganization is completed, the portfolio managers of the Acquiring Fund may, in their discretion, sell securities acquired from the Acquired Fund. To the extent that the portfolio managers choose to sell a significant percentage of such securities, the Acquiring Fund’s portfolio turnover rate and brokerage costs may be higher than they otherwise would have been.
Description of Securities to be Issued
Shares of Common Stock. The Acquiring Fund has established and designated Class A, Class C, Class I and Class R3 shares, par value $0.0001 per share. The Corporation’s charter permits the Board, in its sole discretion, and subject to compliance with the 1940 Act, to further subdivide the shares of the Acquiring Fund into one or more other classes of shares.
Voting Rights of Shareholders. Holders of shares of the Acquiring Fund are entitled to one vote per share on matters as to which they are entitled to vote, with fractional shares voting proportionally. The Acquiring Fund operates as a series of the Corporation, an open-end management investment company registered with the SEC under the 1940 Act. The Corporation currently has 37 series, including the Acquiring Fund, and the Board may, in its sole discretion, create additional series from time to time. Separate votes generally are taken by each series on matters affecting an individual series. In addition to the specific voting rights described above, shareholders of the Acquiring Fund are entitled, under current law, to vote with respect to certain other matters, including changes in
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fundamental investment policies and restrictions. Moreover, under the 1940 Act, shareholders owning not less than 10% of the outstanding shares of the Corporation may request that the Board call a shareholders’ meeting for the purpose of voting upon the removal of one or more board members.
Continuation of Shareholder Accounts and Plans; Share Certificates
If the Reorganization is approved, the Acquiring Fund will establish an account for each Acquired Fund shareholder containing the appropriate number of shares of the appropriate class of the Acquiring Fund. The shareholder services and shareholder programs of the Funds are substantially identical. Shareholders of the Acquired Fund who are accumulating shares through systematic investing, or who are receiving payments under the systematic withdrawal plan, will retain the same rights and privileges after the Reorganization through plans maintained by the Acquiring Fund. No certificates for Acquiring Fund shares will be issued as part of the Reorganization.
State Street Bank & Trust Company serves as the custodian for the assets of the Acquired Fund and U.S. Bank National Association serves as the custodian for the assets of the Acquiring Fund. Boston Financial Data Services serves as transfer agent for the Acquired Fund and U.S. Bancorp Fund Services, LLC serves as transfer agent for the Acquiring Fund. PricewaterhouseCoopers LLP serves as the independent auditors for the Acquired Fund and Ernst & Young LLP serves as independent auditors for the Acquiring Fund. All service providers of the Acquiring Fund are expected to continue following the Reorganization, except that PricewaterhouseCoopers LLP is expected to be retained as the independent registered public accounting firm for the Acquiring Fund beginning with the fiscal year ending June 30, 2012.
Certain Federal Income Tax Consequences
As a condition to each Fund’s obligation to consummate the Reorganization, each Fund will receive a tax opinion from Vedder Price P.C. (which opinion will be based on certain factual representations and certain customary assumptions and exclusions) substantially to the effect that, on the basis of the existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”), current administrative rules and court decisions, for federal income tax purposes:
1. | The transfer of all the assets of the Acquired Fund to the Acquiring Fund in exchange solely for Acquiring Fund shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund, followed by the pro rata distribution to the Acquired Fund shareholders of all the Acquiring Fund shares received by the Acquired Fund in complete liquidation of the Acquired Fund, will constitute a “reorganization” within the meaning of Section 368(a) of the Code, and the Acquiring Fund and the Acquired Fund will each be a “party to a reorganization” within the meaning of Section 368(b) of the Code with respect to the Reorganization. |
2. | No gain or loss will be recognized by the Acquiring Fund upon the receipt of all the assets of the Acquired Fund solely in exchange for Acquiring Fund shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund. |
3. | No gain or loss will be recognized by the Acquired Fund upon the transfer of all the Acquired Fund’s assets to the Acquiring Fund solely in exchange for Acquiring Fund shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund or upon the distribution (whether actual or constructive) of all such Acquiring Fund shares to the Acquired |
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Fund shareholders solely in exchange for such shareholders’ shares of the Acquired Fund in complete liquidation of the Acquired Fund. |
4. | No gain or loss will be recognized by Acquired Fund shareholders upon the exchange of their Acquired Fund shares solely for Acquiring Fund shares pursuant to the Reorganization. |
5. | The aggregate basis of the Acquiring Fund shares received by each Acquired Fund shareholder pursuant to the Reorganization will be the same as the aggregate basis of the Acquired Fund shares exchanged therefor by such shareholder. The holding period of the Acquiring Fund shares received by each Acquired Fund shareholder will include the period during which the Acquired Fund shares exchanged therefor were held by such shareholder, provided such Acquired Fund shares are held as capital assets at the effective time of the Reorganization. |
6. | The basis of the Acquired Fund’s assets acquired by the Acquiring Fund will be the same as the basis of such assets to the Acquired Fund immediately before the Reorganization. The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund. |
Prior to the closing of the Reorganization, the Acquired Fund will declare a distribution to its shareholders, which together with all previous distributions, will have the effect of distributing to shareholders all its net investment income and realized net capital gains (after reduction by any available capital loss carryforwards), if any, through the closing of the Reorganization. This distribution will be taxable to shareholders for federal income tax purposes and may include net capital gains resulting from the sale of portfolio assets discussed below. Additional distributions may be made if necessary. All dividends and distributions will be reinvested in additional shares of the Acquired Fund unless a shareholder has made an election to receive dividends and distributions in cash. Dividends and distributions are treated the same for federal income tax purposes whether received in cash or additional shares.
A portion of the Acquired Fund’s portfolio assets may be sold prior to the Reorganization. The federal income tax effect of such sales would depend on the holding periods of such assets and the difference between the price at which such portfolio assets were sold and the Fund’s basis in such assets. Any net capital gains (net long-term capital gain in excess of any net short-term capital loss) recognized in these sales, after the application of any available capital loss carryforwards (capital losses from prior taxable years that may be used to offset future capital gains), would be distributed to the Acquired Fund’s shareholders as capital gain dividends. Any net short-term capital gains (in excess of any net long-term capital loss and after application of any available capital loss carryforwards) would be distributed as ordinary dividends. All such distributions would be made during or with respect to the Acquired Fund’s taxable year in which the sale occurs and would be taxable to shareholders for federal income tax purposes.
After the Reorganization, the Acquiring Fund’s ability to use the Acquired Fund’s and Acquiring Fund’s pre-Reorganization capital losses, if any, may be limited under certain federal income tax rules applicable to reorganizations of this type. Therefore, in certain circumstances, former shareholders of the Acquired Fund may pay federal income tax sooner, or may pay more federal income taxes, than they would have had the Reorganization not occurred. The effect of these potential limitations, however, will depend on a number of factors, including the amount of the losses, the amount of gains to be offset, the exact timing of the Reorganization and the amount of unrealized capital gains in the Funds at the time of the Reorganization.
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In addition, shareholders of the Acquired Fund will receive a proportionate share of any taxable income and gains realized by the Acquiring Fund and not distributed to its shareholders prior to the Reorganization when such income and gains are eventually distributed by the Acquiring Fund. As a result, shareholders of the Acquired Fund may receive a greater amount of taxable distributions than they would have had the Reorganization not occurred.
This description of the federal income tax consequences of the Reorganization is made without regard to the particular facts and circumstances of any shareholder. Shareholders are urged to consult their own tax advisors as to the specific consequences to them of the Reorganization, including the applicability and effect of state, local, non-U.S. and other tax laws.
The Acquired Fund and Acquiring Fund will be responsible for all expenses associated with the Reorganization, including, but not limited to, legal and auditing fees, the costs of printing and distributing this Proxy Statement/Prospectus, and the solicitation expenses discussed below, if the Reorganization is approved. Nuveen Fund Advisors estimates that expenses for the Reorganization will be approximately $145,000. It is anticipated that these expenses will be offset over time by the lower operating expenses of the Acquiring Fund that are expected to result after the Reorganization. Each of the Acquired Fund and Acquiring Fund will be responsible for expenses incurred in connection with the Reorganization ratably up to each Fund’s projected annual cost savings. If the Reorganization were completed on April 30, 2011, Nuveen Fund Advisors estimates that Acquired Fund shareholders, as shareholders of the Acquiring Fund, would save approximately $75,000 in the first year after the Reorganization and that Acquiring Fund shareholders would save approximately $82,000 in the first year after the Reorganization. As a result, the Acquired Fund is expected to be charged approximately 48% of the Reorganization expenses or approximately $69,000 and the Acquiring Fund is expected to be charged approximately 52% of the Reorganization expenses or approximately $76,000. To the extent that the payment of these expenses would cause either Fund’s expenses to exceed the expense caps then in effect, Nuveen Fund Advisors would reimburse such expenses to the extent necessary to operate within the cap. Based on current expense levels, it is anticipated that Nuveen Fund Advisors will reimburse all expenses charged to the Acquired Fund and none of the expenses charged to the Acquiring Fund. If the Reorganization is not approved or completed, Nuveen will pay all costs associated with the Reorganization.
The Acquired Fund has engaged Computershare Fund Services to assist in the solicitation of proxies at an estimated cost of $12,475, which is included in the expense estimate above and which will be allocated between the Acquired Fund and Acquiring Fund as noted above if shareholders approve the Reorganization and it is completed.
Comparison of Maryland Corporations and Massachusetts Business Trusts
The following description is based on relevant provisions of the Maryland General Corporation Law and applicable Massachusetts law and each Fund’s operative documents. This summary does not purport to be complete and we refer you to the Maryland General Corporation Law (the “MGCL”), applicable Massachusetts law and each Fund’s operative documents.
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In General
The Acquired Fund is a series of a Massachusetts business trust. A fund organized as a series of a Massachusetts business trust is governed by the trust’s declaration of trust or similar instrument. Massachusetts law allows the trustees of a business trust to set the terms of a fund’s governance in its declaration. All power and authority to manage the fund and its affairs generally reside with the trustees, and shareholder voting and other rights are limited to those provided to the shareholders in the declaration. Because Massachusetts law governing business trusts provides more flexibility compared to typical state corporate statutes, the Massachusetts business trust has become a common form of organization for mutual funds. However, some consider it less desirable than other entities because it relies on the terms of the applicable declaration and judicial interpretations rather than statutory provisions for substantive issues, such as the personal liability of shareholders and trustees, and does not provide the level of certitude that corporate laws like those of Maryland, or newer statutory trust laws, such as those of Delaware, provide.
The Acquiring Fund is a series of a Maryland corporation. A fund organized as a series of a Maryland corporation is governed both by the MGCL and the Maryland corporation’s charter and bylaws. For a Maryland corporation, unlike a Massachusetts trust, the MGCL prescribes many aspects of corporate governance.
Shareholders of a Maryland corporation generally are shielded from personal liability for the corporation’s debts or obligations. Shareholders of a Massachusetts business trust, on the other hand, are not afforded the statutory limitation of personal liability generally afforded to shareholders of a corporation from the trust’s liabilities. Instead, the declaration of trust of a fund organized as a Massachusetts business trust typically provides that a shareholder will not be personally liable, and further provides for indemnification to the extent that a shareholder is found personally liable, for the fund’s acts or obligations. The Declaration of Trust for the Trust contains such provisions.
Similarly, the trustees of a Massachusetts business trust are not afforded statutory protection from personal liability for the obligations of the trust. The directors of a Maryland corporation, on the other hand, generally are shielded from personal liability for the corporation’s acts or obligations by the MGCL. Courts in Massachusetts have, however, recognized limitations of a trustee’s personal liability in contract actions for the obligations of a trust contained in the trust’s declaration, and declarations may also provide that trustees may be indemnified out of the assets of the trust to the extent held personally liable. The Declaration of Trust contains such provisions.
Maryland Corporations
A Maryland corporation is governed by the MGCL, its charter and bylaws. Some of the key provisions of the MGCL are summarized below.
Shareholder Voting
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, or engage in a statutory share exchange, merger or consolidation unless approved by a vote of shareholders. Depending on the circumstances and the charter of the corporation, there may be various exceptions to these votes. Shareholders of Maryland corporations are generally entitled to one vote per share and fractional votes for fractional shares held. The Corporation’s Charter contains such provisions.
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Election and Removal of Directors
Shareholders of a Maryland corporation generally are entitled to elect and remove directors. Shareholders of the Corporation may elect directors at any annual meeting or a special meeting in lieu thereof. Provided the charter or bylaws so provide, the MGCL does not require a corporation registered as an open-end investment company to hold an annual meeting in any year in which the election of directors is not required by the 1940 Act. The Corporation’s Charter contains such a provision. Under the bylaws of the Corporation, a special meeting of shareholders shall be called upon the written request of the holders of shares entitled to cast not less than 10% of all votes entitled to vote at such meeting for the purpose of voting on the removal of directors or for other purposes.
Amendments to the Charter
Under the MGCL, shareholders of corporations generally are entitled to vote on amendments to the charter. However, the board of directors of a Maryland corporation is authorized, without a vote of the shareholders, to amend the charter to change the name of the corporation, to change the name or other designation of any class or series of stock and to change the par value of any class or series of stock. Under the MGCL, generally a change in the name or other designation of a class or series of stock, however, may not change the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, or terms or conditions of redemption. The board of directors of a Maryland corporation may, however, if permitted by the charter, without a vote of the shareholders, classify or reclassify any unissued stock by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption. The Charter of the Corporation permits the Board to do so. The MGCL permits the board of directors of an open-end investment company to supplement the charter without a vote of the shareholders to increase the aggregate number of authorized shares or the number of shares in any class or series, unless prohibited by the charter. The Corporation’s Charter does not prohibit the Board from doing so.
Issuance of Shares
The board of directors of a Maryland corporation has the power to authorize the issuance of stock and, prior to issuance of shares of each class or series, the board of directors of a Maryland corporation is required by Maryland law to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series.
Shareholder, Director and Officer Liability
Under Maryland law, shareholders generally are not personally liable for debts or obligations of a corporation. Maryland law provides that a director who has met his or her statutory standard of conduct has no liability for reason of being or having been a director. Maryland law provides that a corporation may indemnify and advance expenses to its directors for acts and omissions in their official capacity, subject to certain exceptions, and the Corporation’s Charter requires it to do so. The indemnification provisions and the limitation on liability are both subject to any limitations of the 1940 Act, which generally provides that no director or officer shall be protected from liability to the corporation or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The provisions governing the advance of expenses are subject to applicable requirements of the 1940 Act or rules thereunder.
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Preemptive Rights
Pursuant to the charter, shareholders of the Acquiring Fund have no preemptive rights.
Derivative Actions
Under Maryland law, applicable case law at the time of a particular derivative action will establish any requirements or limitations with respect to shareholder derivative actions.
Massachusetts Business Trusts
The Acquired Fund is governed by the Trust’s Declaration of Trust and the Amended and Restated By-Laws (the “By-Laws”). Under the Declaration of Trust, any determination as to what is in the interests of the Trust made by the trustees in good faith is conclusive, and in construing the provisions of the Declaration, there is a presumption in favor of a grant of power to the trustees. Further, the Declaration of Trust provides that certain determinations made in good faith by the trustees are binding upon the Trust and all shareholders, and shares are issued and sold on the condition and understanding, evidenced by the purchase of shares, that any and all such determinations shall be so binding. The following is a summary of some of the key provisions of the Acquired Fund’s governing documents.
Shareholder Voting
The 1940 Act requires a vote of shareholders on matters that Congress has determined might have a material effect on shareholders and their investments. For example, shareholder consent is required under the 1940 Act to approve new investment advisory agreements in many cases, an increase in an advisory fee or a 12b-1 fee, changes to fundamental policies, the election of directors or trustees in certain circumstances, and the merger or reorganization of a fund in certain circumstances, particularly where the merger or consolidation involves an affiliated party.
The Declaration of Trust requires a shareholder vote on matters in addition to those required under the 1940 Act, such as certain mergers, consolidations and sales of assets, derivative actions (to the same extent as shareholder of a Massachusetts business corporation) and certain amendments to the Declaration of Trust. Shareholders have no power to vote on any matter except as required by applicable law, the Governing Documents, or as otherwise determined by the trustees.
There are ordinarily no annual meetings of shareholders, but special meetings may be called by the Trustees or certain officers and by the written request of shareholders owning at least 10% of the outstanding shares entitled to vote. The By-Laws provide that the holders of a majority of the voting power of the shares of beneficial interest of the Acquired Fund entitled to vote at a meeting shall constitute a quorum for the transaction of business. Except as may otherwise be required by the 1940 Act, the Declaration of Trust or the By-Laws, the Declaration of Trust provides that the affirmative vote of the holders of a majority, except in the case of the election of trustees which shall only require a plurality, of the shares present in person or by proxy and entitled to vote at a meeting of shareholders at which a quorum is present is required to approve a matter.
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Election and Removal of Trustees
The Declaration of Trust provides that the trustees determine the size of the Board, subject to a minimum of two and a maximum of twelve, and to set and alter the terms of office of the trustees, and may make their terms of unlimited duration. It also provides that vacancies on the Board may be filled by the remaining trustees, except when election by the shareholders is required under the 1940 Act. Therefore, there will normally be no meetings of shareholders for the purpose of electing trustees unless and until such time as required by law. Trustees are then elected by a plurality vote of the shareholders. A trustee may be removed for cause by action of at least two-thirds of the remaining trustees.
Issuance of Shares
Under the Declaration of Trust, the trustees are permitted to issue an unlimited number of shares for such consideration and on such terms as the trustees may determine. Shareholders are not entitled to any pre-emptive rights or other rights to subscribe to additional shares. Shares are subject to such other preferences, conversion, exchange or similar rights, as the trustees may determine.
Series and Classes
The Declaration of Trust gives broad authority to the trustees to establish series and classes in addition to those currently established and to determine the rights and preferences, conversion rights, voting powers, restrictions, limitations, qualifications or terms or conditions of redemptions of the shares of the series and classes. The trustees are also authorized to merge or terminate a series or a class without a vote of shareholders under certain circumstances.
Amendments to Declaration of Trust
Amendments to the Declaration of Trust generally require a vote by a majority of the outstanding shares, voting in the aggregate and not by class except to the extent that applicable law may require voting by class, although certain amendments may be made by the trustees without a shareholder vote.
Shareholder, Trustee and Officer Liability
The Declaration of Trust provides that shareholders have no personal liability for the acts or obligations of the Trust and require the Trust to indemnify a shareholder from any loss or expense arising solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reasons. In addition, the Trust will assume the defense of any claim against a shareholder for personal liability at the request of the shareholder. Similarly, the Declaration of Trust provides that any person who is a trustee, officer or employee of the Trust is not personally liable to any person in connection with the affairs of the Trust, other than to the Trust and its shareholders arising from bad faith, willful misfeasance, gross negligence or reckless disregard for his or her duty. The Declaration of Trust further provides for indemnification of such persons and advancement of the expenses of defending any such actions for which indemnification might be sought. The Declaration of Trust also provides that trustees may rely in good faith on expert advice.
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Preemptive Rights
Pursuant to the Declaration of Trust, shareholders of the Acquired Fund have no preemptive rights.
Derivative Actions
Massachusetts has what is commonly referred to as a “universal demand statute,” which requires that a shareholder make a written demand on the board, requesting the board members to bring an action, before the shareholder is entitled to bring or maintain a court action or claim on behalf of the entity.
The foregoing is only a summary of certain rights of shareholders under the charter documents governing the Corporation and the Trust and under applicable state law, and is not a complete description of provisions contained in those sources. Shareholders should refer to the provisions of those documents and state law directly for a more thorough description.
The following table sets forth the capitalization of the Acquired Fund and the Acquiring Fund as of April 30, 2011, and the pro forma capitalization of the combined fund as if the Reorganization had occurred on that date. These numbers may differ at the Closing Date.
Capitalization Table as of April 30, 2011 (Unaudited)
Acquired Fund | Acquiring Fund | Pro Forma Combined Fund | ||||||||||
Net Assets | ||||||||||||
Class A | $ | 68,314,719 | $ | 84,235,542 | $ | 152,542,493 | (b) | |||||
Class C | 61,522,031 | 5,041,595 | 66,563,161 | (b) | ||||||||
Class I | 56,312,025 | 734,877,689 | 791,121,947 | (b) | ||||||||
Class R3 | 542,550 | 0 | (a) | 542,550 | (b) | |||||||
Total | $ | 186,691,325 | $ | 824,154,826 | $ | 1,010,770,151 | ||||||
Shares Outstanding | ||||||||||||
Class A | 3,442,105 | 8,347,126 | 15,117,239 | (c) | ||||||||
Class C | 3,095,974 | 498,432 | 6,581,304 | (c) | ||||||||
Class I | 2,842,735 | 72,792,412 | 78,370,845 | (c) | ||||||||
Class R3 | 27,358 | 0 | (a) | 53,747 | (c) | |||||||
Total | 9,408,172 | 81,637,970 | 100,123,135 | |||||||||
Net Asset Value Per Share | ||||||||||||
Class A | $ | 19.85 | $ | 10.09 | $ | 10.09 | ||||||
Class C | 19.87 | 10.11 | 10.11 | |||||||||
Class I | 19.81 | 10.10 | 10.09 | |||||||||
Class R3 | 19.83 | 0.00 | (a) | 10.09 | ||||||||
Shares Authorized | ||||||||||||
Class A | Unlimited | 2 Billion | 2 Billion | |||||||||
Class C | Unlimited | 2 Billion | 2 Billion | |||||||||
Class I | Unlimited | 2 Billion | 2 Billion | |||||||||
Class R3 | Unlimited | 0 | (a) | 2 Billion | (a) |
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(a) | Class R3 shares were established July 12, 2011. |
(b) | Figures reflect the costs associated with the proposed Reorganization, estimated to be approximately $145,000, of which $69,000 will be charged to the Acquired Fund and $76,000 will be charged to the Acquiring Fund if the Reorganization is approved. To the extent that payment of these expenses would cause either the Acquired or Acquiring Fund to exceed an expense cap, Nuveen Fund Advisors will reimburse the portion of the expenses necessary for the Fund to operate within the cap. Based on current expense levels, it is anticipated that Nuveen Fund Advisors will reimburse $69,000 of the Acquired Fund expenses. The $76,000 attributable to the Acquiring Fund would be allocated among the Acquiring Fund’s share classes based on relative net assets. |
(c) | Figures reflect the issuance by the Acquiring Fund of approximately 6,770,113 Class A shares, 6,082,872 Class C shares, 5,578,433 Class I shares and 53,747 Class R3 shares to shareholders of the Acquired Fund in connection with the proposed Reorganization. |
Certain legal matters concerning the issuance of Class A, Class C, Class I and Class R3 shares of the Acquiring Fund will be passed on by Dorsey & Whitney LLP, 50 South Sixth Street, Minneapolis, Minnesota 55402, and the federal income tax consequences of the Reorganization will be passed on by Vedder Price P.C., 222 North LaSalle Street, Chicago, Illinois 60601.
Information Filed with the Securities and Exchange Commission
This Proxy Statement/Prospectus and the related Statement of Additional Information do not contain all the information set forth in the registration statements and the exhibits relating thereto and the annual and semi-annual reports which the Funds have filed with the SEC pursuant to the requirements of the Securities Act of 1933, as amended, and the 1940 Act, to which reference is hereby made. The SEC file number for the registration statement containing the current Prospectus and Statement of Additional Information for the Acquired Fund is Registration No. 811-09037 and the SEC file number for the registration statement containing the current Prospectus and Statement of Additional Information for the Acquiring Fund is Registration No. 811-05309. Such Prospectuses and Statements of Additional Information are incorporated herein by reference.
THE BOARD’S APPROVAL OF THE REORGANIZATION
Based on the considerations described below, the Board has determined that the Reorganization would be in the best interests of each Fund and that the interests of each Fund’s existing shareholders would not be diluted as a result of the Reorganization. The Board has approved the Reorganization and recommends that Acquired Fund shareholders vote in favor of the Reorganization.
In preparation for a telephonic meeting of the Board held on June 16, 2011 (the “Meeting”) at which the Reorganization was proposed, Nuveen Fund Advisors provided the Board with information regarding the proposed Reorganization, including the rationale therefore and alternatives considered to the Reorganization of the Funds. Prior to approving the Reorganization, the independent board members reviewed the foregoing information with their independent legal counsel and with management, reviewed with independent legal counsel applicable law and their duties in considering such matters, and met with independent legal counsel in a private session without management present. In approving the Reorganization, the Board considered a number of principal factors in reaching its determination, including the following:
— | the similarities and difference in the Funds’ investment objectives and principal investment strategies; |
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— | the Funds’ relative risks; |
— | the Funds’ relative sizes; |
— | the relative investment performance of the Funds and portfolio managers; |
— | the relative fees and expenses of the Funds, including caps on the Funds’ expenses agreed to by Nuveen Fund Advisors; |
— | the anticipated tax-free nature of the Reorganization; |
— | the expected costs of the Reorganization and the extent to which the Funds would bear any such costs; |
— | the terms of the Reorganization and whether the Reorganization would dilute the interests of shareholders of the Funds; |
— | the effect of the Reorganization on shareholder services and shareholder rights; |
— | alternatives to the Reorganization; and |
— | any potential benefits of the Reorganization to Nuveen Fund Advisors and its affiliates as a result of the Reorganization. |
Investment Similarities and Differences
Based on the information presented, the Board noted that the investment objectives of the Funds are substantially similar. In this regard, the investment objective of the Acquired Fund is to provide high current income with minimal fluctuations of principal, and the investment objective of the Acquiring Fund is to provide current income while maintaining a high degree of principal stability. The Board further noted that the principal investment strategies of the Acquired Fund and Acquiring Fund appear substantially similar. The Board recognized that prior to March 2011, the Acquiring Fund operated under more restrictive investment policies than those of the Acquired Fund. In March 2011, however, the Board on the recommendation of the portfolio management team approved certain changes to the investment strategies for the Acquiring Fund. As a result, the principal investment strategies are now substantially similar, although the Board noted a significant remaining difference related to non-U.S. dollar exposure.
The Board noted that because the Funds’ investment strategies are substantially similar, the principal risks of the Funds are also substantially similar, although the Acquired Fund potentially is subject to greater risk from non-U.S. dollar exposure due to the difference in the foreign investment policy noted above. Nevertheless, the Board recognizes that Nuveen Fund Advisors anticipates that the risk profiles of the Funds will be very similar going forward given that the same portfolio management team manages both Funds.
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The Board noted that the Acquiring Fund is significantly larger than the Acquired Fund and that combining the Funds should provide additional benefits to shareholders of both Funds, as fixed operating expenses of the Acquiring Fund following the Reorganization will be spread over a larger asset base. The Reorganization may therefore lower the total expense ratio borne by shareholders of the Acquiring Fund as noted in more detail below.
Investment Performance and Portfolio Managers
The Board considered the investment performance of each Fund. In reviewing past performance, the Board, however, observed that until recently, the Funds were managed by different portfolio management teams and the Acquiring Fund operated under more restrictive investment policies limiting some of the usefulness of the past performance comparisons. Prior to January 1, 2011, the Acquired Fund had been managed by a different portfolio management team than that of the Acquiring Fund. As of January 1, 2011, the portfolio management team of the Acquiring Fund also became the portfolio management team for the Acquired Fund. Further, as noted, the Board approved certain investment policy changes for the Acquired Fund in March 2011. Because the Funds are now operating under substantially similar policies with the same portfolio management team, the Board recognized that differences between the two Funds may be less significant going forward. Further, as the portfolio management team of the Acquiring Fund will continue to manage the Acquiring Fund following the Reorganization, the Board considered the Acquiring Fund’s performance compared to a peer group of comparable funds. The Board also considered the differences in yield, earnings and dividends between the Acquiring Fund and the Acquired Fund. The Board, however, noted that the differences can be largely attributed to the fact that the Funds were historically managed by different investment teams with different investment policies. Given that the Funds’ portfolios consist primarily of short duration assets some of which will mature prior to the Reorganization, the Funds’ portfolio turnover rates, and that the Funds now operate under substantially similar investment policies and are managed by the same portfolio management team, the Board noted that it is anticipated that the yield and earnings differentials between the two Funds should be significantly reduced by the time the Reorganization is consummated as the portfolios become more closely aligned.
The Board considered the fees and expense ratios of each class of the Funds (including estimated expenses of the Acquiring Fund following the Reorganization) and the impact of expense caps. The Board noted that although the management fees of the Acquiring Fund (even after the proposed reduction noted below) are higher than the management fees of the Acquired Fund, the projected net expenses of the Acquiring Fund following the Reorganization are lower than those of the Acquired Fund. This reduction is primarily the result of the much larger average account size of the Acquiring Fund which produces lower transfer agency fees as a percentage of net assets. The Board further noted that the management fee breakpoints in the advisory agreements for the two Funds are the same. Nuveen Fund Advisors has agreed to a 0.02% reduction in the fund-level management fee at each breakpoint if the Reorganization is completed. With this reduction, the proposed Reorganization is expected to result in a slight decrease in gross expenses for both Funds.
The Board also considered the expense limitation agreements for the Funds, including with respect to the Acquiring Fund following the Reorganization. In reviewing these arrangements, the
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Board noted, among other things, the distributor of the Acquiring Fund has agreed to limit its Class A 12b-1 fees to 0.15% of average daily net assets through March 31, 2012. In light of the foregoing, Class A shares of the Acquired Fund are expected to experience a significant decrease in net expenses as a result of the Class A share 12b-1 fee waiver in effect for the Acquiring Fund through March 31, 2012. All other share classes of the Acquired Fund are expected to experience a smaller decrease in net expenses. Although the pro forma expenses of the Acquiring Fund following the Reorganization are expected to be below the expense caps of the Acquiring Fund, the Board notes that in connection with the Reorganization, Nuveen Fund Advisors has agreed to an undertaking that, to protect shareholders from any unforeseen increase in expenses, the Acquiring Fund will operate under the current expense caps of the Acquiring Fund for a period of one year from the date of the Reorganization, except that the current 0.10% waiver of Rule 12b-1 fees for Class A shares will end March 31, 2012, resulting in a corresponding 0.10% expense cap increase for that share class.
The Board also recognized that the management fees for the Funds are comprised of fund-level and complex-level fees. Pursuant to the complex level fee arrangement, the fees of funds in the Nuveen complex are reduced as eligible assets in the fund complex reach certain levels. The complex level fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when eligible complex-wide assets increase, even if assets of a particular Fund are unchanged or decrease. The complex-level fees are lower for the Acquired Fund than for the Acquiring Fund because when the Acquiring Fund became part of the Nuveen complex, a portion of the Acquiring Fund’s assets were deemed ineligible for purposes of calculating the effective complex-level fee rate, whereas none of the assets of the Acquired Fund are ineligible. After the Reorganization, the assets of the Acquired Fund will retain their “eligible asset” status and therefore be counted for purposes of calculating the complex-level fee. Accordingly, following the Reorganization, the Acquiring Fund will participate in complex-level fee savings to a greater degree than it did prior to the Reorganization because a lower percentage of the Acquiring Fund’s assets following the Reorganization will be excluded from the complex-level fee calculation.
Tax Consequences of the Reorganization
The Board noted that the Reorganization is expected to be tax-free to shareholders of the participating Funds. The Board further recognized that with fund reorganizations, applicable tax laws could impose limits on the amount of capital loss carryforwards that an acquiring fund may use in any one year. It is anticipated that with respect to the Reorganization, an annual limitation will be imposed on the Acquiring Fund’s utilization of the Acquired Fund’s pre-merger capital loss carryforwards. Because the annual limitation, however, is expected to be large in comparison to anticipated loss carryforwards, the application of this limit to the proposed Reorganization is expected to have an insignificant impact on the tax profile of the Acquiring Fund following the Reorganization.
The Board considered the projected cost savings in net expenses of each Fund following the Reorganization. In light of these estimated cost savings, the Board considered that the costs of the Reorganization would be allocated between the Funds ratably up to the respective Fund’s annual projected savings. To the extent that payment of these expenses would cause either the Acquiring Fund or the Acquired Fund to exceed its expense cap, Nuveen Fund Advisors would reimburse the portion of the expenses necessary for the Fund to operate within its expense limit. Based on current expense levels, it is anticipated that Nuveen Fund Advisors will reimburse all expenses charged to the Acquired
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Fund and none of the expenses charged to the Acquiring Fund. If the Reorganization is not ultimately completed, Nuveen will bear all costs of the proposed Reorganization.
The terms of the Reorganization are intended to avoid dilution of the interests of the shareholders of the Funds. In this regard, each Acquired Fund shareholder will receive the same class of shares in the Acquiring Fund equal in value to the shares of the respective class of the Acquired Fund held.
Effect on Shareholder Services and Shareholder Rights
The Board noted that it was anticipated that the services provided to shareholders would generally not change, except to the extent services differed because the Funds have different transfer agents. Shareholders of the Acquired Fund will receive the same class of shares as they held in the Acquiring Fund, subject to the same distribution and service fees. The Board also considered that the Acquiring Fund is a series of a Maryland corporation, whereas the Acquired Fund is a series of a Massachusetts business trust. As a result, the rights of shareholders between the Funds differ. Notwithstanding the foregoing, the principal attributes of a share in each Fund are comparable as shareholders in both Funds are entitled to one vote per share held and fractional votes for fractional shares held.
Alternatives to the Reorganization
The Board could have decided to continue the two Funds in their present form managed by the same management teams or to liquidate one of the overlapping Funds, but did not believe either alternative would be in the best interests of shareholders. The Board recognized that continuing to offer two substantially similar overlapping Funds may cause confusion among the distribution network and sales team and dilute their selling efforts. As a result, one or both Funds may be unable to grow assets, potentially increasing investor overall expenses if assets decrease. With the proposed Reorganization, Nuveen’s distribution and marketing efforts can focus on one short term bond fund. The shareholders of both Funds can therefore benefit from the potential of greater sales, asset growth and economies of scale that could be achieved in one combined fund rather than diluted between two substantially similar Funds. The Board also could have decided to liquidate a Fund; however, the Board did not believe this option was in the best interests of shareholders as liquidation is a taxable event.
Potential Benefits to Nuveen Fund Advisors and Affiliates
The Board recognized that the Reorganization may result in some benefits and economies for Nuveen Fund Advisors and its affiliates. These may include, for example, a reduction in the level of operational expenses incurred for administrative, compliance and portfolio management services as a result of the elimination of the Acquired Fund as a separate Fund in the Nuveen complex. However, the Board also noted that based on pro forma projections, the annual management fees earned by Nuveen Fund Advisors on the Acquiring Fund following the Reorganization, net of fee waivers and expense reimbursements, would be approximately $18,000 less than the net fees Nuveen Fund Advisors would have earned from the two Funds operating separately. Further, due to the expense cap for the Acquired Fund, it is anticipated that Nuveen Fund Advisors would ultimately bear some of the Reorganization costs.
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The Board, including the independent board members, approved the Reorganization, concluding that the Reorganization is in the best interests of both Funds and that the interests of existing shareholders of the Funds will not be diluted as a result of the Reorganization.
The following tables set forth the percentage of ownership of each person who, as of August 4, 2011, the record date with respect to the Special Meeting, owns of record, or is known by the Funds to own of record or beneficially, 5% or more of any class of shares of either Fund. The tables also set forth the estimated percentage of shares of the combined fund that would have been owned by such parties if the Reorganization had occurred on April 30, 2011. These amounts may differ on the Closing Date.
Acquired Fund | ||||||
Class | Name and Address of | Percentage of | Estimated Pro Forma | |||
Class A Shares |
| . % | . % | |||
| ||||||
| ||||||
Acquiring Fund | ||||||
Class | Name and Address of | Percentage of | Estimated Pro Forma | |||
Class A Shares |
| . % | . % | |||
| ||||||
|
At the close of business on August 4, 2011, there were Class A shares, Class C shares, Class I shares and Class R3 shares of the Acquired Fund outstanding. As of August 4, 2011, the board members and officers of the Acquired Fund as a group owned less than 1% of the total outstanding shares of the Acquired Fund and as a group owned less than 1% of each class of shares of the Acquired Fund.
At the close of business on August 4, 2011, there were Class A shares, Class C shares, Class I shares and Class R3 shares of the Acquiring Fund outstanding. As of August 4, 2011, the board members and officers of the Acquiring Fund as a group owned less than 1% of the total outstanding shares of the Acquiring Fund and as a group owned less than 1% of each class of shares of the Acquiring Fund.
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The Funds generally do not hold annual shareholders’ meetings, but will hold special meetings as required or deemed desirable. Because the Funds do not hold regular meetings of shareholders, the anticipated date of the next shareholder meeting cannot be provided. To be considered for inclusion in the proxy statement for any meeting of shareholders, a shareholder proposal must be submitted a reasonable time before the proxy statement for the meeting is mailed. Whether a proposal is included in the proxy statement will be determined in accordance with applicable federal and state laws. The timely submission of a proposal does not guarantee its inclusion. Shareholders wishing to submit proposals for inclusion in a proxy statement for a shareholder meeting should send their written proposal to the respective Fund at 333 West Wacker Drive, Chicago, Illinois 60606.
Shareholders who want to communicate with the Board or any individual board member should write to their Fund, to the attention of Lorna Ferguson, Manager of Fund Board Relations, Nuveen Investments, 333 West Wacker Drive, Chicago, Illinois 60606. The letter should indicate that you are a Fund shareholder, and identify the Fund (or Funds). If the communication is intended for a specific board member and so indicates, it will be sent only to that board member. If a communication does not indicate a specific board member, it will be sent to the chair of the nominating and governance committee and to the Board’s independent legal counsel for further distribution as deemed appropriate by such persons.
Proxy Statement/Prospectus Delivery
Please note that only one Proxy Statement/Prospectus may be delivered to two or more shareholders of the Acquired Fund who share an address, unless the Fund has received instructions to the contrary. To request a separate copy of the Proxy Statement/Prospectus, or for instructions as to how to request a separate copy of such document or as to how to request a single copy if multiple copies of such document are received, shareholders should contact the Acquired Fund at 333 West Wacker Drive, Chicago, Illinois 60606 or by calling (800) 257-8787.
VOTING INFORMATION AND REQUIREMENTS
Holders of shares of the Acquired Fund are entitled to one vote per share on matters as to which they are entitled to vote, with fractional shares voting proportionally.
Approval of the Reorganization will require the affirmative vote of a majority of the outstanding voting securities of the Acquired Fund, with shareholders of each class voting together as a single class. The “vote of a majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of the vote of (i) 67% or more of the shares of the Fund entitled to vote thereon present at the meeting if the holders of more than 50% of such outstanding shares are present in person or represented by proxy; or (ii) more than 50% of such outstanding shares of the Fund entitled to vote thereon.
Each valid proxy given by a shareholder of the Acquired Fund will be voted by the persons named in the proxy in accordance with the instructions marked thereon and as the persons named in the proxy may determine on such other business as may come before the Special Meeting on which
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shareholders are entitled to vote. If no designation is made, the proxy will be voted by the persons named in the proxy, as recommended by the Board, “FOR” approval of the Reorganization. Abstentions and broker non-votes (i.e., shares held by brokers or nominees, typically in “street name,” as to which (i) instructions have not been received from beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have discretionary voting power on a particular matter) do not count as votes “FOR” the proposal and have the same effect as a vote “AGAINST” the proposal. At least a majority of the outstanding shares of the Acquired Fund entitled to vote on the proposal must be present in person or by proxy to have a quorum to conduct business at the Special Meeting. Abstentions and broker non-votes will be deemed present for quorum purposes.
Shareholders who execute proxies may revoke them at any time before they are voted by filing with the Acquired Fund a written notice of revocation, by delivering a duly executed proxy bearing a later date, or by attending the Special Meeting and voting in person. The giving of a proxy will not affect your right to vote in person if you attend the Special Meeting and wish to do so.
It is not anticipated that any action will be asked of the shareholders of the Acquired Fund other than as indicated above, but if other matters are properly brought before the Special Meeting, it is intended that the persons named in the proxy will vote in accordance with their judgment.
If a quorum is not obtained or if a quorum is present but sufficient votes in favor of a proposal are not received by the scheduled time of the Special Meeting, the persons named in the proxy may propose and vote in favor of one or more adjournments of the Special Meeting to permit further solicitation of proxies. If sufficient shares were present to constitute a quorum, but insufficient votes had been cast in favor of a proposal to approve it, proxies would be voted in favor of adjournment only if the persons named in the proxies determined that adjournment and additional solicitation was reasonable and in the best interest of the shareholders. Any such adjournment will require the affirmative vote of the holders of a majority of the outstanding shares present in person or by proxy and entitled to vote at the session of the Special Meeting to be adjourned, whether or not a quorum is present. If the adjournment is approved, the date, time and place of the new meeting will be announced at the time of adjournment, and no further notice of the new meeting time and date will be given to shareholders.
Proxies of shareholders of the Acquired Fund are solicited by the Board. Additional solicitation may be made by mail, telephone, telegraph or personal interview by representatives of the Adviser or Nuveen, or by dealers or their representatives.
, 2011
Please sign and return your proxy promptly.
Your vote is important and your participation
in the affairs of your Fund does make a difference.
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made as of this day of , 2011 by Nuveen Investment Funds, Inc., a Maryland corporation (the “Corporation”), on behalf of Nuveen Short Term Bond Fund, a series of the Corporation (the “Acquiring Fund”), Nuveen Investment Trust III, a Massachusetts business trust (the “Trust”), on behalf of Nuveen Short Duration Bond Fund, a series of the Trust (the “Acquired Fund” and, together with the Acquiring Fund, the “Funds”), and Nuveen Fund Advisors, Inc., the investment adviser to the Funds (for purposes of Section 9.1 of the Agreement only).
This Agreement is intended to be, and is adopted as, a plan of reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder. The reorganization will consist of: (i) the transfer of all the assets of the Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class C, Class I and Class R3 voting shares of common stock, par value $0.0001 per share, of the Acquiring Fund (“Acquiring Fund Shares”) and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund; and (ii) the pro rata distribution of all the Acquiring Fund Shares to the shareholders of each corresponding class of the Acquired Fund, in complete liquidation and termination of the Acquired Fund as provided herein, all upon the terms and conditions set forth in this Agreement (the “Reorganization”).
WHEREAS, the Acquired Fund is a separate series of the Trust and the Acquiring Fund is a separate series of the Corporation, and the Trust and the Corporation are each an open-end, management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and the Acquired Fund owns securities that generally are assets of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue the Acquiring Fund Shares; and
WHEREAS, the Board of Trustees of the Trust (the “Acquired Fund Board”) and the Directors of the Corporation (the “Acquiring Fund Board”) have made the determinations required by Rule 17a-8 under the 1940 Act with respect to the Acquired Fund and Acquiring Fund, respectively.
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND SHARES AND THE ASSUMPTION OF THE ACQUIRED FUND LIABILITIES AND TERMINATION AND LIQUIDATION OF THE ACQUIRED FUND
1.1 THE EXCHANGE. Subject to the terms and conditions contained herein and on the basis of the representations and warranties contained herein, the Acquired Fund agrees to transfer all of its assets, as set forth in Section 1.2, to the Acquiring Fund. In consideration therefor, the Acquiring Fund agrees: (i) to deliver to the Acquired Fund the number of full and fractional Class A, Class C, Class I and Class R3 Acquiring Fund Shares, computed in the manner set forth in Section 2.3 herein;
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and (ii) to assume all the liabilities of the Acquired Fund, as set forth in Section 1.3. All Acquiring Fund Shares delivered to the Acquired Fund shall be delivered at net asset value without a sales load, commission or other similar fee being imposed. In the event that Class A shares of the Acquiring Fund are transferred in the Reorganization to former holders of Class A shares of the Acquired Fund with respect to which the front-end sales charge was waived due to a purchase of $1 million or more, the Acquiring Fund agrees that in determining whether a deferred sales charge is payable upon the sale of such Class A shares of the Acquiring Fund it shall give credit for the period during which the holder thereof held such Acquired Fund shares. Such transactions shall take place at the closing provided for in Section 3.1 (the “Closing”).
1.2 ASSETS TO BE TRANSFERRED. The Acquired Fund shall transfer all of its assets to the Acquiring Fund, including, without limitation, all cash, securities, commodities, interests in futures, dividends or interest receivables owned by the Acquired Fund and any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund on the Closing Date as such term is defined in Section 3.1.
The Acquired Fund will, within a reasonable period of time before the Closing Date, furnish the Acquiring Fund with a list of the Acquired Fund’s portfolio securities and other investments. The Acquiring Fund will, within a reasonable period of time before the Closing Date, furnish the Acquired Fund with a list of the securities, if any, on the Acquired Fund’s list referred to above that do not conform to the Acquiring Fund’s investment objective, policies, and restrictions. The Acquired Fund, if requested by the Acquiring Fund, will dispose of securities on the Acquiring Fund’s list before the Closing Date. In addition, if it is determined that the portfolios of the Acquired Fund and the Acquiring Fund, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Acquired Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. Notwithstanding the foregoing, nothing herein will require the Acquired Fund to dispose of any investments or securities if, in the reasonable judgment of the Acquired Fund Board or Nuveen Fund Advisors, Inc. (the “Adviser”), such disposition would adversely affect the status of the Reorganization as a “reorganization” as such term is used in the Code or would otherwise not be in the best interests of the Acquired Fund.
1.3 LIABILITIES TO BE ASSUMED. The Acquired Fund will endeavor to discharge all of its known liabilities and obligations to the extent possible before the Closing Date. Notwithstanding the foregoing, any liabilities not so discharged shall be assumed by the Acquiring Fund, which assumed liabilities shall include all of the Acquired Fund’s liabilities, debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not arising in the ordinary course of business, whether or not determinable at the Closing Date, and whether or not specifically referred to in this Agreement.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date as is conveniently practicable but in no event later than 12 months after the Closing Date (the “Liquidation Date”): (a) the Acquired Fund will distribute to its shareholders of record with respect to each class of shares, determined as of the close of business on the Closing Date, as such term is defined in Section 3.1 (the “Acquired Fund Shareholders”), on a pro rata basis within that class, the Acquiring Fund Shares of the same class received by the Acquired Fund pursuant to Section 1.1; and (b) the Acquired Fund will thereupon proceed to dissolve and terminate as set forth in Section 1.7 below. Such distribution will be accomplished with respect to each class of shares of the Acquired Fund by the
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transfer of the Acquiring Fund Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of Acquired Fund Shareholders and all issued and outstanding shares of the Acquired Fund will simultaneously be canceled on the books of the Acquired Fund. The Acquiring Fund shall not issue certificates representing Acquiring Fund Shares in connection with such transfer.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund’s transfer agent. Acquiring Fund Shares will be issued simultaneously to the Acquired Fund, in an amount computed in the manner set forth in Section 2.3.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of Acquiring Fund Shares in a name other than the registered holder of the Acquired Fund shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred.
1.7 TERMINATION. The Acquired Fund shall completely liquidate and be dissolved, terminated and have its affairs wound up in accordance with Massachusetts state law, promptly following the Closing Date and the making of all distributions pursuant to Section 1.4.
1.8 BOARD REPORTING. Any reporting responsibility of the Acquired Fund including, without limitation, the responsibility for filing of regulatory reports, tax returns or other documents with the Securities and Exchange Commission (the “Commission”), any state securities commission and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Acquired Fund.
1.9 BOOKS AND RECORDS. All books and records of the Acquired Fund, including all books and records required to be maintained under the 1940 Act, and the rules and regulations thereunder, shall be available to the Acquiring Fund from and after the Closing Date and shall be turned over to the Acquiring Fund as soon as practicable following the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund’s assets and liabilities shall be computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on the Closing Date (such time and date being hereinafter called the “Valuation Time”), using the valuation procedures set forth in the Acquiring Fund’s Prospectus and Statement of Additional Information (in effect as of the Closing Date) or such other valuation procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share per class of Acquiring Fund Shares shall be the net asset value per share for such class computed as of the Valuation Time, using the valuation procedures set forth in Section 2.1.
2.3 SHARES TO BE ISSUED. The number of Acquiring Fund Shares to be issued (including fractional shares, if any) in consideration for the net assets as described in Article I, shall be determined with respect to each class by dividing the value of the assets net of liabilities with respect
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to each class of shares of the Acquired Fund determined in accordance with Section 2.1 by the net asset value of an Acquiring Fund share of the same class determined in accordance with Section 2.2.
2.4 EFFECT OF SUSPENSION IN TRADING. In the event that on the Closing Date, either: (a) the NYSE or another primary exchange on which the portfolio securities of the Acquiring Fund or the Acquired Fund are purchased or sold shall be closed to trading or trading on such exchange shall be restricted; or (b) trading or the reporting of trading on the NYSE or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall be postponed until the first business day when trading is fully resumed and reporting is restored.
ARTICLE III
CLOSINGS AND CLOSING DATE
3.1 CLOSING DATE. The Closing shall occur on October 7, 2011 or such other date as the parties may agree (the “Closing Date”). Unless otherwise provided, all acts taking place at the Closing shall be deemed to take place as of immediately after the Valuation Time. The Closing shall be held as the close of business (the “Effective Time”) at the offices of Vedder Price P.C. in Chicago, Illinois or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN’S CERTIFICATE. The Acquired Fund shall cause State Street Bank & Trust Company, as custodian for the Acquired Fund (the “Custodian”), to deliver to the Acquiring Fund at the Closing a certificate of an authorized officer stating that: (a) the Acquired Fund’s portfolio securities, cash, and any other assets shall have been delivered in proper form to the Acquiring Fund on the Closing Date; and (b) all necessary taxes, including all applicable federal and state stock transfer stamps, if any, shall have been paid, or provision for payment shall have been made, in conjunction with the delivery of portfolio securities by the Acquired Fund.
3.3 TRANSFER AGENT’S CERTIFICATE. The Acquired Fund shall cause Boston Financial Data Services, as transfer agent for the Acquired Fund, to deliver to the Acquiring Fund at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of all the Class A, Class C, Class I and Class R3 Acquired Fund Shareholders, and the number and percentage ownership of outstanding shares per class owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver or cause U.S. Bancorp Fund Services, LLC, its transfer agent, to issue and deliver to the Acquired Fund a confirmation evidencing the Class A, Class C, Class I and Class R3 Acquiring Fund Shares to be credited on the Closing Date to the Secretary of the Trust or provide evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired Fund’s account on the books of the Acquiring Fund.
3.4 DELIVERY OF ADDITIONAL ITEMS. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, share certificates, receipts and other documents, if any, as such other party or its counsel may reasonably request to effect the transactions contemplated by this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The Trust, on behalf of the Acquired Fund, represents and warrants as follows:
(a) The Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts.
(b) The Acquired Fund is a separate series of the Trust duly authorized in accordance with the applicable provisions of the Trust’s Declaration of Trust, as amended (“Declaration of Trust”).
(c) The Trust is registered as an open-end management investment company under the 1940 Act, and such registration is in full force and effect.
(d) The Acquired Fund is not, and the execution, delivery, and performance of this Agreement (subject to shareholder approval) will not result, in the violation of any provision of the Trust’s Declaration of Trust or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which the Acquired Fund is a party or by which it is bound.
(e) Except as otherwise disclosed in writing to and accepted by the Acquiring Fund, the Acquired Fund has no material contracts or other commitments that will be terminated with liability to it before the Closing Date.
(f) No litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquired Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its business, or the ability of the Acquired Fund to carry out the transactions contemplated by this Agreement. The Acquired Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated herein.
(g) The financial statements of the Acquired Fund as of September 30, 2010, and for the year then ended have been prepared in accordance with generally accepted accounting principles, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Acquired Fund as of September 30, 2010, and there are no known contingent liabilities of the Acquired Fund as of such date that are not disclosed in such statements. The unaudited financial statements of the Acquired Fund as of March 31, 2011, and for the semi-annual period then ended, have been prepared in accordance with generally accepted accounting principles, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Acquired Fund as of March 31, 2011, and there are no known contingent liabilities of the Acquired Fund as of such date that are not disclosed in such statements.
(h) Since the date of the financial statements referred to in subsection (g) above, there have been no material adverse changes in the Acquired Fund’s financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business) and there are no
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known contingent liabilities of the Acquired Fund arising after such date. For the purposes of this subsection (h), a decline in the net asset value of the Acquired Fund shall not constitute a material adverse change.
(i) All federal, state, local and other tax returns and reports of the Acquired Fund required by law to be filed by it (taking into account permitted extensions for filing) have been timely filed and are complete and correct in all material respects. All federal, state, local and other taxes of the Acquired Fund required to be paid (whether or not shown on any such return or report) have been paid, or provision shall have been made for the payment thereof and any such unpaid taxes are properly reflected on the financial statements referred to in subsection (g) above. To the best of the Acquired Fund’s knowledge, no tax authority is currently auditing or preparing to audit the Acquired Fund, and no assessment for taxes, interest, additions to tax or penalties has been asserted against the Acquired Fund.
(j) All issued and outstanding shares of the Acquired Fund are, and as of the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Acquired Fund (recognizing that under Massachusetts law, Acquired Fund shareholders, under certain circumstances, could be held personally liable for the obligations of the Acquired Fund). All the issued and outstanding shares of the Acquired Fund will, at the time of the Closing, be held by the persons and in the amounts set forth in the records of the Acquired Fund’s transfer agent as provided in Section 3.3. The Acquired Fund has no outstanding options, warrants or other rights to subscribe for or purchase any shares of the Acquired Fund, and has no outstanding securities convertible into shares of the Acquired Fund.
(k) At the Closing, the Acquired Fund will have good and marketable title to the Acquired Fund’s assets to be transferred to the Acquiring Fund pursuant to Section 1.2, and full right, power, and authority to sell, assign, transfer, and deliver such assets, and the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the Securities Act of 1933, as amended (the “1933 Act”), except those restrictions as to which the Acquiring Fund has received notice and necessary documentation at or prior to the Closing.
(l) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquired Fund including the determinations of the Acquired Fund Board required by Rule 17a-8(a) of the 1940 Act. Subject to approval by the Acquired Fund shareholders, this Agreement constitutes a valid and binding obligation of the Acquired Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles.
(m) The information to be furnished by the Acquired Fund for use in no-action letters, applications for orders, registration statements, proxy materials and other documents that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations.
(n) From the effective date of the Registration Statement (as defined in Section 5.7), through the time of the meeting of the Acquired Fund shareholders and on the Closing Date, any
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written information furnished by the Trust with respect to the Acquired Fund for use in the Proxy Materials (as defined in Section 5.7), or any other materials provided in connection with the Reorganization, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make the statements, in light of the circumstances under which such statements were made, not misleading.
(o) For each taxable year of its operations (including the taxable year ending on the Closing Date), the Acquired Fund has been treated as a separate corporation for federal income tax purposes pursuant to Section 851(g) of the Code, has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, has been eligible to compute and has computed its federal income tax under Section 852 of the Code, and will have distributed on or prior to the Closing Date all its investment company taxable income (determined without regard to the deduction for dividends paid) and net capital gain (as such terms are defined in the Code) that has accrued or will accrue on or prior to the Closing Date.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Corporation, on behalf of the Acquiring Fund, represents and warrants as follows:
(a) The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland.
(b) The Acquiring Fund is a separate series of the Corporation duly authorized in accordance with the applicable provisions of the Corporation’s Articles of Incorporation, as amended (“Articles”).
(c) The Corporation is registered as an open-end management investment company under the 1940 Act, and such registration is in full force and effect.
(d) The Acquiring Fund is not, and the execution, delivery and performance of this Agreement will not result, in a violation of the Corporation’s Articles or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which the Acquiring Fund is a party or by which it is bound.
(e) No litigation, administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquiring Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its business or the ability of the Acquiring Fund to carry out the transactions contemplated by this Agreement. The Acquiring Fund knows of no facts that might form the basis for the institution of such proceedings and it is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transaction contemplated herein.
(f) The financial statements of the Acquiring Fund as of June 30, 2011 and for the fiscal year then ended have been prepared in accordance with generally accepted accounting principles and have been audited by independent auditors, and such statements (copies of which have been furnished to the Acquired Fund) fairly reflect the financial condition of the Acquiring Fund as of June 30, 2011, and there are no known contingent liabilities of the Acquiring Fund as of such date that are not disclosed in such statements.
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(g) Since the date of the financial statements referred to in subsection (f) above, there have been no material adverse changes in the Acquiring Fund’s financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business) and there are no known contingent liabilities of the Acquiring Fund arising after such date. For the purposes of this subsection (g), a decline in the net asset value of the Acquiring Fund shall not constitute a material adverse change.
(h) At the date hereof, all federal, state, local and other tax returns and reports of the Acquiring Fund required by law to be filed by it (taking into account permitted extensions for filing) have been timely filed and are complete and correct in all material respects. All federal, state, local and other taxes of the Acquiring Fund required to be paid (whether or not shown on any such return or report) have been paid or provision shall have been made for their payment and any such unpaid taxes are properly reflected on the financial statements referred to in subsection (f) above. To the best of the Acquiring Fund’s knowledge, no tax authority is currently auditing or preparing to audit the Acquiring Fund, and no assessment for taxes, interest, additions to tax or penalties has been asserted against the Acquiring Fund.
(i) All issued and outstanding shares of the Acquiring Fund are, and, as of the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Acquiring Fund. The Acquiring Fund has no outstanding options, warrants, or other rights to subscribe for or purchase shares of the Acquiring Fund, and there are no outstanding securities convertible into shares of the Acquiring Fund.
(j) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquiring Fund, including the determination of the Acquiring Fund Board required pursuant to Rule 17a-8(a) of the 1940 Act. This Agreement constitutes a valid and binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles.
(k) The Acquiring Fund Shares to be issued and delivered to the Acquired Fund for the account of the Acquired Fund Shareholders pursuant to the terms of this Agreement will, at the Closing Date, have been duly authorized. When so issued and delivered, such shares will be duly and validly issued shares of the Acquiring Fund, and will be fully paid and non-assessable.
(l) The information to be furnished by the Acquiring Fund for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations.
(m) From the effective date of the Registration Statement (as defined in Section 5.7), through the time of the meeting of the Acquired Fund shareholders and on the Closing Date, any written information furnished by the Corporation with respect to the Acquiring Fund for use in the Proxy Materials (as defined in Section 5.7), or any other materials provided in connection with the Reorganization, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make the statements, in light of the circumstances under which such statements were made, not misleading.
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(n) For each taxable year of its operation, the Acquiring Fund has been treated as a separate corporation for federal income tax purposes pursuant to Section 851(g) of the Code, has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, has been eligible to compute and has computed its federal income tax under Section 852 of the Code and will be eligible to, and will, do so for the taxable year that includes the Closing Date.
(o) The Acquiring Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and any state securities laws as it may deem appropriate in order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE FUNDS
5.1 OPERATION IN ORDINARY COURSE. Subject to Sections 1.2 and 8.5, each of the Acquiring Fund and the Acquired Fund will operate its respective business in the ordinary course between the date of this Agreement and the Closing Date, it being understood that such ordinary course of business will include customary dividends and distributions, any other distribution necessary or desirable to avoid federal income or excise taxes, and shareholder purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The Trust will call a special meeting of the Acquired Fund shareholders to consider and act upon this Agreement (or transactions contemplated thereby) and to take all other appropriate action necessary to obtain approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants that the Acquiring Fund Shares to be issued pursuant to this Agreement are not being acquired for the purpose of making any distribution, other than in connection with the Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Acquired Fund’s shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, each Fund will take or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but in any case within 60 days after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring Fund and which shall be certified by the Trust’s Controller, a statement of the earnings and profits of the Acquired Fund for federal income tax purposes, as well as any net operating loss carryovers and capital loss carryovers, that will be carried over to the Acquiring Fund pursuant to Section 381 of the Code.
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5.7 PREPARATION OF REGISTRATION STATEMENT AND PROXY MATERIALS. The Corporation will prepare and file with the Commission a registration statement on Form N-14 relating to the Acquiring Fund Shares to be issued to the Acquired Fund Shareholders (the “Registration Statement”). The Registration Statement shall include a proxy statement of the Acquired Fund and a prospectus of the Acquiring Fund relating to the transaction contemplated by this Agreement. The Registration Statement shall be in compliance with the 1933 Act, the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the 1940 Act, as applicable. Each party will provide the other party with the materials and information necessary to prepare the proxy statement and related materials (the “Proxy Materials”), for inclusion therein, in connection with the meeting of the Acquired Fund’s shareholders to consider the approval of this Agreement and the transactions contemplated herein.
5.8 TAX STATUS OF REORGANIZATION. The intention of the parties is that the Reorganization will qualify as a reorganization within the meaning of Section 368(a) of the Code. None of the Acquired Fund, the Trust, the Acquiring Fund or the Corporation shall take any action, or cause any action to be taken (including, without limitation, the filing of any tax return), that is inconsistent with such treatment or results in the failure of the transaction to qualify as a reorganization within the meaning of Section 368(a) of the Code. At or prior to the Closing Date, the Acquired Fund, the Trust, the Acquiring Fund and the Corporation will take such action, or cause such action to be taken, as is reasonably necessary to enable counsel to render the tax opinion contemplated herein in Section 8.9.
ARTICLE VI
CONDITION PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided for herein shall be subject to the following condition:
6.1 All representations, covenants, and warranties of the Acquiring Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. The Acquiring Fund shall have delivered to the Acquired Fund a certificate executed in the Acquiring Fund’s name by the Corporation’s President or Vice President and its Controller, in form and substance satisfactory to the Acquired Fund and dated as of the Closing Date, to such effect and as to such other matters as the Acquired Fund shall reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions provided for herein shall be subject to the following conditions:
7.1 All representations, covenants, and warranties of the Acquired Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. The Acquired Fund shall
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have delivered to the Acquiring Fund on the Closing Date a certificate executed in the Acquired Fund’s name by the Trust’s President or Vice President and the Controller, in form and substance satisfactory to the Acquiring Fund and dated as of the Closing Date, to such effect and as to such other matters as the Acquiring Fund shall reasonably request.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a statement of the Acquired Fund’s assets and liabilities, together with a list of the Acquired Fund’s portfolio securities showing the tax basis of such securities by lot and the holding periods of such securities, as of the Closing Date, certified by the Controller of the Trust.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT
The obligations of the Acquired Fund and the Acquiring Fund hereunder shall also be subject to the following:
8.1 This Agreement and the transactions contemplated herein, with respect to the Acquired Fund, shall have been approved by the requisite vote of the holders of the outstanding shares of the Acquired Fund in accordance with applicable law and the provisions of the Trust’s Declaration of Trust and By-Laws. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this Section 8.1.
8.2 On the Closing Date, the Commission shall not have issued an unfavorable report under Section 25(b) of the 1940 Act, or instituted any proceeding seeking to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. Furthermore, no action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other consents, orders, and permits of federal, state and local regulatory authorities (including those of the Commission and of state securities authorities, including any necessary “no-action” positions and exemptive orders from such federal and state authorities) to permit consummation of the transactions contemplated herein shall have been obtained.
8.4 The Registration Statement shall have become effective under the 1933 Act, and no stop orders suspending the effectiveness thereof shall have been issued. To the best knowledge of the parties to this Agreement, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act.
8.5 The Acquired Fund shall have declared and paid a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to its shareholders all of the Acquired Fund’s investment company taxable income for all taxable periods ending on or before the Closing Date (computed without regard to any deduction for dividends paid), if any, plus the excess of its interest income excludible from gross income under Section 103(a) of the Code, if any, over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for all taxable periods ending on
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or before the Closing Date and all of its net capital gains realized in all taxable periods ending on or before the Closing Date (after reduction for any available capital loss carry forward).
8.6 The Acquired Fund shall have delivered to the Acquiring Fund on the Closing Date a certificate executed in its name by the Trust’s President or Senior Vice President, in a form reasonably satisfactory to the Acquiring Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Trust, on behalf of the Acquired Fund, made in this Agreement are true and correct on and as of the Closing Date and as to such other matters as the Acquiring Fund shall reasonably request. The Acquiring Fund shall have delivered to the Acquired Fund on the Closing Date a certificate executed in its name by the Corporation’s President or Senior Vice President, in a form reasonably satisfactory to the Acquired Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Corporation, on behalf of the Acquiring Fund, made in this Agreement are true and correct on and as of the Closing Date and as to such other matters as the Acquired Fund shall reasonably request.
8.7 The Acquiring Fund shall have received on the Closing Date an opinion from counsel, dated as of the Closing Date, substantially to the effect that:
(a) The Trust is a validly existing voluntary association with transferable shares of beneficial interest under the laws of the Commonwealth of Massachusetts.
(b) The Agreement has been duly authorized, executed and delivered by the Trust, on behalf of the Acquired Fund, and constitutes a valid and legally binding obligation of the Trust, on behalf of the Acquired Fund, enforceable in accordance with its terms.
(c) The execution and delivery of the Agreement by the Trust, on behalf of the Acquired Fund, did not, and the exchange of the Acquired Fund’s assets for Acquiring Fund Shares pursuant to the Agreement will not, violate the Trust’s Declaration of Trust or By-Laws.
(d) To the knowledge of such counsel, and without any independent investigation, (i) the Trust is registered as an investment company with the Commission and is not subject to any stop order; and (ii) all regulatory consents, authorizations, approvals or filings required to be obtained or made by the Acquired Fund under the federal laws of the United States of America or the laws of the Commonwealth of Massachusetts for the transfer of the Acquired Fund’s assets and liabilities for Acquiring Fund Shares pursuant to the Agreement have been obtained or made.
8.8 The Acquired Fund shall have received on the Closing Date an opinion from counsel, dated as of the Closing Date, substantially to the effect that:
(a) The Corporation is a corporation validly existing and in good standing under the laws of Maryland.
(b) The Agreement has been duly authorized, executed and delivered by the Corporation, on behalf of the Acquiring Fund, and constitutes a valid and legally binding obligation of the Corporation, on behalf of the Acquiring Fund, enforceable in accordance with its terms.
(c) The execution and delivery of the Agreement by the Corporation, on behalf of the Acquiring Fund, did not, and the issuance of Acquiring Fund Shares pursuant to the Agreement will not, violate the Corporation’s Articles or By-Laws.
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(d) To the knowledge of such counsel, and without any independent investigation, (i) the Corporation is registered as an investment company with the Commission and is not subject to any stop order; and (ii) all regulatory consents, authorizations, approvals or filings required to be obtained or made by the Acquiring Fund under the federal laws of the United States of America or the laws of the State of Maryland for the issuance of Acquiring Fund Shares pursuant to the Agreement have been obtained or made.
8.9 The Funds shall have received an opinion of Vedder Price P.C. addressed to the Acquiring Fund and the Acquired Fund substantially to the effect that for federal income tax purposes:
(a) The transfer of all the Acquired Fund’s assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund followed by the pro rata distribution to the Acquired Fund Shareholders of all the Acquiring Fund Shares received by the Acquired Fund in complete liquidation of the Acquired Fund will constitute a “reorganization” within the meaning of Section 368(a) of the Code and the Acquiring Fund and the Acquired Fund will each be a “party to a reorganization,” within the meaning of Section 368(b) of the Code, with respect to the Reorganization.
(b) No gain or loss will be recognized by the Acquiring Fund upon the receipt of all the assets of the Acquired Fund solely in exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund.
(c) No gain or loss will be recognized by the Acquired Fund upon the transfer of all the Acquired Fund’s assets to the Acquiring Fund solely in exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund or upon the distribution (whether actual or constructive) of such Acquiring Fund Shares to the Acquired Fund Shareholders solely in exchange for such shareholders’ shares of the Acquired Fund in complete liquidation of the Acquired Fund.
(d) No gain or loss will be recognized by the Acquired Fund Shareholders upon the exchange of their Acquired Fund shares solely for Acquiring Fund Shares in the Reorganization.
(e) The aggregate basis of the Acquiring Fund Shares received by each Acquired Fund Shareholder pursuant to the Reorganization will be the same as the aggregate basis of the Acquired Fund shares exchanged therefor by such shareholder. The holding period of the Acquiring Fund Shares received by each Acquired Fund Shareholder will include the period during which the Acquired Fund shares exchanged therefor were held by such shareholder, provided such Acquired Fund shares are held as capital assets at the time of the Reorganization.
(f) The basis of the Acquired Fund’s assets transferred to the Acquiring Fund will be the same as the basis of such assets to the Acquired Fund immediately before the Reorganization. The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund.
No opinion will be expressed as to (1) the effect of the Reorganization on (A) the Acquired Fund or the Acquiring Fund with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting, (B) any Acquired Fund shareholder or any Acquiring Fund shareholder that is required to recognize unrealized gains and
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losses for federal income tax purposes under a mark-to-market system of accounting, or (C) the Acquired Fund or the Acquiring Fund with respect to any stock held in a passive foreign investment company as defined in Section 1297(a) of the Code or (2) any other federal tax issues (except those set forth above) and all state, local or foreign tax issues of any kind.
Such opinion shall be based on customary assumptions and such representations as Vedder Price P.C. may reasonably request of the Funds, and the Acquired Fund and the Acquiring Fund will cooperate to make and certify the accuracy of such representations. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this Section 8.9.
ARTICLE IX
EXPENSES
9.1 Each of Acquired Fund and Acquiring Fund will pay expenses incurred in connection with the Reorganization based on its portion of the projected annual costs savings to the Funds resulting from the Reorganization. Reorganization expenses include, without limitation: (a) expenses associated with the preparation and filing of the Registration Statement and other Proxy Materials; (b) postage; (c) printing; (d) accounting fees; (e) legal fees incurred by each Fund; (f) solicitation costs of the transaction; and (g) other related administrative or operational costs. If the Reorganization is not consummated, Nuveen Fund Advisors, Inc. will bear the expenses incurred in connection with the Reorganization.
9.2 Each party represents and warrants to the other that there is no person or entity entitled to receive any broker’s fees or similar fees or commission payments in connection with the transactions provided for herein.
9.3 Notwithstanding the foregoing, expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by the other party of such expenses would result in the disqualification of the Acquired Fund or the Acquiring Fund, as the case may be, as a regulated investment company within the meaning of Section 851 of the Code.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The parties agree that no party has made to the other parties any representation, warranty and/or covenant not set forth herein, and that this Agreement constitutes the entire agreement between and among the parties.
10.2 The representations, warranties, and covenants contained in this Agreement or in any document delivered pursuant to or in connection with this Agreement shall not survive the consummation of the transactions contemplated hereunder.
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ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the parties and such termination may be effected by the Trust’s President or Vice President and the Corporation’s President or Vice President without further action by the Acquired Fund Board or Acquiring Fund Board. In addition, either Fund may at its option terminate this Agreement at or before the Closing Date due to:
(a) a breach by any other party of any representation, warranty, or agreement contained herein to be performed at or before the Closing Date, if not cured within 30 days;
(b) a condition precedent to the obligations of the terminating party that has not been met and it reasonably appears that it will not or cannot be met; or
(c) a determination by the Acquired Fund Board or Acquiring Fund Board that the consummation of the transactions contemplated herein is not in the best interests of the Acquired Fund or Acquiring Fund, respectively.
11.2 In the event of any such termination, in the absence of willful default, there shall be no liability for damages on the part of the Trust, the Trustees, the Acquired Fund, the Corporation, the Directors, the Acquiring Fund, the Adviser, or the Trust’s, Corporation’s or Adviser’s officers.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such manner as may be mutually agreed upon in writing by the officers of the Trust and officers of the Corporation as specifically authorized by the Acquired Fund Board or Acquiring Fund Board; provided, however, that following the meeting of the Acquired Fund shareholders called by the Acquired Fund pursuant to Section 5.2 of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement to the detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.
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13.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but, except as provided in this section, no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm, or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquired Fund hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents, or employees of the Trust personally, but shall bind only the property of the Acquired Fund, as provided in the Trust’s Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust, on behalf of the Acquired Fund, and signed by authorized officers of the Trust acting as such. Neither the authorization by such Trustees nor the execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the property of the Acquired Fund as provided in the Trust’s Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the date first written above.
NUVEEN INVESTMENT TRUST III, on behalf of Nuveen Short Duration Bond Fund | ||
By: |
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Name: |
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Title: |
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ACKNOWLEDGED:
By: |
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Name: |
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Title: |
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NUVEEN INVESTMENT FUNDS, INC., on behalf of Nuveen Short Term Bond Fund | ||
By: |
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Name: |
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Title: |
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ACKNOWLEDGED:
By: |
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Name: |
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Title: |
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I-16
The undersigned is a party to this Agreement for the purposes of Section 9.1 only: | ||
NUVEEN FUND ADVISORS, INC. | ||
By: |
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Name: |
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Title: |
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ACKNOWLEDGED:
By: |
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I-17
EVERY SHAREHOLDER’S VOTE IS IMPORTANT
VOTING OPTIONS:
| ||||
VOTE ON THE INTERNET Log on to: www.proxy-direct.com Follow the on-screen instructions available 24 hours
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VOTE BY PHONE Call 1-866-963-6132 Follow the recorded instructions available 24 hours
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VOTE BY MAIL Vote, sign and date this Proxy Card and return in the postage-paid envelope
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VOTE IN PERSON Attend Shareholder Meeting 333 West Wacker Drive Chicago, IL, 60606 on October 3, 2011 |
Please detach at perforation before mailing.
PROXY | NUVEEN SHORT DURATION BOND FUND SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 3, 2011 | PROXY |
THIS PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES. The undersigned shareholder(s) of the Nuveen Short Duration Bond Fund, revoking previous proxies, hereby appoints Kevin J. McCarthy, Kathleen Prudhomme and Christopher Rohrbacher, or any one of them true and lawful attorneys with power of substitution of each, to vote all shares of Nuveen Short Duration Bond Fund which the undersigned is entitled to vote, at the Special Meeting of Shareholders to be held on October 3, 2011, at 3:00 p.m. Central time, in the 31st floor conference room of Nuveen Investments, 333 West Wacker Drive, Chicago, Illinois, 60606, and at any adjournment thereof as indicated on the reverse side. In their discretion, the proxy holders named above are authorized to vote upon such other matters as may properly come before the meeting.
Receipt of the Notice of the Special Meeting and the accompanying Proxy Statement/Prospectus is hereby acknowledged. The shares of Nuveen Short Duration Bond Fund represented hereby will be voted as indicated or FOR the proposal if no choice is indicated.
VOTE VIA THE INTERNET: www.proxy-direct.com VOTE VIA THE TELEPHONE: 1-866-963-6132 | ||||
999 9999 9999 999 | ||||
Note: Please sign exactly as your name(s) appear(s) on this card. When signing as attorney, executor, administrator, trustee, guardian or as custodian for a minor, please sign your name and give your full title as such. If signing on behalf of a corporation, please sign the full corporate name and your name and indicate your title. If you are a partner signing for a partnership, please sign the partnership name, your name and indicate your title. Joint owners should each sign these instructions. Please sign, date and return. | ||||
Signature and Title, if applicable | ||||
Signature (if held jointly)
| ||||
Date | [CFS Doc Code] |
EVERY SHAREHOLDER’S VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the Nuveen Short Duration Bond Fund
Shareholders Meeting to Be Held on October 3, 2011.
The Proxy Statement for this meeting is available at https://www.proxy-direct.com/nuv22802
IF YOU VOTE ON THE INTERNET OR BY TELEPHONE,
YOU NEED NOT RETURN THIS PROXY CARD
Please detach at perforation before mailing.
The Board of Trustees recommends a vote “FOR” the following proposal.
PLEASE MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. EXAMPLE: ¢
FOR | AGAINST | ABSTAIN | ||||||
1. | To approve an Agreement and Plan of Reorganization (and the related transactions) which provides for (i) the transfer of all the assets of Nuveen Short Duration Bond Fund (the “Acquired Fund”) to Nuveen Short Term Bond Fund (the “Acquiring Fund”) in exchange solely for voting shares of common stock of the Acquiring Fund and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund; and (ii) the distribution by the Acquired Fund of all the shares of each class of the Acquiring Fund to the holders of shares of the corresponding class of the Acquired Fund in complete liquidation and termination of the Acquired Fund. | ¨ | ¨ | ¨ | ||||
2. | To transact such other business as may properly come before the Special Meeting or any adjournment or postponement thereof. | ¨ | ¨ | ¨ |
WE URGE YOU TO SIGN, DATE AND MAIL THIS PROXY PROMPTLY
[CFS Doc Code]
Mutual Funds
Prospectus
July 12, 2011
Nuveen Income Funds
Class / Ticker Symbol | ||||||||
Fund Name | Class A | Class C | Class R3 | Class I | ||||
Nuveen Short Term Bond Fund | FALTX | FBSCX | Pending | FLTIX |
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Table of Contents
Section 1 Fund Summary | ||||
Nuveen Short Term Bond Fund | 4 | |||
Section 2 How We Manage Your Money | ||||
Who Manages the Fund | 9 | |||
More About Our Investment Strategies | 10 | |||
What the Risks Are | 12 | |||
Section 3 How You Can Buy and Sell Shares | ||||
What Share Classes We Offer | 17 | |||
How to Reduce Your Sales Charge | 19 | |||
How to Buy Shares | 20 | |||
Special Services | 21 | |||
How to Sell Shares | 22 | |||
Section 4 General Information | ||||
Dividends, Distributions and Taxes | 26 | |||
Distribution and Service Plan | 27 | |||
Net Asset Value | 28 | |||
Frequent Trading | 29 | |||
Fund Service Providers | 31 | |||
Section 5 Financial Highlights | 32 |
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
Investment Objective
The investment objective of the fund is to provide investors with current income while maintaining a high degree of principal stability.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 17 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 19 of the prospectus and “Purchase and Redemption of Fund Shares” on page 68 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
Class A | Class C | Class R3 | Class I | |||||||||||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 2.25% | None | None | None | ||||||||||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds)1 | None | 1.00% | None | None | ||||||||||||
Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
Exchange Fee | None | None | None | None | ||||||||||||
Annual Low Balance Account Fee (for accounts under $1,000)2 | $15 | $15 | None | $15 |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Class A | Class C | Class R34 | Class I | |||||||||||||
Management Fees | 0.48% | 0.48% | 0.48% | 0.48% | ||||||||||||
Distribution and Service (12b-1) Fees | 0.25% | 1.00% | 0.50% | 0.00% | ||||||||||||
Other Expenses | 0.10% | 0.10% | 0.10% | 0.10% | ||||||||||||
Acquired Fund Fees and Expenses | 0.01% | 0.01% | 0.01% | 0.01% | ||||||||||||
Total Annual Fund Operating Expenses3 | 0.84% | 1.59% | 1.09% | 0.59% |
1 | The CDSC on Class C shares applies only to redemptions within 12 months of purchase. |
2 | Fee applies to the following types of accounts held directly with the fund: individual retirement accounts (IRAs), Coverdell Education Savings Accounts, and accounts established pursuant to the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). |
3 | Expenses have been restated to reflect current contractual fees and the payment by the fund of certain networking and sub-transfer agency fees previously paid by the fund’s administrator. |
4 | Class R3 shares were established July 12, 2011. Accordingly, expenses are based upon the actual expenses incurred by the other classes. |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
A | C | R3 | I | A | C | R3 | I | |||||||||||||||||||||||||||||
1 Year | $ | 309 | $ | 162 | $ | 111 | $ | 60 | $ | 309 | $ | 162 | $ | 111 | $ | 60 | ||||||||||||||||||||
3 Years | $ | 487 | $ | 502 | $ | 347 | $ | 189 | $ | 487 | $ | 502 | $ | 347 | $ | 189 | ||||||||||||||||||||
5 Years | $ | 680 | $ | 866 | $ | 601 | $ | 329 | $ | 680 | $ | 866 | $ | 601 | $ | 329 | ||||||||||||||||||||
10 Years | $ | 1,239 | $ | 1,889 | $ | 1,329 | $ | 738 | $ | 1,239 | $ | 1,889 | $ | 1,329 | $ | 738 |
4
Section 1 Fund Summary
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 44% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in bonds, such as:
• | residential and commercial mortgage-backed securities. |
• | asset-backed securities. |
• | corporate debt obligations, including obligations issued by special-purpose entities that are backed by corporate debt obligations. |
• | U.S. government securities, which are securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. |
• | municipal securities. |
Up to 20% of the fund’s total assets may be invested in securities rated lower than investment grade or unrated securities of comparable quality as determined by the fund’s sub-adviser (securities commonly referred to as “high yield” or “junk bonds”). The fund will not invest in securities rated lower than CCC at the time of purchase or in unrated securities of equivalent quality.
The fund may invest up to 35% of its total assets in debt obligations of foreign corporations and foreign governments. However, no more than 10% of the fund’s total assets may be invested in debt obligations of corporations and governments that are located in emerging market countries. A country is considered to have an “emerging market” if it has a relatively low gross national product per capita compared to the world’s major economies, and the potential for rapid economic growth, provided that no issuer included in the fund’s current benchmark index will be considered to be located in an emerging market country.
Up to 10% of the fund’s total assets may have non-U.S. dollar currency exposure from non-U.S. dollar denominated securities and currency derivatives, calculated on an absolute notional basis (i.e., adding together the absolute value of net long and net short exposures to non-U.S. dollar currencies).
The fund’s sub-adviser selects securities using a “top-down” approach which begins with the formulation of the sub-adviser’s general economic outlook. Following this, various sectors and industries are analyzed and selected for investment. Finally, the sub-adviser selects individual securities within these sectors or industries.
The fund invests primarily in debt securities rated investment grade at the time of purchase by a nationally recognized statistical rating organization or in unrated securities of comparable quality. As noted above, however, up to 20% of the fund’s total assets may be invested in securities that are rated lower than investment grade at the time of purchase or that are unrated and of comparable quality. Quality determinations regarding unrated securities will be made by the fund’s sub-adviser. If the rating of a security is reduced or the credit quality of an unrated security declines after purchase, the fund is not required to sell the security, but may consider doing so. Unrated securities will not exceed 5% of the fund’s total assets.
Under normal market conditions the fund attempts to maintain a weighted average effective maturity and an average effective duration for its portfolio securities of one to three years. The fund’s weighted average effective maturity and effective duration are measures of how the fund may react to interest rate changes.
The fund may utilize the following derivatives: options; futures contracts; options on futures contracts; interest rate caps, collars, and floors; foreign currency contracts; options on foreign currencies; swap agreements, including swap agreements on interest rates, currency rates, security indexes and specific securities, and credit default swap agreements; and options on the foregoing types of swap agreements. The fund may enter into standardized
Section 1 Fund Summary
5
derivatives contracts traded on domestic or foreign securities exchanges, boards of trade, or similar entities, and non-standardized derivatives contracts traded in the over-the-counter (“OTC”) market. The fund may use these derivatives in an attempt to manage market risk, currency risk, credit risk and yield curve risk, to manage the effective maturity or duration of securities in the fund’s portfolio or for speculative purposes in an effort to increase the fund’s yield or to enhance returns. The fund may also use derivatives to gain exposure to non-dollar denominated securities markets to the extent it does not do so through direct investments. The use of a derivative is speculative if the fund is primarily seeking to enhance returns, rather than offset the risk of other positions. The fund may not use any derivative to gain exposure to a security or type of security that it would be prohibited by its investment restrictions from purchasing directly.
Principal Risks
The price and yield of this fund will change daily due to changes in interest rates and other factors, which means you could lose money. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The principal risks of investing in this fund are described below:
Active Management Risk—Because the fund is actively managed, the fund could underperform its benchmark or other mutual funds with similar investment objectives.
Call Risk—If an issuer calls higher-yielding bonds held by the fund, performance could be adversely impacted.
Credit Risk—The issuer of a debt security could suffer adverse changes in financial condition that result in a payment default or a downgrade of the security. Parties to contracts with the fund could default on their obligations.
Currency Risk—Changes in currency exchange rates may affect the fund’s net asset value, the value of dividends and interest earned, and gains and losses realized on the sale of securities.
Derivatives Risk—The use of derivative instruments involves additional risks and transaction costs which could leave the fund in a worse position than if it had not used these instruments. 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 performance. When the fund invests in a derivative for speculative purposes, the fund will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost.
High-Yield Securities Risk—High-yield securities generally are less liquid, have more volatile prices, and have greater credit risk than investment grade securities.
Income Risk—The fund’s income could decline during periods of falling interest rates.
Interest Rate Risk—Interest rate increases can cause the value of debt securities to decrease.
Liquidity Risk—Trading opportunities are more limited for debt securities that have received ratings below investment grade.
Mortgage- and Asset-Backed Securities Risk—These securities generally can be prepaid at any time. Prepayments that occur either more quickly or more slowly than expected can adversely impact the fund.
Non-U.S. Investment Risk/Emerging Market Risk—Non-U.S. companies or U.S. companies with significant non-U.S. operations may be subject to risks in addition to those of companies that principally operate in the United States as a result of, among other things, political, social and economic developments abroad and different legal, regulatory and tax environments. These additional risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
6
Section 1 Fund Summary
The bar chart below shows the variability of the fund by showing changes in the fund’s performance from year to year for Class A shares. The performance of the other share classes will differ due to their different expense structures. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return
During the ten-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 5.45% and -3.37%, respectively, for the quarters ended June 30, 2009 and December 31, 2008.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated to that of the Barclays Capital 1-3 Year Government/Credit Bond Index, the fund’s benchmark index, which is a broad measure of market performance. The Barclays Capital 1-3 Year Government/Credit Bond Index is an unmanaged index of investment grade, fixed income securities with maturities ranging from one to three years. The performance information reflects sales charges and fund expenses. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. After-tax returns are shown for Class A shares only; after-tax returns for other share classes will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects fee waivers, if any, in effect during the periods presented. If any such waivers were not in place, performance would be reduced.
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||||||||||
Inception Date | 1 Year | 5 Years | 10 Years | Since Inception (Class C) | ||||||||||||||||
Nuveen Short Term Bond Fund: | ||||||||||||||||||||
Class A (return before taxes) | 12/14/92 | 0.99 | % | 3.62 | % | 3.54 | % | N/A | ||||||||||||
Class A (return after taxes on distributions) | 0.12 | % | 2.28 | % | 2.19 | % | N/A | |||||||||||||
Class A (return after taxes on distributions and sale of fund shares) | 0.64 | % | 2.30 | % | 2.20 | % | N/A | |||||||||||||
Class C (return before taxes) | 10/28/09 | 2.45 | % | N/A | N/A | 2.58 | % | |||||||||||||
Class I (return before taxes) | 2/4/94 | 3.48 | % | 4.27 | % | 3.94 | % | N/A | ||||||||||||
Barclays Capital 1-3 Year Gov’t/Credit Bond Index (reflects no deduction for fees, expenses or taxes) | 2.80 | % | 4.53 | % | 4.34 | % | 2.47 | % |
Section 1 Fund Summary
7
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Managers
Name | Title | Portfolio Manager of Fund Since | ||
Chris J. Neuharth, CFA | Managing Director | March 2004 | ||
Peter L. Agrimson, CFA | Assistant Vice President | October 2010 |
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 through a financial advisor or other financial intermediary or directly from the fund. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
Class A and Class C | Class R3 | Class I | ||||
Eligibility and Minimum Initial Investment | $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. | Available only through certain retirement plans.
No minimum. | 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. | |||
Minimum Additional Investment | $100 | No minimum. | No minimum. |
Tax Information
The fund’s distributions are taxable and will generally be taxed as ordinary income or capital gains.
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 intermediary’s website for more information.
8
Section 1 Fund Summary
Section 2 How We Manage Your Money
To help you better understand the fund, this section includes a detailed discussion of the fund’s 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 Nuveen’s website at www.nuveen.com.
Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”), the fund’s 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 fund, oversees the management of the fund’s portfolio, manages the fund’s 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.
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 the fund. Nuveen Asset Management manages the investment of the fund’s assets on a discretionary basis, subject to the supervision of Nuveen Fund Advisors.
The fund was formerly advised by FAF Advisors, Inc. (“FAF”), a wholly-owned subsidiary of U.S. Bank National Association (“U.S. Bank”). On December 31, 2010, pursuant to an agreement among U.S. Bank, FAF, Nuveen Investments, and certain Nuveen affiliates, Nuveen Fund Advisors acquired a portion of the asset management business of FAF (the “Transaction”).
Chris J. Neuharth, CFA, and Peter L. Agrimson, CFA, are the portfolio managers of the fund.
• | Mr. Neuharth, Managing Director of Nuveen Asset Management, has been a portfolio manager of the fund since March 2004. Mr. Neuharth entered the financial services industry in 1983 and rejoined FAF in 2000. He joined Nuveen Asset Management on January 1, 2011, in connection with the Transaction. |
• | Mr. Agrimson, Assistant Vice President of Nuveen Asset Management, has been a portfolio manager of the fund since October 2010. He began working in the financial services industry in 2005 and joined FAF in 2009. He joined Nuveen Asset Management on January 1, 2011, in connection with the Transaction. Prior to that he served as credit analyst at Long Lake Partners, LLC. |
Additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the fund is provided in the statement of additional information.
Section 2 How We Manage Your Money
9
Management Fee
The management fee schedule for the fund consists of two components: a fund-level fee, based only on the amount of assets within the fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by Nuveen Fund Advisors.
The annual fund-level fee, payable monthly, is based upon the average daily net assets of the fund as follows:
Average Daily Net Assets | Fund-Level Fee | |||
For the first $125 million | 0.3000 | % | ||
For the next $125 million | 0.2875 | % | ||
For the next $250 million | 0.2750 | % | ||
For the next $500 million | 0.2625 | % | ||
For the next $1 billion | 0.2500 | % | ||
For net assets over $2 billion | 0.2250 | % |
The fund’s complex-level fee rate is determined by taking the current overall complex-level fee rate, which is based on the aggregate amount of the “eligible assets” of all Nuveen funds, and making, as appropriate, an upward adjustment to that rate based upon the percentage of the fund’s assets that are not “eligible assets.” The maximum overall complex-level fee rate is 0.2000% of the fund’s average daily net assets, which is based upon complex-level eligible assets of $55 billion, with the complex-level fee rate decreasing incrementally for eligible assets above that level. Fund-specific complex-level fee rates will not exceed the maximum overall complex-level fee rate of 0.2000%. As of March 31, 2011, the fund’s complex-level fee rate was 0.1982%.
The table below reflects management fees paid to FAF (prior to January 1, 2011) and to Nuveen Asset Management (starting on January 1, 2011), after taking into account any fee waivers, for the fund’s most recently completed fiscal year. FAF provided advisory services pursuant to a different management agreement with a different fee schedule. FAF did not provide any administrative services under that agreement.
Management Fee as a % of Average Daily Net Assets | ||||
Nuveen Short Term Bond Fund | 0.31 | % |
Nuveen Fund Advisors has agreed to waive fees and/or reimburse expenses through March 31, 2012 so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities, acquired fund fees and expenses, and extraordinary expenses) for the fund do not exceed 0.60% of the average daily net assets of any class of fund shares. The expense limitation expiring March 31, 2012 may be terminated or modified prior to that date only with the approval of the Board of Directors of the fund.
Information regarding the Board of Directors’ approval of the investment management agreement is currently available in the fund’s semi-annual report for the fiscal period ended December 31, 2010.
The fund’s investment objective, which is described in the “Fund Summary” section, may be changed without shareholder approval. If the fund’s
10
Section 2 How We Manage Your Money
investment objective changes, you will be notified at least 60 days in advance. The fund’s investment policies may be changed by the Board of Directors without shareholder approval unless otherwise noted in this prospectus or the statement of additional information.
The fund’s principal investment strategies are discussed in the “Fund Summary” section. These are the strategies that the fund’s investment adviser and sub-adviser believe are most likely to be important in trying to achieve the fund’s investment objective. This section provides more information about these strategies, as well as information about some additional strategies that the fund’s sub-adviser uses, or may use, to achieve the fund’s objective. You should be aware that the 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.
The debt obligations in which the fund invests may have variable, floating, or fixed interest rates.
U.S. Government Agency Securities
The U.S. Government agency securities in which the fund may invest include securities issued by the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), the Federal Farm Credit Bank (FFCB), the U.S. Agency for International Development (U.S. AID), the Federal Home Loan Banks (FHLB) and the Tennessee Valley Authority (TVA). Securities issued by GNMA, TVA and U.S. AID are backed by the full faith and credit of the U.S. Government. Securities issued by FNMA and FHLMC are supported by the right to borrow directly from the U.S. Treasury. The other U.S. Government agency and instrumentality securities in which the fund invests are backed solely by the credit of the agency or instrumentality issuing the obligations. 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.
Effective Maturity and Effective Duration
The fund attempts to maintain a specified weighted average effective maturity and average effective duration. Effective maturity differs from actual stated or final maturity, which may be substantially longer. In calculating effective maturity, the sub-adviser estimates the effect of expected principal payments and call provisions on securities held in the portfolio. Effective maturity provides the sub-adviser with a better estimate of interest rate risk under normal market conditions, but may underestimate interest rate risk in an environment of adverse (rising) interest rates.
Effective duration, another measure of interest rate risk, measures how much the value of a security is expected to change with a given change in interest rates. The longer a security’s effective duration, the more sensitive its price to changes in interest rates. For example, if interest rates were to increase by one percentage point, the market value of a bond with an effective duration of five years would decrease by 5%, with all other factors being constant. However, all other factors are rarely constant. Effective duration is based on assumptions and subject to a number of limitations. It is most useful when interest rate changes are small, rapid, and occur equally in short-term and long-term securities. In addition, it is difficult to calculate precisely for bonds with prepayment options, such as mortgage- and asset-backed securities,
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because the calculation requires assumptions about prepayment rates. For these reasons, the effective duration of the fund, which may invest a significant portion of its assets in these securities, can be greatly affected by changes in interest rates.
Ratings
The fund has investment strategies requiring it to invest in debt securities that have received a particular rating from a rating service such as Moody’s or Standard & Poor’s. Any reference in this prospectus to a specific rating encompasses all gradations of that rating. For example, if the prospectus says that the fund may invest in securities rated as low as B, the fund may invest in securities rated B-.
Securities Lending
The fund may lend securities representing up to one-third of the value of its total assets to broker-dealers, banks, and other institutions to generate additional income. When the fund loans its portfolio securities, it will receive, at the inception of each loan, cash collateral equal to at least 102% of the value of the loaned securities. Under the fund’s securities lending agreement, the securities lending agent will generally bear the risk that a borrower may default on its obligation to return loaned securities. The fund, however, will be responsible for the risks associated with the investment of cash collateral. The fund may lose money on its investment of cash collateral or may fail to earn sufficient income on its investment to meet its obligations to the borrower.
Temporary Investments
In an attempt to respond to adverse market, economic, political, or other conditions, the fund may temporarily invest without limit in cash and in U.S. dollar-denominated high-quality money market instruments and other short-term securities, including money market funds. Being invested in these securities may keep the fund from participating in a market upswing and prevent the fund from achieving its investment objective.
Portfolio Holdings
A description of the fund’s policies and procedures with respect to the disclosure of the fund’s portfolio holdings is available in the fund’s statement of additional information. Certain portfolio holdings information is available on the fund’s website—www.nuveen.com—by clicking the “Our Products—Mutual Funds” section on the home page and following the applicable link for your fund in the “Search Mutual Fund Family” section. By following these links, you can obtain a list of your fund’s 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 fund’s website following the end of each month with an approximately one-month lag. This information will remain available on the website until the fund files with the Securities and Exchange Commission its annual, semi-annual or quarterly holdings report for the fiscal period that includes the date(s) as of which the website information is current.
Risk is inherent in all investing. Investing in a mutual fund—even the most conservative—involves risk, including the risk that you may receive little or no return on your investment or even that you may lose part or all of your
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investment. Therefore, before investing you should consider carefully the following risks that you assume when you invest in the fund. Because of these and other risks, you should consider an investment in the fund to be a long-term investment.
Active management risk. The fund is actively managed and its performance therefore will reflect in part the sub-adviser’s ability to make investment decisions which are suited to achieving the fund’s investment objective. Due to its active management, the fund could underperform other mutual funds with similar investment objectives.
Additional expenses. When the fund invests in other investment companies, you bear both your proportionate share of fund expenses and, indirectly, the expenses of the other investment companies.
Call risk. The fund may invest in debt securities, which are subject to call risk. Bonds may be redeemed at the option of the issuer, or “called,” before their stated maturity date. In general, an issuer will call its bonds if they can be refinanced by issuing new bonds which bear a lower interest rate. The fund is subject to the possibility that during periods of falling interest rates, a bond issuer will call its high-yielding bonds. The fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the fund’s income.
Credit risk. The fund is subject to the risk that the issuers of debt securities held by the fund 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 bond’s liquidity and make it more difficult for the fund to sell. When the fund purchases unrated securities, it will depend on the sub-adviser’s analysis of credit risk without the assessment of an independent rating organization, such as Moody’s or Standard & Poor’s.
Derivatives risk. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. 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 the fund will not correlate with the underlying instruments or the fund’s other investments. 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. Certain types of derivatives involve greater risks than the underlying obligations because, in addition to general market risks, they are subject to illiquidity risk, counterparty risk, and credit risk. For example, in a credit default swap, the sub-adviser may not correctly evaluate the creditworthiness of the company or companies on which the swap is based. Furthermore, when the fund sells protection in a credit default swap, in addition to being subject to investment exposure on its total net assets, the fund is subject to investment exposure on the notional amount of the swap. Some derivatives also involve leverage, which could increase the volatility of these investments as they may fluctuate in value more than the underlying instrument.
In order to hedge against adverse movements in currency exchange rates, the fund may enter into forward foreign currency exchange contracts. If the sub-adviser’s forecast of exchange rate movements is incorrect, the fund may
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realize losses on its foreign currency transactions. In addition, the fund’s hedging transactions may prevent the fund from realizing the benefits of a favorable change in the value of foreign currencies.
The fund may enter into over-the-counter (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 addition, there may not be a liquid market for OTC derivatives. As a result, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.
Emerging markets risk. The fund may invest in securities of emerging markets issuers. The risks of international investing are particularly significant in emerging markets. Investing in emerging markets generally involves exposure to economic structures that are less diverse and mature, and to political systems that are less stable, than those of developed countries. In addition, issuers in emerging markets typically are subject to a greater degree of change in earnings and business prospects than are companies in developed markets.
High-yield securities risk. Up to 20% of the total assets of the fund may consist of lower-rated corporate debt obligations, which are commonly referred to as “high-yield” securities or “junk bonds.” Although these securities usually offer higher yields than investment grade securities, they also involve more risk. High-yield securities may be more susceptible to real or perceived adverse economic conditions than investment grade securities. In addition, the secondary trading market may be less liquid. High-yield securities generally have more volatile prices and carry more risk to principal than investment grade securities.
Income risk. The fund’s income could decline due to falling market interest rates. This is because, in a falling interest rate environment, the fund generally will have to invest the proceeds from sales of fund shares, as well as the proceeds from maturing portfolio securities (or portfolio securities that have been called, see “Call risk” above, or prepaid, see “Mortgage- and asset-backed securities risk” below), in lower-yielding securities.
Interest rate risk. Debt securities 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.
International investing risk. International investing involves risks not typically associated with U.S. investing. To the extent a fund is allowed to invest in depositary receipts, the fund will be subject to the same risks as when investing directly in foreign securities, unless otherwise noted below. The holder of an unsponsored depositary receipt may have limited voting rights and may not receive as much information about the issuer of the underlying securities as would the holder of a sponsored depositary receipt. The risks of international investing include:
Currency risk. Because the foreign securities in which the fund invests, with the exception of American Depositary Receipts, generally trade in currencies other than the U.S. dollar, changes in currency exchange rates will affect the fund’s 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 the fund. In addition, the prices of the foreign
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securities traded in U.S. dollars that the fund invests in are indirectly influenced by currency fluctuations.
Foreign securities market risk. Securities of many non-U.S. companies may be less liquid and their prices more volatile than securities of comparable U.S. companies. Securities of companies traded in many countries outside the U.S., 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.
Foreign tax risk. The fund’s income from foreign 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 foreign income taxes are paid by the fund, U.S. shareholders may be entitled to a credit or deduction for U.S. tax purposes. See “Shareholder Information—Taxes—Foreign Tax Credits” below for details.
Information risk. Non-U.S. companies generally are not subject to uniform accounting, auditing, and financial reporting standards or to other regulatory requirements that apply to U.S. companies. As a result, less information may be available to investors concerning non-U.S. issuers. Accounting and financial reporting standards in emerging markets may be especially lacking.
Investment restriction risk. 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.
Political and economic risks. International investing is subject to the risk of political, social or economic instability in the country of the issuer of a security, the difficulty of predicting international trade patterns, the possibility of the imposition of exchange controls, expropriation, limits on removal of currency or other assets and nationalization of assets. In addition, there is a risk of loss due to diplomatic developments or governmental actions such as a change in tax statuses or the modification of individual property rights.
Liquidity risk. The fund is exposed to liquidity risk when it invests in high-yield securities. Trading opportunities are more limited for debt securities that have received ratings below investment grade. These features may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on the fund’s performance. Infrequent trading may also lead to greater price volatility.
Mortgage- and asset-backed securities risk. Mortgage-backed securities are secured by and payable from pools of mortgage loans. Similarly, asset-backed securities are supported by obligations such as automobile loans, home equity loans, corporate bonds, or commercial loans. These mortgages
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and other obligations generally can be prepaid at any time without penalty. As a result, mortgage- and asset-backed securities are subject to prepayment risk, which is the risk that falling interest rates could cause prepayments of the securities to occur more quickly than expected. This occurs because, as interest rates fall, more homeowners refinance the mortgages underlying mortgage-related securities or prepay the debt obligations underlying asset-backed securities. The fund may need to reinvest the prepayments at a time when interest rates are falling, reducing the income of the fund. In addition, when interest rates fall, prices on mortgage- and asset-backed securities may not rise as much as for other types of comparable debt securities because investors may anticipate an increase in prepayments.
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 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.
Reliance on investment adviser. The fund is dependent upon services and resources provided by Nuveen Fund Advisors, and therefore Nuveen Fund Advisor’s parent, Nuveen Investments. Nuveen Investments has a substantial amount of indebtedness. Nuveen Investments, through its own business or the financial support of its affiliates, may not be able to generate sufficient cash flow from operations or ensure that future borrowings will be available in an amount sufficient to enable it to pay its indebtedness with scheduled maturities beginning in 2014 or to fund its other liquidity needs. Nuveen Investments’ failure to satisfy the terms of its indebtedness, including covenants therein, may generally have an adverse effect on the financial condition of Nuveen Investments and on the ability of Nuveen Fund Advisors to provide services and resources to the fund.
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Section 3 How You Can Buy and Sell Shares
The fund offers 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 0.15% of the fund’s 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 fund, 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 fund are as follows:
Amount of Purchase | Sales Charge as % of Public Offering Price | Sales Charge as % of Net Amount Invested | Maximum Financial Intermediary Commission as % of Public Offering Price | |||||||||
Less than $50,000 | 2.25 | % | 2.30 | % | 1.75 | % | ||||||
$50,000 but less than $100,000 | 2.00 | 2.04 | 1.75 | |||||||||
$100,000 but less than $250,000 | 1.25 | 1.27 | 1.00 | |||||||||
$250,000 and over* | — | — | 0.60 |
* | You can purchase $250,000 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 0.60% of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% 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 6 months of purchase, 0.75% if you redeem any of your shares within 12 months of purchase and 0.50% if you redeem any of your shares within 18 months of purchase. See “How to Sell Shares—Contingent Deferred Sales Charge” below for more information. |
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 the fund’s 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 year’s 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 your redemption proceeds. You do not pay a CDSC on any Class C shares you purchase by reinvesting dividends.
The fund has 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.
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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 the fund’s 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. Class I shares are not subject to sales charges or ongoing service or distribution fees. Class I shares 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:
• | Certain employer-sponsored retirement plans. |
• | Certain bank or broker-affiliated trust departments. |
• | Advisory accounts of Nuveen Fund Advisors and its affiliates. |
• | Trustees/directors and former trustees/directors of any Nuveen Fund, and their immediate family members (as defined in the statement of additional information). |
• | Officers, directors and former directors of Nuveen Investments and its affiliates, and their immediate family members. |
• | Full-time and retired employees of Nuveen Investments and its affiliates, and their immediate family members. |
• | Certain financial intermediary personnel, and their immediate family members. |
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.
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Section 3 How You Can Buy and Sell Shares
The fund offers 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
• | Rights of Accumulation. In calculating the appropriate sales charge on a purchase of Class A shares of the fund, you may be able to add the amount of your purchase to the value that day of all of your prior purchases of any Nuveen Mutual Fund. |
• | Letter of Intent. Subject to certain requirements, you may purchase Class A shares of the fund at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. |
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 dependent children, 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 the fund may be purchased at net asset value without a sales charge as follows:
• | Purchases of $1,000,000 or more. |
• | Monies representing reinvestment of Nuveen Mutual Fund distributions. |
• | 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). |
• | Trustees/directors and former trustees/directors of the Nuveen Funds. |
• | Financial intermediary personnel. Purchases by any person who, for at least the last 90 days, has been an officer, director, or bona fide employee of any financial intermediary or any such person’s immediate family member. |
• | 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. |
• | Additional categories of investors. Purchases made by: (i) investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; (ii) clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services and (iii) through December 31, 2011, shareholders of funds not currently sub-advised by Nuveen Asset Management that were sub-advised by FAF prior to the closing of its Transaction with Nuveen Investments. |
In order to obtain a sales charge reduction or waiver, it may be necessary at the time of purchase for you to inform the fund 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 fund or your
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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 fund 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. Orders received before the close of trading on a business day (normally, 4:00 p.m. New York time) will receive that day’s closing share price; otherwise, you will receive the next business day’s price.
You may purchase fund shares (1) through a financial advisor or (2) directly from the fund.
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.
Directly from the Fund
Eligible investors may purchase shares directly from the fund.
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 the 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 NAV, or public offering price as applicable based on your share class, calculated after the fund’s 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 the fund nor the transfer
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Section 3 How You Can Buy and Sell Shares
agent are 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.
By Mail. To purchase shares by mail, simply complete and sign a new account form, enclose a check made payable to the fund, and mail both to:
Regular U.S. Mail: | Overnight Express Mail: | |
Nuveen Mutual Funds P.O. Box 701 Milwaukee, WI 53201-0701 | Nuveen Mutual Funds 615 East Michigan Street Milwaukee, WI 53202 |
The fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC’s post office box, of purchase orders or redemption requests does not constitute receipt by the transfer agent of the fund.
After you have established an account, you may continue to purchase shares by mailing your check to Nuveen Mutual Funds at the same address.
Please note the following:
• | All purchases must be drawn on a bank located within the United States and payable in U.S. dollars to Nuveen Mutual Funds. |
• | Cash, money orders, cashier’s checks in amounts less than $10,000, third-party checks, Treasury checks, credit card checks, traveler’s checks, starter checks, and credit cards will not be accepted. We are unable to accept post dated checks, post dated on-line bill pay checks, or any conditional order of payment. |
• | If a check or ACH transaction does not clear your bank, the fund reserves the right to cancel the purchase, and you may be charged a fee of $25 per check or transaction. You could be liable for any losses or fees incurred by the fund as a result of your check or ACH transaction failing to clear. |
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.
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 the fund’s systematic investment plan. You can stop the deductions at any time by notifying the fund in writing.
• | From your bank account. You can make systematic investments of $100 or more per month by authorizing the fund to draw pre-authorized checks on your bank account. |
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• | From your paycheck. With your employer’s 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. |
• | 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. |
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, paid to a third party or sent payable to you at an address other than your address of record. You must complete the appropriate section of the account application or Account Update Form to participate in the fund’s systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent purchases of Class A 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, and, if your shares are held with a financial intermediary, the financial intermediary must have the operational capability to support exchanges. 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.
The fund may change or cancel its exchange policy at any time upon 60 days’ notice. The fund reserves the right to revise or suspend the exchange privilege, limit the amount or number of exchanges or reject any exchange.
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.
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, the 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. You will receive the share price next determined after the fund has received your properly
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Section 3 How You Can Buy and Sell Shares
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 day’s 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 days from your purchase date.
You may sell your shares (1) through a financial advisor or (2) directly to the fund.
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 Fund
By telephone. If you did not purchase shares through a financial advisor, you may redeem your shares by calling Nuveen Investor Services at (800) 257-8787. Proceeds can be wired to your bank account (if you have previously supplied your bank account information to the fund) or sent to you by check. The fund charges a $15 fee for wire redemptions, but has the right to waive this fee for shares redeemed through certain financial intermediaries and by certain accounts. Proceeds also can be sent directly to your bank or brokerage account via electronic funds transfer if your bank or brokerage firm is a member of the ACH network. Credit is usually available within two to three business days. The fund reserves the right to limit telephone redemptions to $50,000 per account per day.
If you recently purchased your shares by check or through the ACH network, proceeds from the sale of those shares may not be available until your check or ACH payment has cleared, which may take up to ten business days from the date of purchase.
By mail. To redeem shares by mail, send a written request to your financial intermediary, or to the fund at the following address:
Regular U.S. Mail: | Overnight Express Mail: | |
Nuveen Mutual Funds P.O. Box 701 Milwaukee, WI 53201-0701 | Nuveen Mutual Funds 615 East Michigan Street Milwaukee, WI 53202 |
Your request should include the following information:
• | name of the fund; |
• | account number; |
• | dollar amount or number of shares redeemed; |
• | name on the account; |
• | signatures of all registered account owners; and |
• | any certificate you have for the shares. |
After you have established your account, signatures on a written request must be guaranteed if:
• | you would like redemption proceeds payable or sent to any person, address or bank account other than that on record; |
• | you have changed the address on the fund’s records within the last 30 days; |
• | your redemption request is in excess of $50,000; or |
• | you are requesting a change in ownership on your account. |
Section 3 How You Can Buy and Sell Shares
23
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 member or other acceptable form of authentication from a financial institution source.
In addition to the situations described above, the fund reserves 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.
By wire. You can call or write to have redemption proceeds sent to a bank account. See the policies for redeeming shares by phone or by mail. Before requesting to have redemption proceeds sent to a bank account, please make sure the fund has your bank account information on file. If the fund does not have this information, you will need to send written instructions with your bank’s name and a voided check or pre-printed savings account deposit slip. You must provide written instructions signed by all fund and bank account owners, and each individual must have their signature guaranteed.
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, the fund will first redeem any shares that are not subject to a CDSC, and then redeem the shares you have owned for the longest period of time, unless you ask the fund to redeem your shares in a different order. No CDSC is imposed on shares you buy through the reinvestment of dividends and capital gains. The 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 fund reserves the right to liquidate or assess a low balance fee on any account held directly with the fund that has a balance that has fallen below the account balance minimum of $1,000 for any reason, including market fluctuations.
If the fund elects to exercise this right, 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
24
Section 3 How You Can Buy and Sell Shares
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 fund generally pays redemption proceeds in cash. Under unusual conditions that make cash payment unwise and for the protection of existing shareholders, the fund may pay all or a portion of your redemption proceeds in securities or other fund assets. Although it is unlikely that your shares would be redeemed in-kind, you would probably have to pay brokerage costs to sell the securities distributed to you, as well as taxes on any capital gains from that sale.
Section 3 How You Can Buy and Sell Shares
25
To help you understand the tax implications of investing in the fund, this section includes important details about how the fund makes distributions to shareholders. We discuss some other fund policies as well.
Dividends from the fund’s net investment income are declared daily and paid monthly. Any capital gains are distributed at least once each year. Generally, you will begin to earn dividends on the next business day after the fund receives your payment and will continue to earn dividends through the business day immediately preceding the day the fund pays your redemption proceeds.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless you request otherwise. You may request to have your dividends paid to you by check, sent via electronic funds transfer through the Automated Clearing House (ACH) 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 fund receives from its 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 fund 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 the fund holds its assets). Dividends from the fund’s 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, certain ordinary income distributions received from the 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 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
26
Section 4 General Information
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, federal law requires the fund to withhold federal income tax from your distributions and redemption proceeds at the then current rate.
Please consult the statement of additional information and your tax advisor for more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is commonly known as “buying the dividend.” The entire dividend may be taxable to you even though a portion of the dividend effectively represents a return of your purchase price.
Foreign Tax Credit
A regulated investment company more than 50% of the value of whose assets consists of stock or securities in foreign corporations at the close of the taxable year may, for such taxable year, pass the regulated investment company’s foreign tax credits through to its investors.
The Distributor serves as the selling agent and distributor of the fund’s shares. In this capacity, the Distributor manages the offering of the fund’s 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, the fund has adopted a distribution and service plan under Rule 12b-1 under the 1940 Act. See “How You Can Buy and Sell Shares—What 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 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, C and 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, 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 and sales literature and reports to shareholders used in connection with the sale of shares. Because these fees are paid out of the fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Long-term holders of Class C and 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.
Section 4 General Information
27
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 firm’s recent gross sales of Nuveen Mutual Fund shares and/or total assets of Nuveen Mutual Funds held by the firm’s 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 firm’s total assets held in and recent net investments into Nuveen Mutual Funds, the firm’s level of participation in Nuveen Mutual Fund sales and marketing programs, the firm’s 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. 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 intermediary’s organization by, for example, placing the funds on a list of preferred or recommended funds and/or granting the Distributor and/or its affiliates preferential or enhanced opportunities to promote the funds in various ways within the intermediary’s organization.
The price you pay for your shares is based on the fund’s net asset value per share, which is determined as of the close of trading (normally 4:00 p.m. New York time) on each day the NYSE is open for business. Net asset value is calculated for each class of the fund by taking the value of the class’ total assets, including interest or dividends accrued but not yet collected, less all liabilities, and dividing by the total number of shares outstanding. The result, rounded to the nearest cent, is the net asset value per share. All valuations are subject to review by the fund’s Board of Directors or its designee.
28
Section 4 General Information
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 Directors. Independent pricing services typically value non-equity portfolio 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 securities, particularly less liquid and lower quality securities, the pricing services may consider information about a security, its issuer, or market activity provided by the fund’s investment adviser or sub-adviser. Foreign securities and currency held by the fund will be valued in U.S. dollars based on foreign 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 the fund at its fair value as determined in good faith by the Board of Directors or its designee. As a general principle, the fair value of a portfolio instrument is the amount that an owner might reasonably expect to receive upon the instrument’s 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, the 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. The fund may rely on an independent fair valuation service in making any such fair value determinations.
If the fund holds securities that are primarily listed on non-U.S. exchanges, the net asset value of the fund’s shares may change on days when shareholders will not be able to purchase or redeem the fund’s shares.
The fund is intended for long-term investment and should not be used for excessive trading. Excessive trading in the fund’s shares can disrupt portfolio management, lead to higher operating costs, and cause other operating inefficiencies for the fund. However, the fund is also mindful that shareholders may have valid reasons for periodically purchasing and redeeming fund shares.
Accordingly, the fund has adopted a Frequent Trading Policy that seeks to balance the fund’s 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 fund’s Frequent Trading Policy generally limits an investor to four “round trip” trades in a 12-month 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 fund may also suspend the trading privileges of any investor who makes a round trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
Section 4 General Information
29
The fund primarily receives 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 fund 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 fund. Despite the fund’s efforts to detect and prevent frequent trading, the fund 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 fund’s 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 fund through such accounts. Technical limitations in operational systems at such intermediaries or at the Distributor may also limit the fund’s ability to detect and prevent frequent trading. In addition, the fund 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 fund’s Frequent Trading Policy and may be approved for use in instances where the fund reasonably believes that the intermediary’s 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 fund does not knowingly permit frequent trading, it cannot guarantee that it will be able to identify and restrict all frequent trading activity.
The fund reserves the right in its sole discretion to waive unintentional or minor violations (including transactions below certain dollar thresholds) if it determines 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 fund may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
The fund reserves the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if it determines, in its sole discretion, that a transaction or a series of transactions involves market timing or excessive trading that may be detrimental to fund shareholders. The fund also reserves the right to reject any purchase order, including exchange purchases, for any reason. For example, the fund may refuse purchase orders if the fund would be unable to invest the proceeds from the purchase order in accordance with the fund’s investment policies and/or objective, or if the fund would be adversely affected by the size of the
30
Section 4 General Information
transaction, the frequency of trading in the account or various other factors. For more information about the fund’s Frequent Trading Policy and its enforcement, see “Purchase and Redemption of Fund Shares—Frequent Trading Policy” in the statement of additional information.
The custodian of the assets of the fund is U.S. Bank National Association, 60 Livingston Avenue, St. Paul, MN 55101. U.S. Bancorp Fund Services, LLC, 615 East Michigan St., Milwaukee, WI 53202, acts as the fund’s transfer agent and as such performs bookkeeping and data processing for the maintenance of shareholder accounts.
Section 4 General Information
31
Section 5 Financial Highlights
The table that follows presents performance information about the share classes of the fund offered during the most recently completed fiscal period. This information is intended to help you understand the fund’s financial performance for the past five years. Some of this information reflects financial results for a single fund share held throughout the period. Total returns in the tables represent the rate that you would have earned or lost on an investment in the fund, assuming you reinvested all of your dividends and distributions.
The information below, except for the information for the fiscal period ended December 31, 2010, has been derived from the financial statements audited by Ernst & Young LLP, an independent registered public accounting firm, whose report, along with the fund’s financial statements, is included in the fund’s annual report, which is available upon request. The information for the fiscal period ended December 31, 2010 has not been audited. The fund’s financial statements for this period are included in the semi-annual report, which is available upon request.
Nuveen Short Term Bond Fund
Per Share Data | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Invest ment Income | Realized and Unrealized Gains (Losses) on Investments | Total From Investment Operations | Dividends (From Net Investment Income) | Distri butions (From Return of Capital) | Total Distri butions | Net Asset Value, End of Period | Total Return(4) | Net Assets, End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fiscal period ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(1,7) | $ | 9.98 | 0.12 | 0.03 | 0.15 | (0.11 | ) | — | (0.11 | ) | $ | 10.02 | 1.46 | % | $ | 87,948 | 0.75 | % | 2.36 | % | 1.03 | % | 2.08 | % | 19 | % | ||||||||||||||||||||||||||||||||||
Fiscal year ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(1) | $ | 9.66 | 0.31 | 0.34 | 0.65 | (0.33 | ) | — | (0.33 | ) | $ | 9.98 | 6.77 | % | $ | 87,631 | 0.75 | % | 3.17 | % | 1.04 | % | 2.88 | % | 44 | % | ||||||||||||||||||||||||||||||||||
2009(1) | $ | 9.89 | 0.46 | (0.26 | ) | 0.20 | (0.43 | ) | — | (0.43 | ) | $ | 9.66 | 2.22 | % | $ | 65,704 | 0.74 | % | 4.87 | % | 1.06 | % | 4.55 | % | 54 | % | |||||||||||||||||||||||||||||||||
2008(1) | $ | 9.90 | 0.45 | (0.03 | ) | 0.42 | (0.43 | ) | — | (0.43 | ) | $ | 9.89 | 4.30 | % | $ | 59,933 | 0.74 | % | 4.48 | % | 1.05 | % | 4.17 | % | 55 | % | |||||||||||||||||||||||||||||||||
2007(1) | $ | 9.83 | 0.36 | 0.09 | 0.45 | (0.38 | ) | — | (0.38 | ) | $ | 9.90 | 4.60 | % | $ | 66,722 | 0.75 | % | 3.61 | % | 1.04 | % | 3.32 | % | 47 | % | ||||||||||||||||||||||||||||||||||
Fiscal period ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006(1,2) | $ | 9.93 | 0.23 | (0.06 | ) | 0.17 | (0.27 | ) | — | (0.27 | ) | $ | 9.83 | 1.75 | % | $ | 78,771 | 0.75 | % | 3.11 | % | 1.04 | % | 2.82 | % | 60 | % | |||||||||||||||||||||||||||||||||
Fiscal year ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005(1) | $ | 10.11 | 0.27 | (0.16 | ) | 0.11 | (0.29 | ) | — | (3) | (0.29 | ) | $ | 9.93 | 1.08 | % | $ | 97,863 | 0.75 | % | 2.68 | % | 1.05 | % | 2.38 | % | 64 | % | ||||||||||||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fiscal period ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(1,7) | $ | 10.00 | 0.08 | 0.03 | 0.11 | (0.06 | ) | — | (0.06 | ) | $ | 10.05 | 1.12 | % | $ | 4,946 | 1.60 | % | 1.54 | % | 1.78 | % | 1.36 | % | 19 | % | ||||||||||||||||||||||||||||||||||
Fiscal period ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(1,5) | $ | 9.95 | 0.13 | 0.06 | 0.19 | (0.14 | ) | — | (0.14 | ) | $ | 10.00 | 1.90 | % | $ | 3,111 | 1.60 | % | 1.95 | % | 1.79 | % | 1.76 | % | 44 | % | ||||||||||||||||||||||||||||||||||
Class I Shares(6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fiscal period ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(1,7) | $ | 9.99 | 0.13 | 0.02 | 0.15 | (0.11 | ) | — | (0.11 | ) | $ | 10.03 | 1.54 | % | $ | 736,414 | 0.60 | % | 2.52 | % | 0.78 | % | 2.34 | % | 19 | % | ||||||||||||||||||||||||||||||||||
Fiscal year ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(1) | $ | 9.67 | 0.32 | 0.34 | 0.66 | (0.34 | ) | — | (0.34 | ) | $ | 9.99 | 6.92 | % | $ | 629,151 | 0.60 | % | 3.26 | % | 0.79 | % | 3.07 | % | 44 | % | ||||||||||||||||||||||||||||||||||
2009(1) | $ | 9.89 | 0.48 | (0.25 | ) | 0.23 | (0.45 | ) | — | (0.45 | ) | $ | 9.67 | 2.48 | % | $ | 315,024 | 0.59 | % | 5.02 | % | 0.81 | % | 4.80 | % | 54 | % | |||||||||||||||||||||||||||||||||
2008(1) | $ | 9.91 | 0.46 | (0.03 | ) | 0.43 | (0.45 | ) | — | (0.45 | ) | $ | 9.89 | 4.35 | % | $ | 257,403 | 0.59 | % | 4.62 | % | 0.80 | % | 4.41 | % | 55 | % | |||||||||||||||||||||||||||||||||
2007(1) | $ | 9.83 | 0.37 | 0.10 | 0.47 | (0.39 | ) | — | (0.39 | ) | $ | 9.91 | 4.86 | % | $ | 311,131 | 0.60 | % | 3.74 | % | 0.79 | % | 3.55 | % | 47 | % |
32
Section 5 Financial Highlights
Per Share Data | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Invest ment Income | Realized and Unrealized Gains (Losses) on Investments | Total From Investment Operations | Dividends (From Net Investment Income) | Distri butions (From Return of Capital) | Total Distri butions | Net Asset Value, End of Period | Total Return(4) | Net Assets, End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||||||||
Fiscal period ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006(1,2) | $ | 9.93 | 0.24 | (0.06 | ) | 0.18 | (0.28 | ) | — | (0.28 | ) | $ | 9.83 | 1.87 | % | $ | 454,665 | 0.60 | % | 3.26 | % | 0.79 | % | 3.07 | % | 60 | % | |||||||||||||||||||||||||||||||||
Fiscal year ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005(1) | $ | 10.11 | 0.28 | (0.16 | ) | 0.12 | (0.29 | ) | (0.01 | ) | (0.30 | ) | $ | 9.93 | 1.23 | % | $ | 625,392 | 0.60 | % | 2.83 | % | 0.80 | % | 2.63 | % | 64 | % |
(1) | Per share data calculated using average shares outstanding method. |
(2) | For the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
(3) | Rounds to less than $0.01. |
(4) | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
(5) | Commenced operations on October 28, 2009. All ratios for the period October 28, 2009 to June 30, 2010 have been annualized, except total return and portfolio turnover. |
(6) | Effective January 18, 2011, Class Y shares were renamed Class I shares. |
(7) | For the six-month period ended December 31, 2010 (unaudited). All ratios have been annualized, except total return and portfolio turnover. |
Section 5 Financial Highlights
33
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your financial goals. The funds below are grouped by category.
Municipal-National
All-American Municipal Bond
High Yield Municipal Bond
Inflation Protected Municipal Bond
Intermediate Duration Municipal Bond
Intermediate Tax Free*
Limited Term Municipal Bond
Municipal Bond
Municipal Bond 2
Short Tax Free*
Tax Free*
Municipal-State
Arizona Municipal Bond
California High Yield Municipal Bond
California Municipal Bond
California Municipal Bond 2
California Tax Free*
Colorado Municipal Bond
Colorado Tax Free*
Connecticut Municipal Bond
Georgia Municipal Bond
Kansas Municipal Bond
Kentucky Municipal Bond
Louisiana Municipal Bond
Maryland Municipal Bond
Massachusetts Municipal Bond
Massachusetts Municipal Bond 2
Michigan Municipal Bond
Minnesota Intermediate Municipal Bond*
Municipal-State (continued)
Minnesota Municipal Bond*
Missouri Municipal Bond
Missouri Tax Free*
Nebraska Municipal Bond*
New Jersey Municipal Bond
New Mexico Municipal Bond
New York Municipal Bond
New York Municipal Bond 2
North Carolina Municipal Bond
Ohio Municipal Bond
Ohio Tax Free*
Oregon Intermediate Municipal Bond*
Pennsylvania Municipal Bond
Tennessee Municipal Bond
Virginia Municipal Bond
Wisconsin Municipal Bond
Taxable Fixed Income
Core Bond*
High Income Bond*
High Yield Bond
Inflation Protected Securities*
Intermediate Government Bond*
Intermediate Term Bond*
Multi-Strategy Core Bond
Preferred Securities
Short Duration Bond
Short Term Bond*
Symphony Credit Opportunities
Symphony Floating Rate Income
Total Return Bond*
Global/International
International*
International Select*
Santa Barbara International Equity
Symphony International Equity
Tradewinds Emerging Markets
Tradewinds Global All-Cap
Tradewinds Global All-Cap Plus
Tradewinds Global Flexible Allocation
Tradewinds Global Resources
Tradewinds International Value
Tradewinds Japan
Value
Equity Income*
Large Cap Value*
Mid Cap Value*
Multi-Manager Large-Cap Value
NWQ Large-Cap Value
NWQ Multi-Cap Value
NWQ Small-Cap Value
NWQ Small-Mid Cap Value
Small Cap Value*
Symphony Large-Cap Value
Tradewinds Value Opportunities
Growth
Large Cap Growth Opportunities*
Mid Cap Growth Opportunities*
Santa Barbara Growth
Small Cap Growth Opportunities*
Symphony Large-Cap Growth
Winslow Large-Cap Growth
Core
Large Cap Select*
Mid Cap Select*
Santa Barbara Dividend Growth
Small Cap Select*
Symphony Mid-Cap Core
Symphony Optimized Alpha
Symphony Small-Mid Cap Core
Real Assets
Global Infrastructure*
Real Estate Securities*
Asset Allocation
Conservative Allocation
Growth Allocation
Moderate Allocation
Strategy Aggressive Growth Allocation*
Strategy Balanced Allocation*
Strategy Conservative Allocation*
Strategy Growth Allocation*
Tactical Market Opportunities*
Quantitative/Enhanced
Quantitative Enhanced Core Equity*
Index
Equity Index*
Mid Cap Index*
Small Cap Index*
*Former First American Fund.
Several additional sources of information are available to you, including the codes of ethics adopted by the fund, Nuveen Investments, Nuveen Fund Advisors and Nuveen Asset Management. The statement of additional information, incorporated by reference into this prospectus, contains detailed information on the policies and operation of the fund included in this prospectus. Additional information about the fund’s investments is available in the annual and semi-annual reports to shareholders. In the fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the fund’s performance during its last fiscal year. The fund’s most recent statement of additional information, annual and semi-annual reports and certain other information are available free of charge by calling Nuveen Investor Services at (800) 257-8787, on the fund’s website at www.nuveen.com or through your financial advisor. Shareholders may call the toll free number above with any inquiries.
You may also obtain this and other fund information directly from the Securities and Exchange Commission (“SEC”). The SEC may charge a copying fee for this information. Reports and other information about the fund are also available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 551-8090 for room hours and operation. You may also request fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street, NE, Washington, D.C. 20549-1520.
The fund is a series of Nuveen Investment Funds, Inc., whose Investment Company Act file number is 811-05309.
Distributed by
Nuveen Securities, LLC
333 West Wacker Drive
Chicago, Illinois 60606
(800) 257-8787
www.nuveen.com
MPR-FSTB-0711P
NUVEEN SHORT DURATION BOND FUND
NUVEEN MULTI-STRATEGY CORE BOND FUND
NUVEEN HIGH YIELD BOND FUND
SUPPLEMENT DATED JUNE 24, 2011
TO THE PROSPECTUS DATED
JANUARY 18, 2011
Proposed Reorganizations of
Nuveen Short Duration Bond Fund into Nuveen Short Term Bond Fund
Nuveen Multi-Strategy Core Bond Fund into Nuveen Total Return Bond Fund
Nuveen High Yield Bond Fund into Nuveen High Income Bond Fund
The Board of Trustees/Directors of Nuveen Investment Trust III (the “Trust”) and Nuveen Investment Funds, Inc. (the “Company”) has approved the reorganization of (a) Nuveen Short Duration Bond Fund, a series of the Trust, into Nuveen Short Term Bond Fund, a series of the Company, (b) Nuveen Multi-Strategy Core Bond Fund, a series of the Trust, into Nuveen Total Return Bond Fund, a series of the Company, and (c) Nuveen High Yield Bond Fund, a series of the Trust, into Nuveen High Income Bond Fund, a series of the Company. Each of Nuveen Short Duration Bond Fund, Nuveen Multi-Strategy Core Bond Fund and Nuveen High Yield Bond Fund is referred to as an “Acquired Fund” and each of Nuveen Short Term Bond Fund, Nuveen Total Return Bond Fund and Nuveen High Income Bond Fund is referred to as an “Acquiring Fund.” Each reorganization is subject to approval by the shareholders of the Acquired Fund in that reorganization.
For each reorganization, if the Acquired Fund’s shareholders approve the reorganization, the Acquired Fund will transfer all of its assets and liabilities to the Acquiring Fund in exchange for Acquiring Fund shares of equal value. These Acquiring Fund shares will then be distributed to Acquired Fund shareholders and the Acquired Fund will be terminated. As a result of these transactions, Acquired Fund shareholders will become shareholders of the Acquiring Fund and will cease to be shareholders of the Acquired Fund. Each Acquired Fund shareholder will receive Acquiring Fund shares with a total value equal to the total value of that shareholder’s Acquired Fund shares immediately prior to the closing of the reorganization.
For each reorganization, a special meeting of the Acquired Fund’s shareholders for the purpose of voting on the reorganization is expected to be held in early October 2011. If the required approval is obtained, it is anticipated that the reorganization will be consummated shortly after the special shareholder meeting. Further information regarding the proposed reorganizations will be contained in proxy materials that are expected to be sent to shareholders of each Acquired Fund in August 2011.
Each Acquired Fund will continue sales and redemptions of its shares as described in the prospectus until shortly before its reorganization. However, holders of shares purchased after the record date set for an Acquired Fund’s special meeting of shareholders will not be entitled to vote those shares at the special meeting.
PLEASE KEEP THIS WITH YOUR PROSPECTUS
FOR FUTURE REFERENCE
MGN-INV3P-0611P
NUVEEN SHORT DURATION BOND FUND
NUVEEN MULTI-STRATEGY CORE BOND FUND
NUVEEN HIGH YIELD BOND FUND
NUVEEN SYMPHONY CREDIT OPPORTUNITIES FUND
SUPPLEMENT DATED APRIL 11, 2011
TO THE PROSPECTUS DATED JANUARY 18, 2011
AS PREVIOUSLY SUPPLEMENTED
WITH RESPECT TO THE NUVEEN SHORT DURATION BOND FUND ON FEBRUARY 25, 2011
AND WITH RESPECT TO ALL THE FUNDS ON MARCH 21, 2011
1. | In the section “How You Can Buy and Sell Shares—What Share Classes We Offer—Class I Shares,” the following paragraph is added after the second paragraph. |
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.
2. | On April 30, 2011, the name of the funds’ distributor will change from Nuveen Investments, LLC to Nuveen Securities, LLC. |
PLEASE KEEP THIS WITH YOUR
FUND’S PROSPECTUS
FOR FUTURE REFERENCE
MGN-INV3-0411P
NUVEEN HIGH YIELD BOND FUND
NUVEEN MULTI-STRATEGY CORE BOND FUND
NUVEEN SHORT DURATION BOND FUND
NUVEEN SYMPHONY CREDIT OPPORTUNITIES FUND
SUPPLEMENT DATED MARCH 21, 2011
TO THE PROSPECTUS DATED JANUARY 18, 2011,
AS PREVIOUSLY SUPPLEMENTED
WITH RESPECT TO THE NUVEEN SHORT DURATION BOND FUND ON FEBRUARY 25, 2011
The section entitled “General Information—Net Asset Value” is hereby replaced in its entirety with the following:
The price you pay for your shares is based on a fund’s net asset value per share, which is determined as of the close of trading (normally 4:00 p.m. New York time) on each day the NYSE is open for business. Net asset value is calculated for each class of a fund by taking the value of the class’ total assets, including interest or dividends accrued but not yet collected, less all liabilities, and dividing by the total number of shares outstanding. The result, rounded to the nearest cent, is the net asset value per share. All valuations are subject to review by the funds’ Board of Trustees or its designee.
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. Independent pricing services typically value non-equity portfolio 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 securities, particularly less liquid and lower quality securities, the pricing services may consider information about a security, its issuer, or market activity provided by a fund’s investment adviser or sub-adviser. Values provided for municipal bonds and loans are intended to represent the mean between the bid and asked prices, while values provided for other debt securities are intended to represent bid prices. Equity securities generally are valued at the last reported sales price or official closing price on an exchange, if available. Foreign securities and currency held by a fund will be valued in U.S. dollars based on foreign 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. As a general principle, the fair value of a portfolio instrument is the amount that an owner might reasonably expect to receive upon the instrument’s 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.
If a fund holds securities that are primarily listed on non-U.S. exchanges, the net asset value of the fund’s shares may change on days when shareholders will not be able to purchase or redeem the fund’s shares.
PLEASE KEEP THIS WITH YOUR PROSPECTUS
FOR FUTURE REFERENCE
MGN-INV3P-0311P
NUVEEN SHORT DURATION BOND FUND
SUPPLEMENT DATED FEBRUARY 25, 2011
TO THE PROSPECTUS DATED JANUARY 18, 2011
Brenda A. Langenfeld is no longer a portfolio manager of the fund, but remains with Nuveen Asset Management, LLC. Chris J. Neuharth and Peter L. Agrimson remain portfolio managers of the fund.
There have been no changes in the fund’s investment objectives or policies.
PLEASE KEEP THIS WITH YOUR
FUND’S PROSPECTUS FOR FUTURE REFERENCE
MGN-SDP-0211P
Mutual Funds
Prospectus
January 18, 2011
Nuveen Taxable Bond Funds
For investors seeking attractive monthly income and portfolio diversification potential.
Share Class / Ticker Symbol | ||||||||||
Fund Name | Class A | Class B | Class C | Class R3 | Class I | |||||
Nuveen Short Duration Bond Fund | NSDAX | — | NSCDX | NSDTX | NSDRX | |||||
Nuveen Multi-Strategy Core Bond Fund | NCBAX | NBCBX | NCBCX | NMSTX | NCBRX | |||||
Nuveen High Yield Bond Fund | NHYAX | NHBYX | NHYCX | NHYTX | NHYRX | |||||
Nuveen Symphony Credit Opportunities Fund | NCOAX | — | NCFCX | NCORX | NCOIX |
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Section 1 Fund Summaries | ||||
Nuveen Short Duration Bond Fund | 4 | |||
Nuveen Multi-Strategy Core Bond Fund | 9 | |||
Nuveen High Yield Bond Fund | 14 | |||
Nuveen Symphony Credit Opportunities Fund | 18 | |||
Section 2 How We Manage Your Money | ||||
Who Manages the Funds | 22 | |||
What Types of Securities We Invest In | 25 | |||
How We Select Investments | 29 | |||
What the Risks Are | 30 | |||
Section 3 How You Can Buy and Sell Shares | ||||
What Share Classes We Offer | 35 | |||
How to Reduce Your Sales Charge | 38 | |||
How to Buy Shares | 39 | |||
Special Services | 40 | |||
How to Sell Shares | 42 | |||
Section 4 General Information | ||||
Dividends, Distributions and Taxes | 45 | |||
Distribution and Service Plans | 46 | |||
Net Asset Value | 47 | |||
Frequent Trading | 48 | |||
Fund Service Providers | 50 | |||
Section 5 Financial Highlights | 52 | |||
Section 6 Glossary of Investment Terms | 56 | |||
Nuveen Short Duration Bond Fund
Investment Objective
The investment objective of the fund is to provide high current income consistent with minimal fluctuations of principal.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 35 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 38 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-73 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
Class A | Class C | Class R3 | Class I | |||||||||||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 2.25% | None | None | None | ||||||||||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 1% | None | None | ||||||||||||
Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
Exchange Fees | None | None | None | None | ||||||||||||
Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $15 |
Annual Fund Operating Expense
(expenses that you pay each year as a percentage of the value of your investment)
Class A | Class C | Class R3 | Class I | |||||||||||||
Management Fees | 0.38% | 0.38% | 0.38% | 0.38% | ||||||||||||
Distribution and Service (12b-1) Fees | 0.25% | 1.00% | 0.50% | — | ||||||||||||
Other Expenses | 0.27% | 0.27% | 0.27% | 0.27% | ||||||||||||
Total Annual Fund Operating Expenses | 0.90% | 1.65% | 1.15% | 0.65% | ||||||||||||
Fee Waivers and Expense Reimbursements2 | (0.07% | ) | (0.07% | ) | (0.07% | ) | (0.07% | ) | ||||||||
Total Annual Fund Operating Expenses After Fee Waivers and Expense Reimbursements | 0.83% | 1.58% | 1.08% | 0.58% |
1 | Fee applies to individual retirement accounts (IRAs) and Coverdell Education Savings Accounts. Other accounts with balances below $1,000 may be liquidated at the discretion of the fund’s investment adviser upon prior written notice to shareholders. |
2 | The investment adviser has agreed to waive fees and reimburse expenses through January 31, 2012 so that Total Annual Fund Operating Expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed 0.60% of the average daily net assets of any class of fund shares. This expense limitation may be terminated or modified prior to that date only with the approval of the Board of Trustees of the fund. |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses are at the lesser of Total Annual Fund Operating Expenses or the applicable expense limitation. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
A | C | R3 | I | A | C | R3 | I | |||||||||||||||||||||||||||||
1 Year | $ | 308 | $ | 161 | $ | 110 | $ | 59 | $ | 308 | $ | 161 | $ | 110 | $ | 59 | ||||||||||||||||||||
3 Years | $ | 499 | $ | 514 | $ | 358 | $ | 201 | $ | 499 | $ | 514 | $ | 358 | $ | 201 | ||||||||||||||||||||
5 Years | $ | 706 | $ | 890 | $ | 626 | $ | 355 | $ | 706 | $ | 890 | $ | 626 | $ | 355 | ||||||||||||||||||||
10 Years | $ | 1,302 | $ | 1,949 | $ | 1,391 | $ | 804 | $ | 1,302 | $ | 1,949 | $ | 1,391 | $ | 804 |
4
Section 1 Fund Summaries
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 72% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in short duration securities using a risk-controlled, multi-strategy approach that invests across multiple sectors of the taxable fixed income market. Typically, the fund’s average duration will be between approximately one and two years but it will not exceed three years.
The fund principally invests in corporate debt securities, including bonds, notes and debentures; U.S. government securities; mortgage-related securities issued by governments, their agencies or instrumentalities, or corporations; asset-backed securities; and non-U.S. debt securities. In addition, in an effort to enhance returns and manage risk, the fund’s portfolio managers employ a variety of strategies, which may include the use of futures, options, swaps, credit derivatives and other derivative instruments, to create debt or non-U.S. currency exposures which reflect their outlook for the global economic environment and the expected relative performance of different sectors of and securities in the fixed income market.
The fund normally invests at least 80% of its net assets in securities rated investment grade (AAA/Aaa to BBB/Baa) at the time of purchase by at least one independent rating agency and unrated securities judged to be of comparable quality by the fund’s portfolio managers. The fund may invest up to 35% of its net assets in debt securities issued by non-U.S. companies. Although a substantial majority of the fund’s assets are invested in U.S. dollar-denominated securities, up to 20% of the fund’s net assets may have non-U.S. dollar currency exposure from non-U.S. dollar-denominated securities and currency derivatives, calculated on an absolute notional basis (i.e., adding together the absolute value of net long and net short exposures to individual non-U.S. dollar currencies). On a net basis (netting out long and short non-U.S. currency exposures in the aggregate), the fund’s non-U.S. dollar exposure will not exceed 5% of net assets. The fund also may invest up to 20% of its net assets in securities rated below investment grade (BB/Ba or lower) at the time of purchase, which are commonly referred to as “high yield” or “junk” bonds. In addition, the fund may engage in repurchase, reverse repurchase and forward purchase agreements.
Principal Risks
Market Risk—The market values of securities owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a debt security will be unable or unwilling to make interest and principal payments when due and the related risk that the value of a debt security may decline because of concerns about the issuer’s ability to make such payments. Credit risk may be heightened for the fund because it may invest up to 20% of its net assets in “high yield” or “junk” bonds; such securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—If interest rates rise, the prices of debt securities held by the fund will fall. Non-U.S. and U.S. interest rates may rise or fall by differing amounts and, as a result, the fund’s investment in non-U.S. securities or non-U.S. interest rate swaps may expose the fund to additional risks.
Income Risk—If interest rates fall, the income from the fund’s portfolio will decline as the fund invests the proceeds from new share sales, or from matured or called debt securities, at interest rates that are below the portfolio’s current earnings rate.
Mortgage/Asset-Backed Securities Risk—The value of the fund’s mortgage-related securities can fall if the owners of the underlying mortgages pay off their mortgages sooner than expected, which could happen when interest rates fall, or later than expected, which could happen when interest rates rise. With respect to asset-backed securities, the payment of interest and the repayment of principal may be impacted by the cash flows generated by the assets backing the securities. 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 mortgage-related and asset-backed securities.
Derivatives Risk—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. These risks are heightened when the fund’s portfolio managers use derivatives to enhance the fund’s 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.
Section 1 Fund Summaries
5
Non-U.S. Investment Risk—Non-U.S. companies or U.S. companies with significant non-U.S. operations may be subject to risks in addition to those of companies that principally operate in the United States as a result of, among other things, political, social and economic developments abroad and different legal, regulatory and tax environments.
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return
During the six-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 2.99% and -0.55%, respectively, for the quarters ended June 30, 2009 and June 30, 2008.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of a broad measure of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of any state or local tax. After-tax returns are shown for Class A shares only; after-tax returns for Class C, R3 and I shares will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here. After-tax returns are not relevant to investors who hold fund shares in tax-deferred accounts such as IRAs or employer-sponsored retirement plans.
6
Section 1 Fund Summaries
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects any fee waivers in effect during the periods presented. If these waivers were not in place, performance would be reduced.
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
1 Year | 5 Years | Since Inception (December 20, 2004) | ||||||||||
Class Returns Before Taxes: | ||||||||||||
Class A | 1.99 | % | 4.38 | % | 3.88 | % | ||||||
Class C | 3.55 | % | 4.10 | % | 3.52 | % | ||||||
Class R3 | 4.06 | % | 4.62 | % | 4.02 | % | ||||||
Class I | 4.57 | % | 5.10 | % | 4.50 | % | ||||||
Class A Returns After Taxes: | ||||||||||||
On Distributions | 0.78 | % | 2.87 | % | 2.37 | % | ||||||
On Distributions and Sales of Shares | 1.27 | % | 2.85 | % | 2.42 | % | ||||||
Citigroup 1-3 Year Treasury Index (reflects no deduction for fees, expenses or taxes) | 2.33 | % | 4.13 | % | 3.71 | % | ||||||
Lipper Short Investment Grade Debt Funds Category Average (reflects no deduction for taxes or certain expenses) | 3.89 | % | 3.61 | % | 3.28 | % |
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Managers
Chris J. Neuharth, CFA, Brenda A. Langenfeld, CFA, and Peter L. Agrimson, CFA, serve as portfolio managers of the fund.
Mr. Neuharth, Managing Director at Nuveen Asset Management, LLC, Ms. Langenfeld, Vice President at Nuveen Asset Management, LLC, and Mr. Agrimson, Assistant Vice President at Nuveen Asset Management, LLC, have been members of the fund’s management team since January 2011.
Section 1 Fund Summaries
7
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 through a financial advisor or other financial intermediary or directly from the fund. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
Class A and Class C | Class R3 | Class I | ||||
Eligibility and Minimum Initial Investment | $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. | Available only through certain retirement plans.
No minimum. | 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 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. | |||
Minimum Additional Investment | $100 | No minimum. | No minimum. |
Tax Information
The fund’s distributions are taxable and will generally be taxed as ordinary income or capital gains.
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 and its distributor 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 to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
8
Section 1 Fund Summaries
Nuveen Multi-Strategy Core Bond Fund
Investment Objective
The investment objective of the fund is to provide total return by investing in fixed income securities.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 35 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 38 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-73 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
Class A | Class B | Class C | Class R3 | Class I | ||||||||||||||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.25% | None | None | None | None | |||||||||||||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5% | 1% | None | None | |||||||||||||||
Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | None | |||||||||||||||
Exchange Fees | None | None | None | None | None | |||||||||||||||
Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $15 | $15 |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Class A | Class B | Class C | Class R3 | Class I | ||||||||||||||||
Management Fees | 0.49% | 0.49% | 0.49% | 0.49% | 0.49% | |||||||||||||||
Distribution and Service (12b-1) Fees | 0.25% | 1.00% | 1.00% | 0.50% | — | |||||||||||||||
Other Expenses | 0.44% | 0.47% | 0.45% | 0.46% | 0.46% | |||||||||||||||
Total Annual Fund Operating Expenses | 1.18% | 1.96% | 1.94% | 1.45% | 0.95% | |||||||||||||||
Fee Waivers and Expense Reimbursements2 | (0.24% | ) | (0.27% | ) | (0.25% | ) | (0.26% | ) | (0.26% | ) | ||||||||||
Total Annual Fund Operating Expenses After Fee Waivers and Expense Reimbursements | 0.94% | 1.69% | 1.69% | 1.19% | 0.69 |
1 | Fee applies to individual retirement accounts (IRAs) and Coverdell Education Savings Accounts. Other accounts with balances below $1,000 may be liquidated at the discretion of the fund’s investment adviser upon prior written notice to shareholders. |
2 | The investment adviser has agreed to waive fees and reimburse expenses through January 31, 2012 so that Total Annual Fund Operating Expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed 0.70% of the average daily net assets of any class of fund shares. This expense limitation may be terminated or modified prior to that date only with the approval of the Board of Trustees of the fund. |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses are at the lesser of Total Annual Fund Operating Expenses or the applicable expense limitation. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Redemption | No Redemption | |||||||||||||||||||||||||||||||||||||||||||
A | B | C | R3 | I | A | B | C | R3 | I | |||||||||||||||||||||||||||||||||||
1 Year | $ | 517 | $ | 572 | $ | 172 | $ | 121 | $ | 70 | $ | 517 | $ | 172 | $ | 172 | $ | 121 | $ | 70 | ||||||||||||||||||||||||
3 Years | $ | 761 | $ | 889 | $ | 585 | $ | 433 | $ | 277 | $ | 761 | $ | 589 | $ | 585 | $ | 433 | $ | 277 | ||||||||||||||||||||||||
5 Years | $ | 1,024 | $ | 1,132 | $ | 1,024 | $ | 767 | $ | 500 | $ | 1,024 | $ | 1,032 | $ | 1,024 | $ | 767 | $ | 500 | ||||||||||||||||||||||||
10 Years | $ | 1,776 | $ | 2,061 | $ | 2,244 | $ | 1,713 | $ | 1,143 | $ | 1,776 | $ | 2,061 | $ | 2,244 | $ | 1,713 | $ | 1,143 |
Section 1 Fund Summaries
9
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 157% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in fixed income securities using a risk-controlled, multi-strategy approach that invests across multiple sectors of the taxable fixed income market. Typically, the fund’s average duration will be five years or less and is not expected to be more than six years.
The fund principally invests in corporate debt securities, including bonds, notes and debentures; U.S. government securities; mortgage-related securities issued by governments, their agencies or instrumentalities, or corporations; asset-backed securities; and non-U.S. debt securities. In addition, in an effort to enhance returns and manage risk, the fund’s portfolio managers employ a variety of strategies, which may include the use of futures, options, swaps, credit derivatives and other derivative instruments, to create debt or non-U.S. currency exposures which reflect their outlook for the global economic environment and the expected relative performance of different sectors of and securities in the fixed income market.
The fund normally invests at least 75% of its net assets in securities rated investment grade (AAA/Aaa to BBB/Baa) at the time of purchase by at least one independent rating agency and unrated securities judged to be of comparable quality by the fund’s portfolio managers. The fund may invest up to 35% of its net assets in debt securities issued by non-U.S. companies. Although a substantial majority of the fund’s assets are invested in U.S. dollar-denominated securities, up to 20% of the fund’s net assets may have non-U.S. dollar currency exposure from non-U.S. dollar-denominated securities and currency derivatives, calculated on an absolute notional basis (i.e., adding together the absolute value of net long and net short exposures to individual non-U.S. dollar currencies). On a net basis (netting out long and short non-U.S. currency exposures in the aggregate), the fund’s non-U.S. dollar exposure will not exceed 5% of net assets. The fund also may invest up to 25% of its net assets in securities rated below investment grade (BB/Ba or lower) at the time of purchase, which are commonly referred to as “high yield” or “junk” bonds. In addition, the fund may engage in repurchase, reverse repurchase and forward purchase agreements.
Principal Risks
Market Risk—The market values of securities owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a fixed income security will be unable or unwilling to make interest and principal payments when due and the related risk that the value of a fixed income security may decline because of concerns about the issuer’s ability to make such payments. Credit risk may be heightened for the fund because it may invest up to 25% of its net assets in “high yield” or “junk” bonds; such securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—If interest rates rise, the prices of fixed income securities held by the fund will fall. Non-U.S. and U.S. interest rates may rise or fall by differing amounts and, as a result, the fund’s investment in non-U.S. securities or non-U.S. interest rate swaps may expose the fund to additional risks.
Income Risk—If interest rates fall, the income from the fund’s portfolio will decline as the fund invests the proceeds from new share sales, or from matured or called fixed income securities, at market interest rates that are below the portfolio’s current earnings rate.
Mortgage/Asset-Backed Securities Risk—The value of the fund’s mortgage-related securities can fall if the owners of the underlying mortgages pay off their mortgages sooner than expected, which could happen when interest rates fall, or later than expected, which could happen when interest rates rise. With respect to asset-backed securities, the payment of interest and the repayment of principal may be impacted by the cash flows generated by the assets backing the securities. 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 mortgage-related and asset-backed securities.
Derivatives Risk—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. These risks are heightened when the fund’s portfolio managers use derivatives to enhance the fund’s 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.
10
Section 1 Fund Summaries
Non-U.S. Investment Risk—Non-U.S. companies or U.S. companies with significant non-U.S. operations may be subject to risks in addition to those of companies that principally operate in the United States as a result of, among other things, political, social and economic developments abroad and different legal, regulatory and tax environments.
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return
During the six-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 5.49% and -0.82%, respectively, for the quarters ended June 30, 2009 and September 30, 2005.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of a broad measure of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of any state or local tax. After-tax returns are shown for Class A shares only; after-tax returns for Class B, C, R3 and I shares will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here. After-tax returns are not relevant to investors who hold fund shares in tax-deferred accounts such as IRAs or employer-sponsored retirement plans.
Section 1 Fund Summaries
11
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects any fee waivers in effect during the periods presented. If these waivers were not in place, performance would be reduced.
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
1 Year | 5 Years | Since Inception December 20, 2004 | ||||||||||
Class Returns Before Taxes: | ||||||||||||
Class A | 3.16 | % | 5.67 | % | 5.04 | % | ||||||
Class B | 3.02 | % | 5.75 | % | 5.10 | % | ||||||
Class C | 6.97 | % | 5.84 | % | 5.04 | % | ||||||
Class R3 | 7.52 | % | 6.37 | % | 5.55 | % | ||||||
Class I | 8.05 | % | 6.87 | % | 6.05 | % | ||||||
Class A Returns After Taxes: | ||||||||||||
On Distributions | 0.59 | % | 3.68 | % | 3.15 | % | ||||||
On Distributions and Sales of Shares | 2.02 | % | 3.67 | % | 3.18 | % | ||||||
Citigroup Broad Investment Grade Bond Index (reflects no deduction for fees, expenses or taxes) | 6.30 | % | 5.98 | % | 5.40 | % | ||||||
Lipper Intermediate Investment Grade Debt Funds Category Average (reflects no deduction for taxes or certain expenses) | 7.72 | % | 5.18 | % | 4.61 | % |
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Managers
Timothy A. Palmer, CFA, Jeffrey J. Ebert, CFA, and Marie A. Newcome, CFA, serve as portfolio managers of the fund.
Mr. Palmer, Managing Director at Nuveen Asset Management, LLC, Mr. Ebert, Senior Vice President at Nuveen Asset Management, LLC, and Ms. Newcome, Vice President at Nuveen Asset Management, LLC, have been members of the fund’s management team since January 2011.
12
Section 1 Fund Summaries
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 through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
Class A and Class C | Class R3 | Class I | ||||
Eligibility and Minimum Initial Investment | $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. | Available only through certain retirement plans.
No minimum. | 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 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. | |||
Minimum Additional Investment | $100 | No minimum. | No minimum. |
Tax Information
The fund’s distributions are taxable and will generally be taxed as ordinary income or capital gains.
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 and its distributor 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 to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
13
Investment Objective
The investment objective of the fund is to maximize total return by investing in a diversified portfolio of high yield debt securities.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 35 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 38 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-73 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
Class A | Class B | Class C | Class R3 | Class I | ||||||||||||||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.75% | None | None | None | None | |||||||||||||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 5% | 1% | None | None | |||||||||||||||
Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | None | |||||||||||||||
Exchange Fees | None | None | None | None | None | |||||||||||||||
Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $15 | $15 |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Class A | Class B | Class C | Class R3 | Class I | ||||||||||||||||
Management Fees | 0.59% | 0.59% | 0.59% | 0.59% | 0.59% | |||||||||||||||
Distribution and Service (12b-1) Fees | 0.25% | 1.00% | 1.00% | 0.50% | — | |||||||||||||||
Other Expenses | 0.35% | 0.35% | 0.35% | 0.35% | 0.33% | |||||||||||||||
Total Annual Fund Operating Expenses | 1.19% | 1.94% | 1.94% | 1.44% | 0.92% |
1 | Fee applies to individual retirement accounts (IRAs) and Coverdell Education Savings Accounts. Other accounts with balances below $1,000 may be liquidated at the discretion of the fund’s investment adviser upon prior written notice to shareholders. |
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Redemption | No Redemption | |||||||||||||||||||||||||||||||||||||||||||
A | B | C | R3 | I | A | B | C | R3 | I | |||||||||||||||||||||||||||||||||||
1 Year | $ | 591 | $ | 597 | $ | 197 | $ | 147 | $ | 94 | $ | 591 | $ | 197 | $ | 197 | $ | 147 | $ | 94 | ||||||||||||||||||||||||
3 Years | $ | 835 | $ | 909 | $ | 609 | $ | 456 | $ | 293 | $ | 835 | $ | 609 | $ | 609 | $ | 456 | $ | 293 | ||||||||||||||||||||||||
5 Years | $ | 1,098 | $ | 1,147 | $ | 1,047 | $ | 787 | $ | 509 | $ | 1,098 | $ | 1,047 | $ | 1,047 | $ | 787 | $ | 509 | ||||||||||||||||||||||||
10 Years | $ | 1,850 | $ | 2,070 | $ | 2,264 | $ | 1,724 | $ | 1,131 | $ | 1,850 | $ | 2,070 | $ | 2,264 | $ | 1,724 | $ | 1,131 |
14
Section 1 Fund Summaries
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 139% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in U.S. and non-U.S. corporate high yield debt securities, including zero coupon, payment in-kind, corporate loans and convertible bonds. These securities generally are rated BB/Ba or below at the time of purchase by independent rating agencies or are unrated but judged to be of comparable quality by the fund’s portfolio managers. These below investment grade securities are commonly referred to as “high yield” or “junk” bonds.
In addition to investing in U.S. and non-U.S. corporate high yield debt securities, the fund may also invest in U.S. and non-U.S. corporate investment grade securities; U.S. government securities, including U.S. Treasury securities and securities issued by U.S. government agencies or instrumentalities; and cash equivalents and other short duration investments. In an effort to hedge risk, enhance returns, or as a substitute for a position in the underlying asset, the fund also may invest in futures, options, interest rate or total return swaps, credit derivatives or other derivative instruments. In doing so, the fund may, in certain circumstances, invest a substantial portion of its assets in such derivative instruments. Substantially all of the fund’s assets will be invested in U.S. dollar-denominated securities.
In building the fund’s investment portfolio from these individual securities, the fund’s portfolio managers seek to diversify the portfolio’s holdings across multiple factors, including individual issuers and industries, to manage the inherent credit risk associated with a high yield debt strategy.
Principal Risks
Market Risk—The market values of securities owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a debt security will be unable or unwilling to make interest and principal payments when due and the related risk that the value of a debt security may decline because of concerns about the issuer’s ability to make such payments. Credit risk may be heightened for the fund because it invests at least 80% of its net assets in “high yield” or “junk” bonds; such securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest Rate Risk—If interest rates rise, the prices of debt securities held by the fund will fall. Non-U.S. and U.S. interest rates may rise or fall by differing amounts and, as a result, the fund’s investment in non-U.S. securities or non-U.S. interest rate swaps may expose the fund to additional risks.
Income Risk—If interest rates fall, the income from the fund’s portfolio will decline as the fund invests the proceeds from new share sales, or from matured or called debt securities, at interest rates that are below the portfolio’s current earnings rate.
Derivatives Risk—The fund may, in certain circumstances, invest a substantial portion of its assets in derivative instruments, including interest rate swaps. 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. These risks are heightened when the fund’s portfolio managers use derivatives to enhance the fund’s 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 doing so, the fund is effectively leveraging its investments, which could result in exaggerated changes in the net asset value of the fund’s shares and can result in losses that exceed the amount originally invested.
Non-U.S. Investment Risk—Non-U.S. companies or U.S. companies with significant non-U.S. operations may be subject to risks in addition to those of companies that principally operate in the United States as a result of, among other things, political, social and economic developments abroad and different legal, regulatory and tax environments.
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Section 1 Fund Summaries
15
Fund Performance
The following bar chart and table provide some indication of the potential risks of investing in the fund. The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future. Updated performance information is available at www.nuveen.com/MF/products/performancesummary.aspx or by calling (800) 257-8787.
The bar chart below shows the variability of the fund’s performance from year to year for Class A shares. The bar chart and highest/lowest quarterly returns that follow do not reflect sales charges, and if these charges were reflected, the returns would be less than those shown.
Class A Annual Total Return
During the six-year period ended December 31, 2010, the fund’s highest and lowest quarterly returns were 14.05% and -20.35%, respectively, for the quarters ended June 30, 2009 and December 31, 2008.
The table below shows the variability of the fund’s average annual returns and how they compare over the time periods indicated with those of a broad measure of market performance and an index of funds with similar investment objectives. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of any state or local tax. After-tax returns are shown for Class A shares only; after-tax returns for Class B, C, R3 and I shares will vary. Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here. After-tax returns are not relevant to investors who hold fund shares in tax-deferred accounts such as IRAs or employer-sponsored retirement plans.
Both the bar chart and the table assume that all distributions have been reinvested. Performance reflects any fee waivers in effect during the periods presented. If these waivers were not in place, performance would be reduced.
Average Annual Total Returns for the Periods Ended December 31, 2010 | ||||||||||||
1 Year | 5 Years | Since Inception (December 20, 2004) | ||||||||||
Class Returns Before Taxes: | ||||||||||||
Class A | 10.75 | % | 6.21 | % | 5.56 | % | ||||||
Class B | 11.40 | % | 6.27 | % | 5.60 | % | ||||||
Class C | 15.41 | % | 6.39 | % | 5.58 | % | ||||||
Class R3 | 15.97 | % | 6.96 | % | 6.14 | % | ||||||
Class I | 16.53 | % | 7.50 | % | 6.67 | % | ||||||
Class A Returns After Taxes: | ||||||||||||
On Distributions | 7.65 | % | 3.38 | % | 2.83 | % | ||||||
On Distributions and Sales of Shares | 6.82 | % | 3.58 | % | 3.07 | % | ||||||
Citigroup High Yield BB/B Index (reflects no deduction for fees, expenses or taxes) | 13.35 | % | 6.22 | % | 5.64 | % | ||||||
Lipper High Current Yield Funds Category Average (reflects no deduction for taxes or certain expenses) | 14.21 | % | 6.59 | % | 5.93 | % |
16
Section 1 Fund Summaries
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Nuveen Asset Management, LLC
Portfolio Managers
John T. Fruit, CFA, and Jeffrey T. Schmitz, CFA, serve as portfolio managers of the fund.
Mr. Fruit, Senior Vice President at Nuveen Asset Management, LLC, and Mr. Schmitz, Vice President at Nuveen Asset Management, LLC, have been members of the fund’s management team since January 2011.
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 through a financial advisor or other financial intermediary or directly from the fund. Class B shares are available only through exchanges and dividend reinvestments by current Class B shareholders. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
Class A and Class C | Class R3 | Class I | ||||
Eligibility and Minimum Initial Investment | $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. | Available only through certain retirement plans.
No minimum. | 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 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. | |||
Minimum Additional Investment | $100 | No minimum. | No minimum. |
Tax Information
The fund’s distributions are taxable and will generally be taxed as ordinary income or capital gains.
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 and its distributor 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 to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Section 1 Fund Summaries
17
Nuveen Symphony Credit Opportunities Fund
Investment Objective
The investment objective of the fund is to seek current income and capital appreciation.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in the fund or in other Nuveen Mutual Funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “What Share Classes We Offer” on page 35 of the fund’s prospectus, “How to Reduce Your Sales Charge” on page 38 of the prospectus and “Purchase and Redemption of Fund Shares” on page S-73 of the fund’s statement of additional information.
Shareholder Fees
(fees paid directly from your investment)
Class A | Class C | Class R3 | Class I | |||||||||||||
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | 4.75% | None | None | None | ||||||||||||
Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price or redemption proceeds) | None | 1% | None | None | ||||||||||||
Maximum Sales Charge (Load) Imposed on Reinvested Dividends | None | None | None | None | ||||||||||||
Exchange Fees | None | None | None | None | ||||||||||||
Redemption Fee | 2% | 2% | 2% | 2% | ||||||||||||
Annual Low Balance Account Fee (for accounts under $1,000)1 | $15 | $15 | $15 | $15 | ||||||||||||
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) |
| |||||||||||||||
Class A | Class C | Class R3 | Class I | |||||||||||||
Management Fees | 0.64% | 0.64% | 0.64% | 0.64% | ||||||||||||
Distribution and Service (12b-1) Fees | 0.25% | 1.00% | 0.50% | — | ||||||||||||
Other Expenses | 0.85% | 1.29% | 1.31% | 0.52% | ||||||||||||
Total Annual Fund Operating Expenses | 1.74% | 2.93% | 2.45% | 1.16% | ||||||||||||
Fee Waivers and Expense Reimbursements2 | (0.65% | ) | (1.09% | ) | (1.11% | ) | (0.32% | ) | ||||||||
Total Annual Fund Operating Expenses After Fee Waivers and Expense Reimbursements | 1.09% | 1.84% | 1.34% | 0.84% |
1 | Fee applies to individual retirement accounts (IRAs) and Coverdell Education Savings Accounts. Other accounts with balances below $1,000 may be liquidated at the discretion of the fund’s investment adviser upon prior written notice to shareholders. |
2 | The investment adviser has agreed to waive fees and reimburse expenses through January 31, 2013 so that Total Annual Fund Operating Expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed 0.85% (1.35% after January 31, 2013) of the average daily net assets of any class of fund shares. The expense limitation expiring January 31, 2013, may be terminated or modified prior to that date only with the approval of the Board of Trustees of the fund. The expense limitation in effect thereafter may be terminated or modified only with the approval of shareholders of the fund. |
18
Section 1 Fund Summaries
Example
The following example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then either redeem or do not redeem your shares at the end of a period. The example also assumes that your investment has a 5% return each year and that the fund’s operating expenses are at the lesser of Total Annual Fund Operating Expenses or the applicable expense limitation. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Redemption | No Redemption | |||||||||||||||||||||||||||||||||||
A | C | R3 | I | A | C | R3 | I | |||||||||||||||||||||||||||||
1 Year | $ | 581 | $ | 187 | $ | 136 | $ | 86 | $ | 581 | $ | 187 | $ | 136 | $ | 86 | ||||||||||||||||||||
3 Years | $ | 857 | $ | 632 | $ | 479 | $ | 303 | $ | 857 | $ | 632 | $ | 479 | $ | 303 | ||||||||||||||||||||
5 Years | $ | 1,207 | $ | 1,157 | $ | 900 | $ | 575 | $ | 1,207 | $ | 1,157 | $ | 900 | $ | 575 | ||||||||||||||||||||
10 Years | $ | 2,191 | $ | 2,597 | $ | 2,074 | $ | 1,350 | $ | 2,191 | $ | 2,597 | $ | 2,074 | $ | 1,350 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal period, the fund’s portfolio turnover rate was 68% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the fund invests primarily in debt instruments (e.g., bonds, loans and convertible securities), a substantial portion of which may be rated below investment-grade or, if unrated, deemed by the fund’s portfolio managers to be of comparable quality. Although the fund invests primarily in debt issued by U.S. companies, it may invest up to 25% of its net assets in U.S. dollar-denominated debt issued by non-U.S. companies that is traded over-the-counter or listed on an exchange. The fund may use derivatives, such as swaps, futures and options, to gain investment exposure.
The fund’s sub-adviser bases its investment process on fundamental, bottom-up credit analysis. Analysts assess sector dynamics, company business models and asset quality. Specific recommendations are based on an analysis of the relative value of the various types of debt within a company’s capital structure. Inherent in the sub-adviser’s credit analysis process is the evaluation of potential upside and downside to any credit. As such, the sub-adviser concentrates its efforts on sectors where there is sufficient transparency to assess the downside risk and where firms have assets to support meaningful recovery in case of default. In its focus on downside protection, the sub-adviser favors opportunities where valuations can be quantified and risks assessed.
Principal Risks
Market Risk—The market values of debt instruments owned by the fund may decline, at times sharply and unpredictably.
Credit Risk—Credit risk is the risk that an issuer of a debt instrument may be unable or unwilling to make dividend, interest and principal payments when due and the related risk that the value of a debt instrument may decline because of concerns about the issuer’s ability to make such payments. Credit risk may be heightened for the fund because it may invest a substantial portion of its net assets in “high yield” or “junk” debt; such securities, while generally offering higher yields than investment-grade debt with similar maturities, involve greater risks, including the possibility of dividend or interest deferral, default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay dividends or interest and repay principal. Credit risk is heightened for loans in which the fund invests because companies that issue such loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy.
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Interest Rate Risk—If interest rates rise, the prices of debt instruments held by the fund will fall.
Income Risk—If interest rates fall, the income from the fund’s portfolio will decline as the fund invests the proceeds from new share sales, or from matured or called debt instruments, at interest rates that are below the portfolio’s current earnings rate.
Loan Settlement Risk—Portfolio transactions in loans may settle in as short as seven days but typically can take up to two or three weeks, and in some cases much longer. Unlike the securities markets, there is no central clearinghouse for loan trades, and the loan market has not established enforceable settlement standards or remedies for failure to settle.
Liquidity Risk—The fund invests a substantial portion of its assets in lower-quality debt issued by companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. If the economy experiences a sudden downturn, or if the debt markets for such companies become distressed, the fund may have particular difficulty selling its assets in sufficient amounts, at reasonable prices and in a sufficiently timely manner to raise the cash necessary to meet any potentially heavy redemption requests by fund shareholders.
Small Fund Risk—The fund currently has less assets than larger funds, and like other relatively small funds, large inflows and outflows may impact the fund’s market exposure for limited periods of time, causing the fund’s performance to vary from that of the fund’s model portfolio. This impact may be positive or negative, depending on the direction of market movement during the period affected. The fund does not generally limit large inflows and outflows by particular investors, but it has policies in place which seek to reduce the impact of these flows when it has prior knowledge of them. If any individual shareholder (or several shareholders whose investment in the fund is controlled by a single decision-maker such as an advisor) owns a large percentage of the fund’s shares, and if such shareholder chooses to redeem his or her shares at one time, the fund may have difficulty selling its assets in a timely manner to raise the cash necessary to meet the redemption request, in which case the fund may have to borrow money to do so. In such an instance, the fund’s remaining shareholders would bear the costs of such borrowings, and the fund would be subject to leverage risk (to the extent such leverage exceeded the amount of portfolio sales awaiting settlement) as long as such borrowings were outstanding. Rapid portfolio sales in response to such a large redemption might also cause the fund to experience above-normal transaction costs, and might disrupt the overall composition of the fund’s portfolio and thereby impede the adviser’s ability to optimally pursue its investment strategy.
Convertible Security Risk—The value of the fund’s convertible securities may decline in response to such factors as rising interest rates and fluctuations in the market price of the common stock underlying the convertible securities.
Non-U.S. Investment Risk—Non-U.S. companies or U.S. companies with significant non-U.S. operations may be subject to risks in addition to those of companies that principally operate in the United States as a result of, among other things, political, social and economic developments abroad and different legal, regulatory and tax environments.
Derivatives Risk—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. These risks are heightened when the fund’s portfolio manager uses derivatives to enhance the fund’s 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.
As with any mutual fund investment, loss of money is a risk of investing. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Fund Performance
Fund performance is not included in this prospectus because the fund has not been in existence for a full calendar year.
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Section 1 Fund Summaries
Management
Investment Adviser
Nuveen Fund Advisors, Inc.
Sub-Adviser
Symphony Asset Management LLC (“Symphony”)
Portfolio Managers
Gunther Stein and Jenny Rhee serve as portfolio managers of the fund.
Mr. Stein, Chief Executive Officer and Chief Investment Officer at Symphony, and Ms. Rhee, Portfolio Manager at Symphony, have been members of the fund’s management team since its inception.
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 through a financial advisor or other financial intermediary or directly from the fund. The fund’s initial and subsequent investment minimums generally are as follows, although the fund may reduce or waive the minimums in some cases:
Class A and Class C | Class R3 | Class I | ||||
Eligibility and Minimum Initial Investment | $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. | Available only through certain retirement plans.
No minimum. | 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 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. | |||
Minimum Additional Investment | $100 | No minimum. | No minimum. |
Tax Information
The fund’s distributions are taxable and will generally be taxed as ordinary income or capital gains.
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 and its distributor 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 to recommend the fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
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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 Nuveen’s website at www.nuveen.com.
Nuveen Fund Advisors, Inc. (“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. Nuveen Fund Advisors 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, IL 60606. Nuveen Fund Advisors is a wholly-owned 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 “MDP Acquisition”). The investor group led by Madison Dearborn Partners, LLC includes affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”). Merrill Lynch has since been acquired by Bank of America Corporation. Nuveen Fund Advisors has adopted policies and procedures that address arrangements with Bank of America Corporation (including Merrill Lynch) that may give rise to certain conflicts of interest.
Each fund is dependent upon services and resources provided by its investment adviser, Nuveen Fund Advisors, and therefore the investment adviser’s parent, Nuveen Investments. Nuveen Investments increased its level of debt in connection with the MDP Acquisition. Nuveen Investments believes that monies generated from operations and cash on hand will be adequate to fund debt service requirements, capital expenditures and working capital requirements for the foreseeable future. However, Nuveen Investments’ ability to continue to fund these items, to service its debt and to maintain compliance with covenants in its debt agreements may be affected by general economic, financial, competitive, legislative, legal and regulatory factors and by its ability to refinance or repay outstanding indebtedness with scheduled maturities beginning in 2014. In the event that Nuveen Investments breaches certain of the covenants included in its debt agreements, the breach of such covenants may result in the accelerated payment of its outstanding debt, increase the cost of such debt or generally have an adverse effect on the financial condition of Nuveen Investments.
Nuveen Fund Advisors has selected its wholly-owned subsidiary, Nuveen Asset Management, LLC, located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to the Nuveen Short Duration Bond Fund (“Short Duration Bond Fund”), Nuveen Multi-Strategy Core Bond Fund (“Multi-Strategy Core Bond Fund”) and Nuveen High Yield Bond Fund (“High Yield Bond Fund”). Nuveen Asset Management, LLC manages the investment of the funds’ assets on a discretionary basis, subject to the
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supervision of Nuveen Fund Advisors. Nuveen Fund Advisors and Nuveen Asset Management, LLC retain the right to reallocate investment advisory responsibilities and fees between themselves in the future.
The portfolio managers of the Short Duration Fund are Chris J. Neuharth, Brenda A. Langenfeld and Peter L. Agrimson. Mr. Neuharth, Ms. Langenfeld and Mr. Agrimson joined Nuveen Asset Management, LLC on January 1, 2011, in connection with the firm’s acquisition of a portion of the asset management business of FAF Advisors, Inc. (“FAF”).
• | Mr. Neuharth, CFA, is a Managing Director at Nuveen Asset Management, LLC. He entered the financial services industry in 1983 and joined FAF in 2000. |
• | Ms. Langenfeld, CFA, is a Vice President at Nuveen Asset Management, LLC. She entered the financial services industry with FAF in 2004. |
• | Mr. Agrimson, CFA, is an Assistant Vice President at Nuveen Asset Management, LLC. He entered the financial services industry in 2005 and joined FAF in 2009. |
The portfolio managers of the Multi-Strategy Core Bond Fund are Timothy A. Palmer, Jeffrey J. Ebert and Marie A. Newcome. Mr. Palmer, Mr. Ebert and Ms. Newcome joined Nuveen Asset Management, LLC on January 1, 2011, in connection with the firm’s acquisition of a portion of FAF’s asset management business.
• | Mr. Palmer, CFA, is a Managing Director at Nuveen Asset Management, LLC. He entered the financial services industry in 1986 and joined FAF in 2003. |
• | Mr. Ebert, CFA, is a Senior Vice President at Nuveen Asset Management, LLC. He entered the financial services industry with FAF in 1991. |
• | Ms. Newcome, CFA, is a Vice President at Nuveen Asset Management, LLC. She entered the financial services industry in 1992 and joined FAF in 2004. |
The portfolio managers of the High Yield Bond Fund are John T. Fruit and Jeffrey T. Schmitz. Mr. Fruit and Mr. Schmitz joined Nuveen Asset Management, LLC on January 1, 2011, in connection with the firm’s acquisition of a portion of FAF’s asset management business.
• | Mr. Fruit, CFA, is a Senior Vice President at Nuveen Asset Management, LLC. He entered the financial services industry in 1988 and joined FAF in 2001. |
• | Mr. Schmitz, CFA, is a Vice President at Nuveen Asset Management, LLC. He entered the financial services industry in 1987 and joined FAF in 2006. Prior to joining FAF, Mr. Schmitz worked as a senior credit research analyst at Deephaven Capital Management, as a trading risk manager at Cargill Financial Services, and in various risk oversight roles with the Office of the Comptroller of the Currency. |
Nuveen Fund Advisors has selected its affiliate, Symphony Asset Management LLC (“Symphony”), located at 555 California Street, Suite 2975, San Francisco, California 94104, to serve as sub-adviser to the Nuveen Symphony Credit Opportunities Fund (“Credit Opportunities Fund”). Symphony manages the investment of the fund’s assets on a discretionary basis, subject to the supervision of Nuveen Fund Advisors. Symphony specializes in the management of market neutral equity and debt strategies and senior loan and other debt portfolios. The portfolio managers of the Credit Opportunities Fund are Gunther Stein and Jenny Rhee.
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• | Mr. Stein is the Chief Executive Officer and Chief Investment Officer at Symphony and is responsible for leading Symphony’s fixed-income and equity investments strategies and research and overseeing firm trading. Prior to joining Symphony in 1999, Mr. Stein was a high yield portfolio manager at Wells Fargo Bank, where he managed a high yield portfolio, was responsible for investing in public high yield bonds and bank loans and managed a team of credit analysts. |
• | Ms. Rhee joined Symphony in 2001 and is currently responsible for trading and portfolio management of fixed-income securities. Prior to joining Symphony, Ms. Rhee was an analyst with Epoch Partners. |
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.
At such time as the funds receive an exemptive order permitting them to do so, or as otherwise permitted by the Investment Company Act of 1940, as amended (the “1940 Act”), or the rules thereunder, the funds may, without obtaining approval of shareholders, retain an unaffiliated sub-adviser to perform some or all of the portfolio management functions on behalf of the funds.
Management Fee
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 qualifying fund assets managed by Nuveen Fund Advisors.
The annual fund-level fee, payable monthly, is based upon the average daily net assets of each fund as follows:
Average Daily Net Assets | Short Duration Bond Fund | Multi-Strategy | High Yield Bond Fund | Credit Opportunities Fund | ||||||||||||
For the first $125 million | 0.2000 | % | 0.3000 | % | 0.4000 | % | 0.4500 | % | ||||||||
For the next $125 million | 0.1875 | % | 0.2875 | % | 0.3875 | % | 0.4375 | % | ||||||||
For the next $250 million | 0.1750 | % | 0.2750 | % | 0.3750 | % | 0.4250 | % | ||||||||
For the next $500 million | 0.1625 | % | 0.2625 | % | 0.3625 | % | 0.4125 | % | ||||||||
For the next $1 billion | 0.1500 | % | 0.2500 | % | 0.3500 | % | 0.4000 | % | ||||||||
For net assets over $2 billion | 0.1250 | % | 0.2250 | % | 0.3250 | % | 0.3750 | % |
The complex-level fee is the same for each fund and begins at a maximum rate of 0.2000% of each fund’s average daily net assets, based upon complex-level assets of $55 billion, with breakpoints for 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, 2010, the effective complex-level fee for each fund was 0.1822% of the fund’s average daily net assets.
For the most recent fiscal year, each fund (other than the Credit Opportunities Fund, which did not have a full fiscal year of operations) paid Nuveen Fund Advisors the following management fees (net of fee waivers and expense reimbursements, where applicable) as a percentage of average daily net assets:
Short Duration Bond Fund | 0.27 | % | ||
Multi-Strategy Core Bond Fund | 0.18 | % | ||
High Yield Bond Fund | 0.47 | % |
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Nuveen Fund Advisors has agreed to waive fees and reimburse expenses through January 31, 2012, so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) for the Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund do not exceed 0.60%, 0.70% and 0.95%, respectively, of the average daily net assets of any class of fund shares. These expense limitations may be terminated or modified prior to that date only with the approval of the Board of Trustees of the fund.
Nuveen Fund Advisors has agreed to waive fees and reimburse expenses so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) for the Credit Opportunities Fund do not exceed 0.85% through January 31, 2013, and 1.35% thereafter, of the average daily net assets of any class of fund shares. The expense limitation expiring January 31, 2013, may be terminated or modified prior to that date only with the approval of the Board of Trustees of the fund. The expense limitation in effect thereafter may be terminated or modified only with the approval of shareholders of the fund.
Information regarding the Board of Trustees’ approval of investment advisory contracts for the funds is available in the funds’ annual report for the fiscal year ended September 30, 2010.
Each fund’s investment objective may not be changed without shareholder approval. 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.
Corporate Debt Securities
The funds may invest in corporate debt securities. Corporate debt securities are fixed income securities issued by businesses to finance their operations. Notes, bonds, debentures and commercial paper are the most common types of corporate debt securities, with the primary difference being their maturities and secured or unsecured status. Commercial paper has the shortest term and is usually unsecured.
The broad category of corporate debt securities includes debt issued by U.S. and non-U.S. companies of all kinds, including those with small-, mid- and large-capitalizations. Corporate debt may be rated investment-grade or below investment-grade and may carry fixed or floating rates of interest. The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may also invest in private placements.
Derivatives
The funds may use futures, interest rate swaps, total return swaps, credit default swaps, options and other derivative instruments to seek to enhance return, to hedge some of the risks of their investments in securities, as a substitute for a position in the underlying asset, to reduce transaction costs, to maintain full market exposure (which means to adjust the characteristics of their investments to more closely approximate those of the markets in which they invest), to manage cash flows, to limit exposure to losses due to changes to non-U.S. currency exchange rates or to preserve capital. The
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Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may also use non-U.S. currency swaps.
Asset-Backed Securities
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may invest in asset-backed securities. 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. Examples include certificates for automobile receivables (CARs) and so-called plastic bonds, backed by credit card receivables.
Mortgage-Backed Securities
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may invest in mortgage-backed securities. A mortgage-backed security is a type of pass-through security backed by an ownership interest in a pool of mortgage loans. Mortgage-backed securities are most commonly issued or guaranteed by the Government National Mortgage Association (“Ginnie Mae”), Federal National Mortgage Association (“Fannie Mae”) or Federal Home Loan Mortgage Corporation (“Freddie Mac”), but may also be issued or guaranteed by other private issuers.
U.S. Government Securities
The funds may invest in U.S. government securities. U.S. government securities include U.S. Treasury obligations and securities issued or guaranteed by various agencies of the U.S. government, or by various instrumentalities which have been established or sponsored by the U.S. government. U.S. Treasury obligations are backed by the “full faith and credit” of the U.S. government. Securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government.
Corporate Loans
The funds may invest in corporate loans, including senior secured bank loans, unsecured and/or subordinated bank loans, loan participations and unfunded contracts. These loans are made by or issued to corporations primarily to finance acquisitions, refinance existing debt, support organic growth, or pay out dividends, and are typically originated by large banks and are then syndicated out to institutional investors as well as to other banks. Corporate loans typically bear interest at a floating rate although some loans pay a fixed rate. Due to their lower place in the borrower’s capital structure, unsecured and/or subordinated loans involve a higher degree of overall risk than senior bank loans of the same borrower. Loan participations are loans that are shared by a group of lenders. Unfunded contracts are commitments by lenders (such as the funds) to loan an amount in the future or that is due to be contractually funded in the future. The Credit Opportunities Fund may invest up to 35% of its net assets in loans.
Convertible Securities
The funds may invest in convertible securities, which are hybrid securities that combine the investment characteristics of bonds and common stocks.
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Convertible securities typically consist of debt securities that may be converted within a specified period of time (typically for the entire life of the security) into a certain amount of common stock or other equity security of the same or a different issuer at a predetermined price. They also include debt securities with warrants or common stock attached and derivatives combining the features of debt securities and equity securities. Convertible securities entitle the holder to receive interest paid or accrued on debt securities, until the securities mature or are redeemed, converted or exchanged. The Credit Opportunities Fund may invest up to 30% of its net assets in convertible securities.
Non-U.S. Investments
The Credit Opportunities Fund may invest up to 25% of its net assets in U.S. dollar-denominated debt issued by non-U.S. companies that is traded over-the-counter or listed on an exchange. The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may invest in a variety of non-U.S. debt securities issued by corporate and governmental entities. Although the funds will concentrate their non-U.S. investments in developed countries, they may invest up to 10% of their net assets in securities of issuers located in emerging market countries.
Repurchase Agreements
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may engage in repurchase, reverse repurchase and forward purchase agreements. These investments will generally be short-term in nature and are primarily used to seek to enhance returns and manage liquidity.
Municipal Obligations
The Short Duration Bond Fund and Multi-Strategy Core Bond Fund may invest in municipal bonds that pay interest that is exempt from regular federal income tax. Income from these bonds may be subject to the federal alternative minimum tax.
States, local governments and municipalities and other issuing authorities issue municipal bonds to raise money for certain purposes such as 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.
High Yield Debt
The High Yield Bond Fund invests at least 80% of its net assets in securities rated below investment grade or unrated securities deemed by the fund’s portfolio management team to be of comparable quality. The Multi-Strategy Core Bond Fund may invest up to 25% of its net assets and the Short Duration Bond Fund may invest up to 20% of its net assets in such securities. The Credit Opportunities Fund invests a substantial portion of its net assets in such securities. Debt securities rated below investment grade are commonly referred to as “high yield” or “junk” bonds. These types of bonds are issued by companies without long track records of sales and earnings, or by companies or municipalities that have questionable credit strength. High yield debt and comparable unrated securities: (a) will likely have some quality and protective characteristics that, in the judgment of the rating agency evaluating the instrument, are outweighed by large uncertainties or
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major risk exposures to adverse conditions; and (b) are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligation.
Investment Companies and Other Pooled Investment Vehicles
The funds may invest up to 10% of their net assets in securities of other open-end or closed-end investment companies, including exchange-traded funds (“ETFs”), that invest primarily in securities of the types in which the funds may invest directly. In addition, the funds may invest a portion of their assets in pooled investment vehicles (other than investment companies) that invest primarily in securities of the types in which the funds may invest directly. The funds may invest in the securities of ETFs in excess of the limits imposed under the 1940 Act pursuant to exemptive orders obtained by certain ETFs and their sponsors from the Securities and Exchange Commission. An ETF is a fund that holds a portfolio of securities generally designed to track the performance of a securities index, including industry, sector, country and region indexes. ETFs trade on a securities exchange and their shares may, at times, trade at a premium or discount to their net asset value.
As a shareholder in a pooled investment vehicle, the funds will bear their ratable share of that vehicle’s expenses, and would remain subject to payment of the funds’ advisory and administrative fees with respect to assets so invested. Shareholders would therefore be subject to duplicative expenses to the extent the funds invest in other pooled investment vehicles. In addition, the funds will incur brokerage costs when purchasing and selling shares of ETFs. Securities of other pooled investment vehicles may be leveraged, in which case the value and/or yield of such securities will tend to be more volatile than securities of unleveraged vehicles.
Cash Equivalents and Short-Term Investments
Under normal market conditions, the funds may hold up to 10% of their net assets in cash or cash equivalents, money market funds and short-term fixed-income securities. The percentage of each fund invested in such holdings varies and depends on several factors, including market conditions. 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 management team believes securities in which it normally invests have elevated risks due to political or economic factors and in other extraordinary circumstances. For more information on eligible short-term investments, see the statement of additional information.
When-Issued or Delayed-Delivery Transactions
The funds may buy or sell securities on a when-issued or delayed-delivery basis, paying for or taking delivery of the securities at a later date, normally within 15 to 45 days of the trade. These transactions involve an element of risk because the value of the security to be purchased may decline to a level below its purchase price before the settlement date.
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’ website—www.nuveen.com—by clicking the “Our Products—Mutual Funds” section on the home page and following the
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applicable link for your fund in the “Search Mutual Fund Family” section. By following these links, you can obtain a list of your fund’s 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 following the end of each month with an approximately one-month lag. This information will remain available on the funds’ 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.
Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund
Nuveen Asset Management, LLC takes an objective approach to the market in selecting securities for the Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund. Depending on the market conditions, Nuveen Asset Management, LLC may emphasize sector rotation, security selection, or yield-curve positioning as the best way to achieve fund goals of consistent, superior long-term performance on a risk-adjusted basis across the full range of market environments. Nuveen Asset Management, LLC is supported by a fixed income strategy committee which provides economic analysis and asset allocation input into the investment decision process, sector teams which provide input into the attractiveness of individual fixed income sectors and research analysts which provide analysis on individual potential portfolio investments.
Credit Opportunities Fund
Symphony bases its investment process on a fundamental, bottom-up credit analysis, leveraging the team’s expertise and extensive experience investing across the capital structure. Each member of the fixed-income team conducts substantial research to develop a keen insight into one or more sectors. Analysts assess sector dynamics, company business models and asset quality. Team members generate buy, sell and swap ideas by taking views and formulating opinions on sectors, companies and seniority of the security. Specific recommendations are based on analysis of the relative value of the various types of debt and senior equity within a company’s capital structure. These ideas are presented and discussed daily with the team and portfolio managers.
Inherent in Symphony’s research process is the assessment of risk for each individual security. As such, Symphony concentrates its efforts on sectors where there is sufficient transparency to assess the downside risk and where firms have assets to support meaningful recovery in case of default. In their focus on downside protection, they favor opportunities where valuations can be quantified and risks assessed. Symphony is generally skeptical toward sectors with less transparency or measurable assets.
In Symphony’s credit analysis process, analysts are required to evaluate both the upside and the downside to any credit. Downside analysis involves estimating the recovery value if the firm were to declare bankruptcy. As a result, the portfolio is likely to favor sectors with higher levels of hard assets and/or operating models which are likely to generate ongoing cash flow, even in bankruptcy.
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The portfolio is built name by name, based on the perceived return potential of the individual investments and the diversification benefits of investing across a range of sectors, issuers and security types. Based on Symphony’s outlook for a sector, the Credit Opportunities Fund may under-weight or over-weight that sector within the portfolio.
Risk is inherent in all investing. Investing in a mutual fund—even the most conservative—involves risk, including the risk that you may receive little or no return on your investment or even that you may lose part or all of your investment. Therefore, before investing you should consider carefully the following risks that you assume when you invest in these funds. Because of these and other risks, you should consider an investment in these funds to be a long-term investment.
Market risk: The market values of the securities owned by the funds may decline, at times sharply and unpredictably. Market values of fixed income securities are affected by a number of different factors, including changes in interest rates, the credit quality of issuers, liquidity and general economic and market conditions. Lower-quality fixed income securities may suffer larger price declines and more volatility than higher-quality bonds in response to negative issuer-specific developments or general economic news. During times of low demand or decreased liquidity in the bond market, prices of bonds, particularly lower-quality bonds, may decline sharply without regard to changes in interest rates or issuer-specific credit-related events. Such periods of decreased liquidity may occur when dealers that make a market in bonds are unable or unwilling to do so, particularly during periods of economic or financial distress.
Credit risk: Credit risk is the risk that an issuer of a debt security will be unable or unwilling to make interest and principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer’s ability or willingness to make such payments. Credit risk may be heightened for the funds because they may invest in “high yield,” “high risk” or “junk” securities; such securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer’s capacity to pay dividends and interest and repay principal. Credit risk is heightened for the corporate loans in which the funds invests because companies that issue such loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy.
Interest rate risk: Because the funds invest in fixed income securities, the funds are subject to interest rate risk. Interest rate risk is the risk that the value of a fund’s portfolio will decline because of rising interest rates. Interest rate risk is generally lower for shorter-term investments and higher for longer-term investments. Duration is a common measure of interest rate risk. Duration measures a bond’s expected life on a present value basis, taking into account the bond’s yield, interest payments and final maturity. Duration is a reasonably accurate measure of a bond’s price sensitivity to changes in interest rates. The longer the duration of a bond, the greater the bond’s price sensitivity is to changes in interest rates. Interest rate risk may be increased by a fund’s investment in inverse floating rate securities and forward commitments because of the leveraged nature of these investments.
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Income risk: The income earned from a fund’s portfolio may decline because of falling market interest rates. This can result when the fund invests the proceeds from new share sales, or from matured or called debt securities, at market interest rates that are below the portfolio’s current earnings rate. Also, if a fund invests in inverse floating rate securities, whose income payments vary inversely with changes in short-term market rates, the fund’s income may decrease if short-term interest rates rise.
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, management risk and liquidity risk. 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. These risks are heightened when the management team uses derivatives to enhance a fund’s 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 funds. In addition, when the funds invest in certain derivative securities, including, but not limited to, when-issued securities, forward commitments, futures contracts and interest rate swaps, they are effectively leveraging their 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 each investment team’s derivatives strategies will depend on its 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. In addition, in volatile markets, 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.
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 each fund’s assets can decline, as can the value of a fund’s distributions.
Corporate loan risk: The corporate loans in which the funds may invest may not be (i) rated at the time of investment, (ii) registered with the Securities and Exchange Commission or (iii) listed on a securities exchange. In addition, the amount of public information available with respect to such loans may be less extensive than that available for more widely rated, registered and exchange-listed securities. Because no active trading market currently exists for some corporate loans, such loans may be illiquid and more difficult to value than more liquid instruments for which a trading market does exist. Portfolio transactions in corporate loans may settle in as short as seven days, but typically can take up to two or three weeks, and in some cases much longer. Unlike the securities markets, there is no central clearinghouse for trading corporate loans, and the corporate loan market has not established enforceable settlement standards or remedies for failure to settle. Because the interest rates of floating-rate corporate loans may reset frequently, if market interest rates fall, the loans’ interest rates will be reset to lower levels, potentially reducing a fund’s income. Because the interest rates of the corporate loans may reset frequently, if market interest rates fall, the loans’ interest rates will be reset to lower levels, potentially reducing a fund’s income.
Affiliates of the fund’s adviser or sub-adviser may participate in the primary and secondary market for loans. Because of limitations imposed by applicable law,
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the presence of such affiliates in the loan market may restrict the fund’s ability to acquire some loans or affect the timing or price of loan acquisitions. Also, because the adviser or sub-adviser may wish to invest in the publicly-traded securities of an obligor, the fund may not have access to material non-public information regarding the obligor to which other investors have access.
Mortgage-related securities risk: The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may invest in mortgage-related securities. Such securities have unique risks. The value of the funds’ mortgage-backed securities can fall if the owners of the underlying mortgages pay off their mortgages sooner than expected, which could happen when interest rates fall, or later than expected or not at all, which could happen when interest rates rise or economic conditions more generally deteriorate. If the underlying mortgages are paid off sooner than expected, the fund may have to reinvest this money in mortgage-backed or other securities that have lower yields. Mortgage-backed securities are most commonly issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac, but may also be issued or guaranteed by other private issuers. Mortgage-backed securities issued by a private issuer generally entail greater risk than obligations directly or indirectly guaranteed by the U.S. government or a government-sponsored entity. The downturn in the housing market and the resulting recession in the United States has negatively affected, and may continue to negatively affect, both the price and liquidity of mortgage-backed securities.
Asset-backed securities risk: The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may also invest in asset-backed securities. With asset-backed securities, payment of interest and repayment of principal may be impacted by the cash flows generated by the assets backing these securities. The value of a fund’s asset-backed securities may also be affected by changes in interest rates and economic conditions more generally; the availability of information concerning the interests in and structure of the pools of purchase contracts, financing leases or sales agreements that are represented by these securities; and the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables and the entities that provide any supporting letters of credit, surety bonds or other credit enhancements. Like mortgage-backed securities, the deterioration of the U.S. economy has negatively affected, and may continue to negatively affect, both the price and liquidity of asset-backed securities.
Convertible security risk: Convertible securities have characteristics of both equity and debt securities and, as a result, are exposed to certain additional risks that are typically associated with debt. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, a convertible security’s market value also tends to reflect the market price of the common stock of the issuing company, particularly when the stock price is greater than the convertible security’s conversion price (i.e., the predetermined price or exchange ratio at which the convertible security can be converted or exchanged for the underlying common stock). Convertible securities are also exposed to the risk that an issuer is unable to meet its obligation to make dividend or interest and principal payments when due as a result of changing financial or market conditions. Convertible securities generally offer lower interest or dividend yields than non-convertible debt securities of similar credit quality because of the potential for capital appreciation.
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Mandatory convertible securities are distinguished as a subset of convertible securities because the conversion is not optional and the conversion price at maturity is based solely upon the market price of the underlying common stock, which may be significantly less than par or the price (above or below par) paid. Mandatory convertible securities generally do not limit the potential for loss to the same extent as securities convertible at the option of the holder.
Changing distribution levels risk: The level of monthly income distributions paid by a fund depends on the amount of income paid by the securities the fund holds. Such payments are not guaranteed and their levels will change. However, changes in the value of the securities generally should not affect the amount of income they pay.
Borrowing and leverage risks: Each fund may borrow for temporary or emergency purposes, including to meet redemption requests, pay dividends, or clear portfolio transactions. Borrowing may exaggerate changes in the net asset value of a fund’s shares and may affect a fund’s net income. When a fund borrows money, it must pay interest and other fees, which will reduce the fund’s 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 in the bond market, such borrowings might be outstanding for longer periods of time. A fund will not purchase additional portfolio securities while outstanding borrowings exceed 5% of the value of its total assets. In addition, when a fund invests in certain derivative securities, including, but not limited to, inverse floating rate securities, when-issued securities, forward commitments, futures contracts and interest rate swaps, it is effectively leveraging its investments. Certain investments or trading strategies that involve leverage can exaggerate changes in the net asset value of a fund’s shares and can result in losses that exceed the amount originally invested.
Liquidity risk: The funds may invest in lower-quality debt instruments issued by companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. If the economy experiences a sudden downturn, or if the debt markets for such companies becomes distressed, a fund may have particular difficulty selling its assets in sufficient amounts, at reasonable prices and in a sufficiently timely manner to raise the cash necessary to meet any potentially heavy redemption requests by fund shareholders. In such event, there would be a greater chance that a fund may be forced to curtail or suspend redemptions, in which case you might experience a delay or inability to liquidate your investment at the desired time or in the desired amount.
Non-U.S. risk: Non-U.S. companies or U.S. companies with significant non-U.S. operations may be subject to risks in addition to those of companies 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 risks include the following:
• | 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. |
• | Non-U.S. markets may be less liquid and more volatile than U.S. markets. |
Currency risk: Non-U.S. securities often trade in currencies other than the U.S. dollar. Changes in currency exchange rates may affect a fund’s net asset value, the value of dividends and interest earned, and gains and losses realized on the sale of securities. An increase in the strength of the U.S. dollar relative to these other currencies may cause the value of a fund to decline. Certain non-U.S. currencies may be particularly volatile, and non-U.S. governments may intervene in the currency markets, causing a decline in value or liquidity in the fund’s non-U.S. holdings whose value is tied to the affected non-U.S. currency. ADRs and other non-U.S. securities denominated in U.S. dollars are also subject to currency risk.
Correlation risk: 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.
Small fund risk: The Credit Opportunities Fund currently has less assets than larger funds, and like other relatively small funds, large inflows and outflows may impact the fund’s market exposure for limited periods of time, causing the fund’s performance to vary from that of the fund’s model portfolio. This impact may be positive or negative, depending on the direction of market movement during the period affected. The Credit Opportunities Fund does not generally limit large inflows and outflows by particular investors, but it has policies in place which seek to reduce the impact of these flows where Nuveen has prior knowledge of them. If any individual shareholder (or several shareholders whose investment in the Credit Opportunities Fund is controlled by a single decision-maker such as an advisor) owns a large percentage of the fund’s shares, and if such shareholder chooses to redeem his or her shares at one time, the fund may have difficulty selling its assets in a timely manner to raise the cash necessary to meet the redemption request, in which case the fund may have to borrow money to do so. In such an instance, the fund’s remaining shareholders would bear the costs of such borrowings, and the fund would be subject to leverage risk (to the extent such leverage exceeded the amount of portfolio sales awaiting settlement) as long as such borrowings were outstanding. Rapid portfolio sales in response to such a large redemption might also cause the Credit Opportunities Fund to experience above-normal transaction costs, and might disrupt the overall composition of the fund’s portfolio and thereby impede the adviser’s ability to optimally pursue its investment strategy. The fund anticipates that early in its existence a substantial portion (likely greater than 25%) of its outstanding shares will be held by a single shareholder or investment decision-maker who is not affiliated with Nuveen Fund Advisors.
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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 fund’s average daily net assets, which compensates your financial advisor or other financial intermediary for providing ongoing service to you. Nuveen Investments, LLC (“Nuveen”), a wholly-owned 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:
Short Duration Bond Fund
Amount of Purchase | Sales Charge as % of Public Offering Price | Sales Charge as % of Net Amount Invested | Maximum Commission as % of Public Offering Price | |||||||||
Less than $50,000 | 2.25 | % | 2.30 | % | 1.75 | % | ||||||
$50,000 but less than $100,000 | 2.00 | 2.04 | 1.75 | |||||||||
$100,000 but less than $250,000 | 1.25 | 1.27 | 1.00 | |||||||||
$250,000 and over* | — | — | 0.60 |
* | You can purchase $250,000 or more of Class A shares at net asset value without an up-front sales charge. Nuveen pays financial intermediaries of record a commission equal to 0.60% of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of the amount over $5 million. Unless the financial intermediary waived the commission, you may be assessed a contingent deferred sales charge (“CDSC”) of 0.60% if you redeem any of your shares within 6 months of purchase, 0.50% if you redeem any of your shares within 12 months of purchase and 0.25% if you redeem any of your shares within 18 months of purchase. The CDSC is calculated on the lower of your purchase price or your redemption proceeds. You do not pay a CDSC on any Class A shares you purchase by reinvesting dividends. |
Multi-Strategy Core Bond Fund
Amount of Purchase | Sales Charge as % of Public Offering Price | Sales Charge as % of Net Amount Invested | Maximum Commission as % of Public Offering Price | |||||||||
Less than $50,000 | 4.25 | % | 4.44 | % | 3.75 | % | ||||||
$50,000 but less than $100,000 | 4.00 | 4.17 | 3.50 | |||||||||
$100,000 but less than $250,000 | 3.50 | 3.63 | 3.00 | |||||||||
$250,000 but less than $500,000 | 2.50 | 2.56 | 2.25 | |||||||||
$500,000 but less than $1,000,000 | 2.00 | 2.04 | 1.75 | |||||||||
$1,000,000 and over* | — | — | 1.00 |
* | You can purchase $1 million or more of Class A shares at net asset value without an up-front sales charge. Nuveen 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 the financial intermediary waived the commission, you may be assessed a contingent deferred sales charge (“CDSC”) of 1% if you redeem any of your shares within 6 months of purchase, 0.75% if you redeem any of your shares within 12 months of purchase and 0.50% if you redeem any of your shares within 18 months of purchase. The CDSC is calculated on the lower of your purchase price or your redemption proceeds. You do not pay a CDSC on any Class A shares you purchase by reinvesting dividends. |
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High Yield Bond Fund
Amount of Purchase | Sales Charge as % of Public Offering Price | Sales Charge as % of Net Amount Invested | Maximum Commission as % of Public Offering Price | |||||||||
Less than $50,000 | 4.75 | % | 4.99 | % | 4.25 | % | ||||||
$50,000 but less than $100,000 | 4.50 | 4.71 | 4.00 | |||||||||
$100,000 but less than $250,000 | 3.50 | 3.63 | 3.00 | |||||||||
$250,000 but less than $500,000 | 2.50 | 2.56 | 2.25 | |||||||||
$500,000 but less than $1,000,000 | 2.00 | 2.04 | 1.75 | |||||||||
$1,000,000 and over* | — | — | 1.00 |
* | You can purchase $1 million or more of Class A shares at net asset value without an up-front sales charge. Nuveen 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 the financial intermediary waived the commission, you may be assessed a contingent deferred sales charge (“CDSC”) of 1% if you redeem any of your shares within 6 months of purchase, 0.75% if you redeem any of your shares within 12 months of purchase and 0.50% if you redeem any of your shares within 18 months of purchase. The CDSC is calculated on the lower of your purchase price or your redemption proceeds. You do not pay a CDSC on any Class A shares you purchase by reinvesting dividends. |
Credit Opportunities Fund
Amount of Purchase | Sales Charge as % of Public Offering Price | Sales Charge as % of Net Amount Invested | Maximum Commission as % of Public Offering Price | |||||||||
Less than $50,000 | 4.75 | % | 4.99 | % | 4.25 | % | ||||||
$50,000 but less than $100,000 | 4.50 | 4.71 | 4.00 | |||||||||
$100,000 but less than $250,000 | 3.50 | 3.63 | 3.00 | |||||||||
$250,000 but less than $500,000 | 2.50 | 2.56 | 2.25 | |||||||||
$500,000 but less than $1,000,000 | 2.00 | 2.04 | 1.75 | |||||||||
$1,000,000 and over* | — | — | 1.00 |
* | You can purchase $1 million or more of Class A shares at net asset value without an up-front sales charge. Nuveen 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 the financial intermediary waived the commission, you may be assessed a contingent deferred sales charge (“CDSC”) of 1% if you redeem any of your shares within 6 months of purchase, 0.75% if you redeem any of your shares within 12 months of purchase and 0.50% if you redeem any of your shares within 18 months of purchase. The CDSC is calculated on the lower of your purchase price or your redemption proceeds. You do not pay a CDSC on any Class A shares you purchase by reinvesting dividends. |
Class B Shares
The Short Duration Bond Fund and Credit Opportunities Fund do not issue Class B shares. The Multi-Strategy Core Bond Fund and High Yield Bond Fund will issue Class B shares upon the exchange of Class B shares from another Nuveen Mutual Fund for which Boston Financial Data Services serves as transfer agent or for purposes of dividend reinvestment, but Class B shares are not available for new accounts or for additional investment into existing accounts.
Class B shares are subject to annual distribution and service fees of 1% of your fund’s 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 Nuveen for paying your financial advisor or other financial intermediary a 4% up-front sales commission, which includes an advance of the first year’s service fee. Nuveen retains the service and distribution fees on accounts with no financial intermediary of record. If you redeem your shares within six years of purchase, you will normally pay a CDSC as shown in the schedule below. The CDSC is based on your purchase or redemption
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price, whichever is lower. You do not pay a CDSC on any Class B shares you purchase by reinvesting dividends.
Years Since Purchase | 0-1 | 1-2 | 2-3 | 3-4 | 4-5 | 5-6 | Over 6 | |||||||||||||||||||||
CDSC | 5 | % | 4 | % | 4 | % | 3 | % | 2 | % | 1 | % | None |
Class B shares automatically convert to Class A shares eight years after you buy them so that the distribution fees you pay over the life of your investment are limited. You will continue to pay an annual service fee on any converted Class B shares.
Class C Shares
You can 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 fund’s 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 Nuveen for paying your financial advisor or other financial intermediary an ongoing sales commission as well as an advance of the first year’s service and distribution fees. Nuveen 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 your redemption proceeds. You do not pay a CDSC on any Class C shares you purchase by reinvesting dividends. Class C shares do not convert.
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 fund’s 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 R3 shares were initially offered by the Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund on August 1, 2008. The expense and performance information for Class R3 shares provided in Section 1 of the prospectus for periods prior to such date are estimated based on the actual expenses and performance of the funds’ other share classes.
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. Class I shares are not subject to sales charges or ongoing service or distribution fees. Class I shares 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 similar 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
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intermediaries that have accounts holding Class I shares with an aggregate value of at least $100,000. Nuveen 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, with no minimum initial investment, by the following categories of investors:
• | Certain trustees, directors and employees of Nuveen Investments and its subsidiaries. |
• | Certain advisory accounts of Nuveen Fund Advisors and its affiliates. |
• | Certain financial intermediary personnel. |
• | Certain bank or broker-affiliated trust departments. |
• | Certain eligible retirement plans as described in the statement of additional information. |
• | Certain additional categories of investors as described in the statement of additional information. |
Please refer to the statement of additional information for more information about Class A, Class B, 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
• | 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 that day of all of your prior purchases of any Nuveen Mutual Fund. |
• | 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. |
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 dependent children; 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:
• | Purchases of $1,000,000 or more. |
• | Monies representing reinvestment of Nuveen Mutual Fund distributions. |
• | Certain employer-sponsored retirement plans. |
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Section 3 How You Can Buy and Sell Shares
• | Certain employees and affiliates of Nuveen. Purchases by officers, trustees and former trustees of the Nuveen Funds, as well as bona fide full-time and retired employees of Nuveen, any parent company of Nuveen and subsidiaries thereof, and such employees’ immediate family members (as defined in the statement of additional information). |
• | Financial intermediary personnel. Purchases by any person who, for at least the last 90 days, has been an officer, director, or bona fide employee of any financial intermediary or any such person’s immediate family member. |
• | 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. |
• | Additional categories of investors. Purchases made by: (i) investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; and (ii) clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services. |
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 Nuveen 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 Nuveen receives your order. Orders received before the close of trading on a business day (normally, 4:00 p.m. New York time) will receive that day’s closing share price; otherwise, you will receive the next business day’s 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
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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.
Directly from the Funds
• | By mail. You may open an account directly with a fund 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. |
• | 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, follow the links under “Our Products” on www.nuveen.com to “Mutual Funds” and choose “Account Access” under the “Shareholder 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 Services—Fund Direct” below. |
• | 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 Services—Fund Direct” below. |
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 at (800) 257-8787 for copies of the necessary forms.
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 fund’s systematic investment plan. You can stop the deductions at any time by notifying your fund in writing.
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Section 3 How You Can Buy and Sell Shares
• | 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. |
• | From your paycheck. With your employer’s 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. |
• | Systematic exchanging. You can make systematic investments by authorizing Nuveen to exchange shares from one Nuveen Mutual Fund account into another identically registered Nuveen account of the same share class. |
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 fund’s systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent purchases of Class A or 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, and, if your shares are held with a financial intermediary, the financial intermediary must have the operational capability to support exchanges. 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.
The funds may change or cancel their exchange policy at any time upon 60 days’ notice. Each fund reserves the right to revise or suspend the exchange privilege, limit the amount or number of exchanges or reject any exchange.
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 DirectSM
The Fund Direct Program allows you to link your fund account to your bank account, transfer money electronically between these accounts and perform a variety of account transactions, including purchasing shares by telephone and investing through a systematic investment plan. You may also have dividends, distributions, redemption payments or systematic withdrawal plan payments sent directly to your bank account.
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
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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. The reinstatement privilege is not available for Class B shares.
You may sell (redeem) your shares on any business day. 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 day’s 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 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
• | 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: |
• | The fund’s name; |
• | Your name and account number; |
• | The dollar or share amount you wish to redeem; |
• | The signature of each owner exactly as it appears on the account; |
• | The name of the person to whom you want your redemption proceeds paid (if other than to the shareholder of record); |
• | The address where you want your redemption proceeds sent (if other than the address of record); and |
• | Any required signature guarantees. |
Guaranteed signatures are required if you are redeeming more than $50,000, you want the check payable to someone other than the shareholder of record or you want the check sent to another address (or the address of record has been changed within the last 30 days). Signature guarantees must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that a fund otherwise approves. A notary public cannot provide a signature guarantee.
• | On-line. You may redeem shares or exchange shares between existing, identically registered accounts on-line. To access your account, follow the links under “Our Products” on www.nuveen.com to “Mutual Funds” |
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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.
and choose “Account Access” under the “Shareholder 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. |
• | By telephone. If your account is held with the 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, Class B or Class C shares that are subject to a CDSC, you may be assessed a CDSC upon redemption. When you redeem Class A, Class B 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 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 Nuveen. 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 with a balance that has fallen below the account balance minimum of $1,000 for any reason, including market fluctuations.
If the funds elect to exercise this right, then annually the funds will assess a $15 low balance account fee on certain IRAs and Coverdell Education Savings Accounts with balances under the account balance minimum. 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.
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Financial intermediaries may apply their own procedures in attempting to comply with the funds’ low balance account policy. You will not be assessed a CDSC if your account is liquidated.
Redemptions In-Kind
The funds generally pay redemption proceeds in cash. Under unusual conditions that make cash payment unwise and for the protection of existing shareholders, the funds may pay all or a portion of your redemption proceeds in securities or other fund assets. Although it is unlikely that your shares would be redeemed in-kind, you would probably have to pay brokerage costs to sell the securities distributed to you, as well as taxes on any capital gains from that sale.
Special Settlement Policy
Large redemptions may require the Credit Opportunities Fund to liquidate a significant portion of its portfolio holdings. Therefore, in order to provide for the orderly liquidation of such holdings, proceeds from a redemption request in excess of $1 million will normally be available three business days after the redemption request is received. The fund may authorize longer or shorter settlement periods in its sole discretion. Because a large redemption could be disruptive to the fund and its portfolio, the fund requests that investors or advisers who are contemplating investments in the fund of $5 million or more consult with fund management to discuss the implications prior to making such an investment.
Redemption Fee Policy
The Credit Opportunities Fund charges a 2% redemption fee on the proceeds of fund shares redeemed or exchanged within 90 days of acquisition. Investors making purchases into the fund through a systematic investment plan will need to discontinue that plan at least 90 days before redeeming in full in order to avoid the redemption fee on recently purchased shares. The redemption fee is intended to offset the trading costs and fund operating expenses associated with frequent trading.
The Credit Opportunities Fund may waive the redemption fee on share redemptions or exchanges by shareholders investing through qualified retirement plans such as 401(k) plans only if the plan sponsor or administrator certifies that the plan does not have the operational capability to assess the fee. The fund also may waive the redemption fee on 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) in instances where the fund reasonably believes either that the intermediary has internal policies and procedures in place to effectively discourage inappropriate trading activity or that the redemptions were effected for reasons other than the desire to profit from short-term trading in fund shares.
The Credit Opportunities Fund may waive the redemption fee in other specified circumstances reasonably determined by the fund not to relate to inappropriate trading activity, and reserves the right to modify or eliminate redemption fee waivers at any time. For additional information, see “General Information—Frequent Trading” in this prospectus, and “Purchase and Redemption of Fund Shares—Frequent Trading Policy” and “Purchase and Redemption of Fund Shares—Redemption Fee Policy” in the statement of additional information.
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Section 3 How You Can Buy and Sell Shares
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.
The funds declare dividends daily and pay such dividends monthly. Your account will begin to accrue dividends on the business day after the day when the monies used to purchase your shares are collected by the transfer agent. Each fund seeks to pay monthly dividends at a level rate that reflects the past and projected net income of the fund. To help maintain more stable monthly distributions, the distribution paid by a fund for any particular monthly period may be more or less than the amount of net income actually earned by the fund during such period, and any such under- (or over-) distribution of income is reflected in the fund’s net asset value. This policy is designed to result in the distribution of substantially all of the funds’ net income over time. The funds declare and pay any taxable capital gains once a year at year end.
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, deposited directly into your bank account, paid to a third party, sent to an address other than your address of record or reinvested in shares of another Nuveen Mutual Fund. For further information, contact your financial advisor or call Nuveen at (800) 257-8787. 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 fund’s 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, 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.
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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 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, Nuveen will send you the statement. The tax status of your dividends is the same whether you reinvest your dividends or elect to receive them in cash. The sale of shares in your account may produce a gain or loss, and is a taxable event. For tax purposes, an exchange 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, federal law requires the fund to withhold federal income tax from your distributions and redemption proceeds at the then current rate.
Please consult the statement of additional information and your tax advisor for more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is commonly known as “buying the dividend.” The entire dividend may be taxable to you even though a portion of the dividend effectively represents a return of your purchase price.
Nuveen serves as the selling agent and distributor of the funds’ shares. In this capacity, Nuveen manages the offering of the funds’ shares and is responsible for all sales and promotional activities. In order to reimburse Nuveen for its costs in connection with these activities, including compensation paid to 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 Shares—What Share Classes We Offer” for a description of the distribution and service fees paid under this plan.
Under the plan, Nuveen receives a distribution fee for Class B, C and R3 shares primarily for providing compensation to financial intermediaries, including Nuveen, in connection with the distribution of shares. Nuveen receives a service fee for Class A, B, C and R3 shares to compensate financial intermediaries, including Nuveen, for providing ongoing account services to shareholders. These services may include establishing and maintaining shareholder accounts, answering shareholder inquiries and providing other personal services to shareholders. These fees also compensate Nuveen for other expenses, including printing and distributing prospectuses to persons other than shareholders, and preparing, printing and distributing advertising and sales literature and reports to shareholders used in connection with the sale of shares. Because these fees are paid out of a fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Long-term holders of Class B, C and R3 shares may pay more in distribution and service fees and CDSCs (Class B and C shares only) than the economic equivalent of the maximum front-end sales charge permitted under the Financial Industry Regulatory Authority Conduct Rules.
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Section 4 General Information
Other Payments to Financial Intermediaries
In addition to sales commissions and certain payments from distribution and service fees to financial intermediaries as previously described, Nuveen 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 firm’s recent gross sales of Nuveen Mutual Fund shares and/or total assets of Nuveen Mutual Funds held by the firm’s customers. The level of payments that Nuveen is willing to provide to a particular financial intermediary may be affected by, among other factors, the firm’s total assets held in and recent net investments into Nuveen Mutual Funds, the firm’s level of participation in Nuveen Mutual Fund sales and marketing programs, the firm’s 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 2010, these payments in the aggregate were approximately 0.035% to 0.040% 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. Nuveen may also make payments to financial intermediaries in connection with sales meetings, due diligence meetings, prospecting seminars and other meetings at which Nuveen 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, Nuveen 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 intermediary’s organization by, for example, placing the funds on a list of preferred or recommended funds and/or granting Nuveen and/or its affiliates preferential or enhanced opportunities to promote the funds in various ways within the intermediary’s organization.
The price you pay for your shares is based on each fund’s net asset value per share, which is determined as of the close of trading (normally 4:00 p.m. New York time) on each day the NYSE is open for business. Net asset value is calculated for each class of each fund by taking the value of the class’ total assets, including interest or dividends accrued but not yet collected, less all
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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 delegate.
In determining net asset value, expenses are accrued and applied daily, and securities and other assets for which market quotations are available are valued at market value. Common stocks and other equity securities are generally valued at the last sales price that day. However, securities admitted to trade on the NASDAQ National Market are valued, except as indicated below, at the NASDAQ Official Closing Price. Common stocks and other equity securities not listed on a securities exchange or the NASDAQ National Market are valued at the mean between the bid and asked prices. The prices of fixed-income securities are provided by a pricing service and based on the mean between the bid and asked prices. When price quotes are not readily available, the pricing service establishes fair value based on various factors, including prices of comparable securities.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Board of Trustees or its delegate at fair value. These securities generally include, but are not limited to, restricted securities (securities that may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of fund net asset value or makes it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, does not reflect the security’s “fair value.” As a general principle, the current “fair value” of a security is the amount that the owner might reasonably expect to receive for it upon its current sale. A variety of factors may be considered in determining the fair value of securities. In particular, for non-U.S.-traded securities whose principal local markets close before the time as of which the funds’ shares are priced, the funds on certain days may adjust the local closing price based upon such factors (which may be evaluated by an outside pricing service) 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. See the statement of additional information for details.
If a fund holds securities that are primarily listed on non-U.S. exchanges, the net asset value of the fund’s shares may change on days when shareholders will not be able to purchase or redeem the fund’s 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.
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Section 4 General Information
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 four “round trip” trades in a 12-month 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 may also suspend the trading privileges of any investor who makes a round trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
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. Nuveen, the funds’ 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 Nuveen 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 Nuveen 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 intermediary’s 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.
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,
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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 fund’s 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 Shares—Frequent Trading Policy” in the statement of additional information.
The custodian of the assets of the funds is State Street Bank & Trust Company, P.O. Box 5043, Boston, Massachusetts 02206-5043. The custodian also provides certain accounting services to the funds. The funds’ transfer, shareholder services and dividend paying agent, Boston Financial Data Services, P.O. Box 8530, Boston, Massachusetts 02266-8530, performs bookkeeping, data processing and administrative services for the maintenance of shareholder accounts.
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Section 5 Financial Highlights
The financial highlights table is intended to help you understand each fund’s financial performance for the past five fiscal years or the life of the fund, if shorter. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned (or lost) on an investment in a fund (assuming reinvestment of all dividends and distributions). The information has been audited by PricewaterhouseCoopers LLP, whose report for the most recent fiscal year, along with the funds’ financial statements, are included in the annual report, which is available upon request.
Nuveen Short Duration Bond Fund
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Investment Income (Loss)(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains | Return of Capital | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratios of Expenses to Average Net Assets(c) | Ratios of Net Investment Income (Loss) to Average Net Assets(c) | Portfolio Turnover Rate(d) | ||||||||||||||||||||||||||||||||||||||||||
Class A (12/04) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 19.74 | $ | .46 | $ | .39 | $ | .85 | $ | (.72 | ) | $ | — | $ | (0.05 | ) | $ | (.77 | ) | $ | 19.82 | 4.36 | % | $ | 76,629 | .78 | % | 2.33 | % | 72 | % | |||||||||||||||||||||||||
2009 | 19.31 | .56 | .72 | 1.28 | (.85 | ) | — | — | (.85 | ) | 19.74 | 7.02 | 47,607 | .65 | 2.93 | 117 | ||||||||||||||||||||||||||||||||||||||||
2008 | 19.40 | .84 | (.05 | ) | .79 | (.88 | ) | — | — | (.88 | ) | 19.31 | 4.03 | 10,450 | .64 | 4.26 | 90 | |||||||||||||||||||||||||||||||||||||||
2007 | 19.24 | .91 | .12 | 1.03 | (.87 | ) | — | — | (.87 | ) | 19.40 | 5.49 | 4,101 | .62 | 4.67 | 138 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.69 | .77 | (.14 | ) | .63 | (1.08 | ) | — | — | (1.08 | ) | 19.24 | 3.29 | 439 | .64 | 4.02 | �� | 234 | ||||||||||||||||||||||||||||||||||||||
Class C (12/04) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 19.77 | .30 | .41 | .71 | (.59 | ) | — | (0.04 | ) | (.63 | ) | 19.85 | 3.65 | 50,187 | 1.53 | 1.54 | 72 | |||||||||||||||||||||||||||||||||||||||
2009 | 19.33 | .43 | .72 | 1.15 | (.71 | ) | — | — | (.71 | ) | 19.77 | 6.27 | 25,215 | 1.40 | 2.21 | 117 | ||||||||||||||||||||||||||||||||||||||||
2008 | 19.42 | .70 | (.05 | ) | .65 | (.74 | ) | — | — | (.74 | ) | 19.33 | 3.19 | 8,068 | 1.39 | 3.57 | 90 | |||||||||||||||||||||||||||||||||||||||
2007 | 19.26 | .73 | .16 | .89 | (.73 | ) | — | — | (.73 | ) | 19.42 | 4.71 | 2,260 | 1.38 | 3.76 | 138 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.69 | .63 | (.14 | ) | .49 | (.92 | ) | — | — | (.92 | ) | 19.26 | 2.54 | 1,067 | 1.36 | 3.25 | 234 | |||||||||||||||||||||||||||||||||||||||
Class R3 (8/08) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 19.72 | .48 | .33 | .81 | (.69 | ) | — | (0.04 | ) | (.73 | ) | 19.80 | 4.06 | 874 | 1.03 | 2.42 | 72 | |||||||||||||||||||||||||||||||||||||||
2009 | 19.31 | .53 | .68 | 1.21 | (.80 | ) | — | — | (.80 | ) | 19.72 | 6.82 | 653 | .90 | 2.77 | 117 | ||||||||||||||||||||||||||||||||||||||||
2008(f) | 19.49 | — | ** | (.04 | ) | (.04 | ) | (.14 | ) | — | — | (.14 | ) | 19.31 | (.40 | ) | 149 | .87 | * | (.13 | )* | 90 | ||||||||||||||||||||||||||||||||||
Class I (12/04)(e) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 19.71 | .50 | .39 | .89 | (.77 | ) | — | (0.05 | ) | (.82 | ) | 19.78 | 4.52 | 59,622 | .53 | 2.53 | 72 | |||||||||||||||||||||||||||||||||||||||
2009 | 19.30 | .61 | .70 | 1.31 | (.90 | ) | — | — | (.90 | ) | 19.71 | 7.29 | 24,164 | .40 | 3.16 | 117 | ||||||||||||||||||||||||||||||||||||||||
2008 | 19.38 | .88 | (.03 | ) | .85 | (.93 | ) | — | — | (.93 | ) | 19.30 | 4.29 | 14,827 | .39 | 4.49 | 90 | |||||||||||||||||||||||||||||||||||||||
2007 | 19.21 | .92 | .17 | 1.09 | (.92 | ) | — | — | (.92 | ) | 19.38 | 5.82 | 9,717 | .38 | 4.72 | 138 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.68 | .77 | (.11 | ) | .66 | (1.13 | ) | — | — | (1.13 | ) | 19.21 | 3.46 | 9,602 | .53 | 3.97 | 234 |
(a) | Per share Net Investment Income (Loss) is calculated using the average daily shares method. |
(b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
(c) | After expense reimbursement from Nuveen Fund Advisors, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the fund’s net cash on deposit with the custodian bank, where applicable. |
(d) | Excluding dollar roll transactions, where applicable. |
(e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(f) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
* | Annualized. |
** | Rounds to less than $.01 per share. |
52
Section 5 Financial Highlights
Nuveen Multi-Strategy Core Bond Fund
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Investment Income (Loss)(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratios of Expenses to Average Net Assets(c) | Ratios of Net Investment Income to Average Net Assets(c) | Portfolio Turnover Rate(d) | |||||||||||||||||||||||||||||||||||||||
Class A (12/04) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 20.40 | $ | .77 | $ | 1.14 | $ | 1.91 | $ | (1.04 | ) | $ | (.02 | ) | $ | (1.06 | ) | $ | 21.25 | 9.49 | % | $ | 32,191 | .88 | % | 3.73 | % | 157 | % | |||||||||||||||||||||||
2009 | 19.06 | .87 | 1.58 | 2.45 | (.91 | ) | (.20 | ) | (1.11 | ) | 20.40 | 13.76 | 13,740 | .75 | 4.50 | 360 | ||||||||||||||||||||||||||||||||||||
2008 | 19.28 | .95 | (.23 | ) | .72 | (.94 | ) | — | (.94 | ) | 19.06 | 3.57 | 6,787 | .74 | 4.90 | 289 | ||||||||||||||||||||||||||||||||||||
2007 | 19.29 | 1.00 | (.08 | ) | .92 | (.93 | ) | — | (.93 | ) | 19.28 | 4.92 | 3,281 | .73 | 5.17 | 278 | ||||||||||||||||||||||||||||||||||||
2006 | 19.73 | .88 | (.34 | ) | .54 | (.98 | ) | — | (.98 | ) | 19.29 | 2.86 | 1,282 | .75 | 4.62 | 241 | ||||||||||||||||||||||||||||||||||||
Class B (12/04) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 20.50 | .66 | 1.11 | 1.77 | (.89 | ) | (.02 | ) | (.91 | ) | 21.36 | 8.74 | 2,383 | 1.63 | 3.17 | 157 | ||||||||||||||||||||||||||||||||||||
2009 | 19.15 | .70 | 1.63 | 2.33 | (.78 | ) | (.20 | ) | (.98 | ) | 20.50 | 12.87 | 2,416 | 1.50 | 3.62 | 360 | ||||||||||||||||||||||||||||||||||||
2008 | 19.34 | .85 | (.25 | ) | .60 | (.79 | ) | — | (.79 | ) | 19.15 | 3.04 | 1,572 | 1.27 | 4.39 | 289 | ||||||||||||||||||||||||||||||||||||
2007 | 19.30 | .88 | (.06 | ) | .82 | (.78 | ) | — | (.78 | ) | 19.34 | 4.35 | 474 | 1.42 | 4.57 | 278 | ||||||||||||||||||||||||||||||||||||
2006 | 19.73 | .74 | (.35 | ) | .39 | (.82 | ) | — | (.82 | ) | 19.30 | 2.06 | 51 | 1.38 | 3.84 | 241 | ||||||||||||||||||||||||||||||||||||
Class C (12/04) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 20.42 | .63 | 1.16 | 1.79 | (.89 | ) | (.02 | ) | (.91 | ) | 21.30 | 8.85 | 21,085 | 1.63 | 3.06 | 157 | ||||||||||||||||||||||||||||||||||||
2009 | 19.08 | .76 | 1.55 | 2.31 | (.77 | ) | (.20 | ) | (.97 | ) | 20.42 | 12.91 | 11,323 | 1.50 | 3.95 | 360 | ||||||||||||||||||||||||||||||||||||
2008 | 19.30 | .80 | (.23 | ) | .57 | (.79 | ) | — | (.79 | ) | 19.08 | 2.84 | 2,531 | 1.49 | 4.14 | 289 | ||||||||||||||||||||||||||||||||||||
2007 | 19.29 | .84 | (.05 | ) | .79 | (.78 | ) | — | (.78 | ) | 19.30 | 4.19 | 1,578 | 1.48 | 4.34 | 278 | ||||||||||||||||||||||||||||||||||||
2006 | 19.73 | .73 | (.35 | ) | .38 | (.82 | ) | — | (.82 | ) | 19.29 | 2.01 | 266 | 1.44 | 3.90 | 241 | ||||||||||||||||||||||||||||||||||||
Class R3 (8/08) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 20.39 | .80 | 1.08 | 1.88 | (.99 | ) | (.02 | ) | (1.01 | ) | 21.26 | 9.35 | 238 | 1.13 | 3.85 | 157 | ||||||||||||||||||||||||||||||||||||
2009 | 19.04 | .80 | 1.61 | 2.41 | (.86 | ) | (.20 | ) | (1.06 | ) | 20.39 | 13.49 | 182 | 1.00 | 4.19 | 360 | ||||||||||||||||||||||||||||||||||||
2008(f) | 19.05 | .05 | .09 | .14 | (.15 | ) | — | (.15 | ) | 19.04 | .64 | 150 | .99 | * | 1.77 | * | 289 | |||||||||||||||||||||||||||||||||||
Class I (12/04)(e) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 20.39 | .84 | 1.11 | 1.95 | (1.09 | ) | (.02 | ) | (1.11 | ) | 21.23 | 9.73 | 34,586 | .63 | 4.07 | 157 | ||||||||||||||||||||||||||||||||||||
2009 | 19.05 | .83 | 1.67 | 2.50 | (.96 | ) | (.20 | ) | (1.16 | ) | 20.39 | 14.05 | 20,516 | .50 | 4.36 | 360 | ||||||||||||||||||||||||||||||||||||
2008 | 19.28 | .86 | (.10 | ) | .76 | (.99 | ) | — | (.99 | ) | 19.05 | 3.83 | 49,336 | .49 | 4.47 | 289 | ||||||||||||||||||||||||||||||||||||
2007 | 19.26 | 1.01 | (.01 | ) | 1.00 | (.98 | ) | — | (.98 | ) | 19.28 | 5.29 | 9,689 | .48 | 5.24 | 278 | ||||||||||||||||||||||||||||||||||||
2006 | 19.72 | .86 | (.29 | ) | .57 | (1.03 | ) | — | (1.03 | ) | 19.26 | 3.03 | 9,623 | .63 | 4.44 | 241 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
(c) | After expense reimbursement from Nuveen Fund Advisors, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the fund’s net cash on deposit with the custodian bank, where applicable. |
(d) | Excluding dollar roll transactions. |
(e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(f) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
* | Annualized. |
Section 5 Financial Highlights
53
Nuveen High Yield Bond Fund
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Investment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains | Return of Capital | Total | Ending Net Asset Value | Total Return(b) | Ending Net Assets (000) | Ratios of Expenses to Average Net Assets(c) | Ratios of Net Investment Income to Average Net Assets(c) | Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||||
Class A (12/04) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 16.15 | $ | 1.44 | $ | 1.25 | $ | 2.69 | $ | (1.40 | ) | $ | — | $ | — | $ | (1.40 | ) | $ | 17.44 | 17.31 | % | $ | 36,443 | 1.08 | % | 8.59 | % | 139 | % | ||||||||||||||||||||||||||
2009 | 16.92 | 1.30 | (.62 | ) | .68 | (1.19 | ) | — | (.26 | ) | (1.45 | ) | 16.15 | 5.94 | 41,921 | .85 | 9.15 | 124 | ||||||||||||||||||||||||||||||||||||||
2008 | 19.55 | 1.25 | (2.41 | ) | (1.16 | ) | (1.35 | ) | — | (.12 | ) | (1.47 | ) | 16.92 | (6.41 | ) | 22,339 | .84 | 6.72 | 141 | ||||||||||||||||||||||||||||||||||||
2007 | 19.37 | 1.55 | .08 | 1.63 | (1.45 | ) | — | — | (1.45 | ) | 19.55 | 8.61 | 9,100 | .83 | 7.85 | 160 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.39 | 1.33 | .16 | 1.49 | (1.51 | ) | — | — | (1.51 | ) | 19.37 | 8.01 | 438 | .85 | 6.96 | 115 | ||||||||||||||||||||||||||||||||||||||||
Class B (12/04) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 16.13 | 1.32 | 1.24 | 2.56 | (1.27 | ) | — | — | (1.27 | ) | 17.42 | 16.48 | 1,567 | 1.83 | 7.86 | 139 | ||||||||||||||||||||||||||||||||||||||||
2009 | 16.91 | 1.22 | (.66 | ) | .56 | (1.09 | ) | — | (.25 | ) | (1.34 | ) | 16.13 | 5.11 | 1,745 | 1.60 | 8.72 | 124 | ||||||||||||||||||||||||||||||||||||||
2008 | 19.53 | 1.08 | (2.37 | ) | (1.29 | ) | (1.25 | ) | — | (.08 | ) | (1.33 | ) | 16.91 | (7.17 | ) | 2,585 | 1.59 | 5.76 | 141 | ||||||||||||||||||||||||||||||||||||
2007 | 19.36 | 1.34 | .14 | 1.48 | (1.31 | ) | — | — | (1.31 | ) | 19.53 | 7.82 | 1,855 | 1.58 | 6.78 | 160 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.39 | 1.13 | .19 | 1.32 | (1.35 | ) | — | — | (1.35 | ) | 19.36 | 7.07 | 217 | 1.57 | 5.97 | 115 | ||||||||||||||||||||||||||||||||||||||||
Class C (12/04) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 16.11 | 1.31 | 1.25 | 2.56 | (1.27 | ) | — | — | (1.27 | ) | 17.40 | 16.49 | 35,016 | 1.84 | 7.84 | 139 | ||||||||||||||||||||||||||||||||||||||||
2009 | 16.88 | 1.20 | (.63 | ) | .57 | (1.09 | ) | — | (.25 | ) | (1.34 | ) | 16.11 | 5.12 | 32,131 | 1.60 | 8.45 | 124 | ||||||||||||||||||||||||||||||||||||||
2008 | 19.51 | 1.10 | (2.40 | ) | (1.30 | ) | (1.22 | ) | — | (.11 | ) | (1.33 | ) | 16.88 | (7.13 | ) | 20,690 | 1.59 | 5.91 | 141 | ||||||||||||||||||||||||||||||||||||
2007 | 19.35 | 1.38 | .09 | 1.47 | (1.31 | ) | — | — | (1.31 | ) | 19.51 | 7.72 | 8,620 | 1.58 | 7.02 | 160 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.39 | 1.13 | .18 | 1.31 | (1.35 | ) | — | — | (1.35 | ) | 19.35 | 7.01 | 678 | 1.59 | 5.99 | 115 | ||||||||||||||||||||||||||||||||||||||||
Class R3 (8/08) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 16.13 | 1.44 | 1.21 | 2.65 | (1.36 | ) | — | — | (1.36 | ) | 17.42 | 17.05 | 145 | 1.34 | 8.56 | 139 | ||||||||||||||||||||||||||||||||||||||||
2009 | 16.91 | 1.28 | (.64 | ) | .64 | (1.17 | ) | — | (.25 | ) | (1.42 | ) | 16.13 | 5.66 | 132 | 1.10 | 9.12 | 124 | ||||||||||||||||||||||||||||||||||||||
2008(e) | 18.32 | .09 | (1.26 | ) | (1.17 | ) | (.17 | ) | — | (.07 | ) | (.24 | ) | 16.91 | (6.57 | ) | 138 | 1.07 | * | 3.07 | * | 141 | ||||||||||||||||||||||||||||||||||
Class I (12/04)(d) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 16.13 | 1.47 | 1.26 | 2.73 | (1.44 | ) | — | — | (1.44 | ) | 17.42 | 17.62 | 73,974 | .80 | 8.79 | 139 | ||||||||||||||||||||||||||||||||||||||||
2009 | 16.90 | 1.34 | (.62 | ) | .72 | (1.23 | ) | — | (.26 | ) | (1.49 | ) | 16.13 | 6.20 | 108,222 | .60 | 9.45 | 124 | ||||||||||||||||||||||||||||||||||||||
2008 | 19.53 | 1.31 | (2.42 | ) | (1.11 | ) | (1.39 | ) | — | (.13 | ) | (1.52 | ) | 16.90 | (6.18 | ) | 77,255 | .59 | 7.03 | 141 | ||||||||||||||||||||||||||||||||||||
2007 | 19.35 | 1.45 | .23 | 1.68 | (1.50 | ) | — | — | (1.50 | ) | 19.53 | 8.89 | 10,534 | .58 | 7.35 | 160 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.40 | 1.37 | .14 | 1.51 | (1.56 | ) | — | — | (1.56 | ) | 19.35 | 8.14 | 9,692 | .76 | 7.06 | 115 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
(c) | After expense reimbursement from Nuveen Fund Advisors, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the fund’s net cash on deposit with the custodian bank, where applicable. |
(d) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(e) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
* | Annualized. |
54
Section 5 Financial Highlights
Symphony Credit Opportunities Fund
Class (Commencement Date) | Investment Operations | Less Distributions | Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Investment Income (Loss)(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Investment Income | Capital Gains | Total | End ing | Total Return(b) | Ending Net Assets (000) | Ratio of Expenses to Average Net Assets(c) | Ratio of Net Investment Income (Loss) to Average Net Assets(c) | Portfolio Turnover Rate | |||||||||||||||||||||||||||||||||||||||
Class A (4/10) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(d) | $ | 20.00 | $ | .45 | $ | .43 | $ | .88 | $ | (.46 | ) | $ | — | $ | (.46 | ) | $ | 20.42 | 4.48 | % | $ | 4,436 | 1.09 | %* | 5.31 | %* | 68 | % | ||||||||||||||||||||||||
Class C (4/10) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(d) | 20.00 | .38 | .43 | .81 | (.41 | ) | — | (.41 | ) | 20.40 | 4.12 | 1,359 | 1.84 | * | 4.53 | * | 68 | |||||||||||||||||||||||||||||||||||
Class R3 (4/10) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(d) | 20.00 | .43 | .42 | .85 | (.44 | ) | — | (.44 | ) | 20.41 | 4.34 | 1,276 | 1.34 | * | 5.04 | * | 68 | |||||||||||||||||||||||||||||||||||
Class I (4/10) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(d) | 20.00 | .47 | .44 | .91 | (.48 | ) | — | (.48 | ) | 20.43 | 4.61 | 16,385 | .84 | * | 5.54 | * | 68 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Total Return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total Return is not annualized. |
(c) | After expense reimbursement from Nuveen Fund Advisors, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the fund’s net cash on deposit with the custodian bank, where applicable. |
(d) | For the period April 28, 2010 (commencement of operations) through September 30, 2010. |
* | Annualized. |
Section 5 Financial Highlights
55
Section 6 Glossary of Investment Terms
• | Asset-backed securities: Fixed income securities backed by a pool of financial assets that individually cannot easily be traded. By pooling together a large portfolio of these illiquid assets, they can be converted into instruments that may be offered and sold more freely in the capital markets. An asset-backed security can be backed by any asset, like accounts receivables, credit card debt or other credit. |
• | Call feature: A feature that allows a bond issuer to redeem the bond before its maturity date. |
• | Citigroup 1-3 Year Treasury Index: An unmanaged index comprised of U.S. Treasury notes and bonds with maturities of one year or greater, but less than three years (minimum amount outstanding is $1 billion per issue). The since inception data for the index represents returns for the period 12/31/04-12/31/10, as returns for the index are calculated on a calendar month basis. |
• | Citigroup Broad Investment Grade Bond Index: An unmanaged index generally considered representative of the U.S. investment grade bond market. The since inception data for the index represents returns for the period 12/31/04-12/31/10, as returns for the index are calculated on a calendar month basis. |
• | Citigroup High Yield BB/B Index: An unmanaged index that comprises all high-yield issues rated BB or B by Standard & Poor’s for which Citigroup calculates a monthly return. The since inception data for the index represents returns for the period 12/31/04-12/31/10, as returns for the index are calculated on a calendar month basis. |
• | Commercial paper: Short-term, unsecured promissory notes issued by corporations, usually with high credit standings, in need of short-term loans. |
• | Corporate debt securities: Contractual obligations of a corporate issuer to pay a face amount or principal and interest in stated periods of time. Notes, bonds, debentures and commercial paper are types of corporate debt securities. |
• | Coupon: Payment the owner of a bond receives on a periodic basis from the issuer of the bond. |
• | Currency derivatives: Financial instruments whose performance is derived, at least in part, from the performance of an underlying currency. |
• | Debentures: Unsecured junior bonds that are generally issued by creditworthy firms. Convertible bonds are usually debentures. |
• | Derivatives: Financial instruments whose performance is derived from the performance of an underlying asset, security or index. Derivatives may be used to hedge risk, to exchange a floating rate of return for fixed rate of return or to gain investment exposure. Derivatives include futures, options and swaps, among other instruments. |
• | Dollar roll transactions: A form of repurchase agreement in which an investor sells a mortgage-backed security during one period and repurchases it in a subsequent period at a previously agreed-upon price. While the investor who sells the security gives up access to the principal and interest, the proceeds from the sale of the security could be reinvested and then used to repurchase the security later. The investor hopes that the difference between the original price and the repurchase |
56
Section 6 Glossary of Investment Terms
price (“the drop”) is high. A large difference between the original price and the repurchase price results in the security being considered “on special.” |
• | Duration exposure: A common gauge of the price sensitivity of a fixed income asset or portfolio to a change in interest rates. |
• | Emerging markets: The financial markets of developing economies in countries with low per capita income in the initial stages of their industrialization cycles. They 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. |
• | Fixed income or debt securities: A security whose coupon or periodic cash flows are known or the method of derivation is known at the time of purchase. |
• | Futures: Derivative contracts obligating buyers to purchase an asset or sellers to sell an asset at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. |
• | High yield or “junk” securities: Fixed income securities rated below the category of “BBB” by Standard & Poor’s or Fitch or the category of “Baa” by Moody’s. Because of the higher risk of default, these securities generally pay a higher yield than investment grade securities. These securities are frequently issued by corporations in the growth stage of their development or by established companies who are highly leveraged or whose operations or industries are depressed. |
• | Inverse floating rate securities: A variable-rate security whose coupon rate or interest rate changes in the direction opposite to that of some reference rate or market rate. |
• | Investment grade securities: Fixed income securities rated in the top four rating classifications, i.e., a rating of “BBB” or higher by Standard & Poor’s or Fitch or the category of “Baa” or higher by Moody’s. Investment grade securities have a lower probability of missing payments or going into default than high yield securities. |
• | Lipper High Current Yield Funds Category Average: Represents the average annualized total return for all reporting funds in the Lipper High Current Yield Fund category. |
• | Lipper Intermediate Investment Grade Debt Funds Category Average: Represents the average annualized total return for all reporting funds in the Lipper Intermediate Investment Grade Debt Fund category. |
• | Lipper Short Investment Grade Debt Funds Category Average: Represents the average annualized total return for all reporting funds in the Lipper Short Investment Grade Debt Fund category. |
• | Mortgage-related securities: A security representing an interest in a pool of mortgage loans. In a mortgage-related security, an issuer’s obligation to repay principal or pay interest on the security is secured by a large pool of mortgages or mortgage-backed securities. To create a mortgage-related security, an issuer will “package” a large number of |
Section 6 Glossary of Investment Terms
57
mortgage loans and issue securities that represent an interest in the income generated by the payments on these mortgages. As the homeowners on the mortgages in the pool pay interest on their loans or repay their principal, these payments flow through to the holders of the mortgage-related security. Mortgage-related securities can bear interest at either fixed or adjustable rates. |
• | Options: Derivative investments giving buyers the right to buy or to sell shares of a specified stock at a specified price on or before a given date. There are also options on currencies and other financial assets. |
• | Pooled investment vehicles: Investment vehicles designed to facilitate investment by combining capital from many investors to deploy it according to a particular investment strategy. |
• | Repurchase, reverse repurchase and forward purchase agreements: A repurchase agreement is a financial transaction in which a dealer, in effect, borrows money by selling securities and simultaneously agreeing to buy them back at a higher price at a later time. The dealer invests the money paid for the securities, hoping to get a higher return than he owes on his obligation to repurchase the securities. Repurchase agreements are commonly called “repos,” and they function in a way similar to a secured loan with the securities serving as collateral. In a reverse repurchase agreement, the dealer, in effect, loans money by buying securities and agreeing to sell them back to the customer at a higher price at a later date. In either case, the difference between the bought and sold price of the securities constitutes the yield on the transaction. A forward purchase agreement is a binding contract under which a commodity or financial instrument is bought or sold at the market price as of the date of the contract but is to be delivered on a stated future (forward) date in settlement of the contract. |
• | Short duration securities: Fixed income securities with maturities of less than three years. Due to their relative shorter maturity, short-duration securities tend to be less sensitive to changes in interest rates. |
• | Surety bonds: A three-way agreement between a surety company, a contractor and the project owner. If the contractor fails to comply with the contract, the surety assumes responsibility and ensures that the project is completed. |
• | Swaps: Derivative contracts in which two parties agree to exchange one stream of cash flows for another stream. Swap agreements define the dates when the cash flows will be paid and how the cash flows are calculated. |
• | Taxable fixed income market: Securities that offer predictable interest income and repayment of principal if held to maturity and are subject to issuer credit risk. The income earned on these securities is subject to federal and state income tax. The taxable fixed income market refers to the system where these securities can be exchanged. |
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Section 6 Glossary of Investment Terms
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your financial goals. The funds below are grouped by category.
Municipal-National
All-American Municipal Bond
High Yield Municipal Bond
Insured Municipal Bond
Intermediate Duration Municipal Bond
Intermediate Tax Free*
Limited Term Municipal Bond
Short Tax Free*
Tax Free*
Municipal-State
Arizona Municipal Bond
California High Yield Municipal Bond
California Insured Municipal Bond
California Municipal Bond
California Tax Free*
Colorado Municipal Bond
Colorado Tax Free*
Connecticut Municipal Bond
Florida Preference Municipal Bond
Georgia Municipal Bond
Kansas Municipal Bond
Kentucky Municipal Bond
Louisiana Municipal Bond
Maryland Municipal Bond
Massachusetts Insured Municipal Bond
Massachusetts Municipal Bond
Michigan Municipal Bond
Minnesota Intermediate Municipal Bond*
Municipal-State (continued)
Minnesota Municipal Bond*
Missouri Municipal Bond
Missouri Tax Free*
Nebraska Municipal Bond*
New Jersey Municipal Bond
New Mexico Municipal Bond
New York Insured Municipal Bond
New York Municipal Bond
North Carolina Municipal Bond
Ohio Municipal Bond
Ohio Tax Free*
Oregon Intermediate Municipal Bond*
Pennsylvania Municipal Bond
Tennessee Municipal Bond
Virginia Municipal Bond
Wisconsin Municipal Bond
Taxable Fixed Income
Core Bond*
High Income Bond*
High Yield Bond
Inflation Protected Securities*
Intermediate Government Bond*
Intermediate Term Bond*
Multi-Strategy Core Bond
Preferred Securities
Short Duration Bond
Short Term Bond*
Symphony Credit Opportunities
Total Return Bond*
Global/International
International*
International Select*
Santa Barbara International Equity
Symphony International Equity
Tradewinds Emerging Markets
Tradewinds Global All-Cap
Tradewinds Global All-Cap Plus
Tradewinds Global Flexible Allocation
Tradewinds Global Resources
Tradewinds International Value
Value
Equity Income*
Large Cap Value*
Mid Cap Value*
Multi-Manager Large-Cap Value
NWQ Large-Cap Value
NWQ Multi-Cap Value
NWQ Small-Cap Value
NWQ Small-Mid Cap Value
Small Cap Value*
Symphony Large-Cap Value
Tradewinds Value Opportunities
Growth
Large Cap Growth Opportunities*
Mid Cap Growth Opportunities*
Santa Barbara Growth
Small Cap Growth Opportunities*
Symphony Large-Cap Growth
Winslow Large-Cap Growth
Core
Large Cap Select*
Mid Cap Select*
Santa Barbara Dividend Growth
Small Cap Select*
Symphony Mid-Cap Core
Symphony Optimized Alpha
Symphony Small-Mid Cap Core
Real Assets
Global Infrastructure*
Real Estate Securities*
Asset Allocation
Conservative Allocation
Growth Allocation
Moderate Allocation
Strategy Aggressive Growth Allocation*
Strategy Balanced Allocation*
Strategy Conservative Allocation*
Strategy Growth Allocation*
Tactical Market Opportunities*
Quantitative/Enhanced
Enhanced Core Equity
Enhanced Mid-Cap
Quantitative Large Cap Core*
Index
Equity Index*
Mid Cap Index*
Small Cap Index*
*Former First American Fund.
Several additional sources of information are available to you, including the codes of ethics adopted by the funds, Nuveen, Nuveen Fund Advisors, Nuveen Asset Management, LLC and Symphony. The statement of additional information, incorporated by reference into this prospectus, contains detailed information on the policies and operation of the funds included in this prospectus. Additional information about the funds’ investments is available in the annual and semi-annual reports to shareholders. In the funds’ annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the funds’ performance during their last fiscal year. The funds’ most recent statement of additional information, annual and semi-annual reports and certain other information are available free of charge by calling Nuveen at (800) 257-8787, on the funds’ website at www.nuveen.com or through your financial advisor. Shareholders may call the toll free number above with any inquiries.
You may also obtain this and other fund information directly from the Securities and Exchange Commission (“SEC”). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 551-8090 for room hours and operation. You may also request fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street NE, Washington, D.C. 20549-1520.
The funds are series of Nuveen Investment Trust III, whose Investment Company Act file number is 811-09037.
Funds distributed by
Nuveen Investments, LLC
333 West Wacker Drive
Chicago, Illinois 60606
(800) 257-8787
www.nuveen.com
MPR-INV3-0111P
STATEMENT OF ADDITIONAL INFORMATION
NUVEEN SHORT TERM BOND FUND
Relating to the Acquisition of the Assets and Liabilities of
NUVEEN SHORT DURATION BOND FUND
333 West Wacker Dr.
Chicago, Illinois 60606
Telephone: (312) 917-7700
This Statement of Additional Information is not a prospectus but should be read in conjunction with the Proxy Statement/Prospectus dated , 2011 for use in connection with the Special Meeting of Shareholders (the “Special Meeting”) of Nuveen Short Duration Bond Fund (the “Acquired Fund”), a series of Nuveen Investment Trust III (the “Trust”), to be held on October 3, 2011. At the Special Meeting, shareholders of the Acquired Fund will be asked to approve the reorganization (the “Reorganization”) of the Acquired Fund into Nuveen Short Term Bond Fund (the “Acquiring Fund”; the Acquired Fund and the Acquiring Fund are collectively referred to as the “Funds”) as described in the Proxy Statement/Prospectus. Copies of the Proxy Statement/Prospectus may be obtained at no charge by writing to the Trust at the address shown above or by calling (800) 257-8787.
Further information about the Funds is contained in the Acquired Fund’s Statement of Additional Information dated January 18, 2011, as supplemented from time to time, and the Acquiring Fund’s Statement of Additional Information dated July 12, 2011, as supplemented from time to time, each of which is incorporated herein by reference only insofar as it relates to the Acquired Fund or Acquiring Fund, respectively. No other parts are incorporated by reference herein.
The unaudited pro forma financial information, attached hereto as Appendix A, is intended to present the financial condition and related results of operations of the Acquiring Fund as if the Reorganization had been consummated on April 30, 2011.
The Acquired Fund’s audited financial statements and related independent registered public accounting firm’s report for the Fund are contained in its Annual Report for the fiscal year ended September 30, 2010 and the unaudited financial statements contained in its Semi-Annual Report for the six-month period ended March 31, 2011 are incorporated herein by reference only insofar as they relate to the Fund. No other parts of the Annual Report or Semi-Annual Report are incorporated by reference herein.
The audited financial statements and related independent registered public accounting firm’s report for the Acquiring Fund are contained in the Fund’s Annual Report for the fiscal year ended June 30, 2010 and the unaudited financial statements contained in its Semi-Annual Report for the six-month period ended December 31, 2010 and are incorporated herein by reference only insofar as they relate to the Fund. No other parts of the Annual Report or Semi-Annual Report are incorporated by reference herein.
The date of this Statement of Additional Information is , 2011.
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Appendix A
Pro Forma Financial Information
The unaudited pro forma financial information set forth below is for informational purposes only and does not purport to be indicative of the financial condition that actually would have resulted if the Reorganization had been consummated. These pro forma numbers have been estimated in good faith based on information regarding the Acquired Fund and Acquiring Fund as of April 30, 2011, using the fees and expenses information shown in the Proxy Statement/Prospectus. The unaudited pro forma financial information should be read in conjunction with the historical financial statements of the Acquired Fund and Acquiring Fund, which are available in their respective annual and semi-annual shareholder reports.
Narrative Description of the Pro Forma Effects of the Reorganization
Note 1 — Reorganization
The unaudited pro forma information has been prepared to give effect to the proposed reorganization of the Acquired Fund into the Acquiring Fund pursuant to an Agreement and Plan of Reorganization (the “Plan”) as if the Reorganization occurred on April 30, 2011, except as noted in Note 3 below.
Acquired Fund | Acquiring Fund | |||
Nuveen Short Duration Bond Fund | Nuveen Short Term Bond Fund |
Note 2 — Basis of Pro Forma
The Reorganization will be accounted for as a reorganization for federal income tax purposes; therefore, no gain or loss will be recognized by the Acquiring Fund or its shareholders as a direct result of the Reorganization. The Acquired Fund and the Acquiring Fund are both registered open-end management investment companies. The Reorganization would be accomplished by the acquisition of all of the assets and the assumption of all of the liabilities of the Acquired Fund by the Acquiring Fund in exchange for shares of the Acquiring Fund and the distribution of such shares to Acquired Fund shareholders in complete liquidation of the Acquired Fund. The table below shows the class and shares that Acquired Fund shareholders would have received if the Reorganization were to have taken place on the period ended date in Note 1.
Acquired Fund Share Class | Acquiring Fund Shares Issued | Acquiring Fund Share Class | ||
Class A | 6,770,113 | Class A | ||
Class C | 6,082,872 | Class C | ||
Class I | 5,578,433 | Class I | ||
Class R3 | 53,747 | Class R3 |
Under accounting principles generally accepted in the United States of America, the historical cost of investment securities will be carried forward to the surviving entity, the Acquiring Fund, and the results of operations of the Acquiring Fund for pre-reorganization periods will not be restated.
A-1
Fund | Net Assets | As-of Date | ||||||
Nuveen Short Duration Bond Fund (Acquired Fund) | $ | 186,691,325 | April 30, 2011 | |||||
Nuveen Short Term Bond Fund (Acquiring Fund) | $ | 824,154,826 | April 30, 2011 | |||||
Nuveen Short Term Bond Fund (Pro Forma Combined) | $ | 1,010,770,151 | April 30, 2011 |
Note 3 — Pro Forma Adjustments
The table below reflects adjustments to annual expenses made to the pro forma combined Fund financial information as if the Reorganization had taken place on the first day of the period as disclosed in Note 1, using the fees and expenses information shown in the Proxy Statement/Prospectus. The pro forma information has been derived from the books and records used in calculating daily net asset values of the Acquired Fund and Acquiring Fund and has been prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect this information. Actual results could differ from those estimates.
Expense Category | Increase (Decrease) | |||
Investment advisory fees1 | ($74,189 | ) | ||
Postage and printing fees2 | ($51,780 | ) | ||
Professional fees2 | ($45,855 | ) | ||
Registration fees2 | ($43,142 | ) | ||
Custodian fees2 | ($19,218 | ) |
(1) | Reflects the impact of applying the Acquiring Fund’s fund-level and complex-level management fee rates following the Reorganization to the combined fund’s average net assets. |
(2) | Reflects the anticipated reduction of certain duplicative expenses eliminated as a result of the Reorganization. |
As a result of the anticipated decrease in expenses presented above, the Adviser anticipates a corresponding decrease in its required fee waiver and/or expense reimbursement of $56,545.
No significant accounting policies will change as a result of the Reorganization, specifically policies regarding security valuation or compliance with Subchapter M of the Code.
Note 4 — Reorganization Costs
The Acquired Fund is expected to be charged an estimated $69,000 in Reorganization costs. These costs represent the estimated nonrecurring expense of the Acquired Fund carrying out its obligations under the Plan and consist of management’s estimate of professional services fees, printing costs and mailing charges related to the proposed Reorganization to be borne by the Acquired Fund. The Acquiring Fund is expected to be charged approximately $76,000 of expenses in connection with the Reorganization. To the extent that payment of these costs would cause either the Acquiring Fund or the Acquired Fund to exceed an expense cap, Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”) will reimburse the portion of the expenses necessary for the fund to operate within the cap. Based on current expense levels, it is anticipated that Nuveen Fund Advisors will reimburse all expenses charged to the Acquired Fund and none of the expenses charged to the Acquiring Fund. The pro forma financial information has been adjusted for any costs related to the Reorganization to be borne by the Funds. Nuveen will bear 100% of these costs and expenses if the Reorganization is not consummated.
A-2
Note 5 — Accounting Survivor
The Acquiring Fund will be the accounting survivor. The surviving fund will have the portfolio management team, portfolio composition, strategies, investment objective, expense structure and policies/restrictions of the Acquiring Fund.
Note 6 — Capital Loss Carryforward
At April 30, 2011 the Acquired Fund had capital loss carryforwards of approximately $0.6 million. At April 30, 2011 the Acquiring Fund had capital loss carryforwards of approximately $21 million. For additional information regarding capital loss limitations, please see the section entitled Federal Income Tax Consequences in the Proxy Statement/Prospectus.
A-3
NUVEEN INVESTMENT FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
July 12, 2011
Nuveen Income Funds
Share Classes/Ticker Symbols | ||||||||
Class A | Class C | Class R3 | Class I | |||||
Nuveen Short Term Bond Fund | FALTX | FBSCX | Pending | FLTIX |
This Statement of Additional Information relates to the Class A, Class C, Class R3 and Class I shares of Nuveen Short Term Bond Fund (the “Fund”), which is a series of Nuveen Investment Funds, Inc. (“NIF”). This Statement of Additional Information is not a prospectus, but should be read in conjunction with the current Prospectus dated July 12, 2011. The financial statements included as part of the Fund’s Annual Report to shareholders for the fiscal year ended June 30, 2010 and the financial statements included as part of the Fund’s Semi-Annual Report to shareholders for the fiscal period ended December 31, 2010 for the Fund are incorporated by reference into this Statement of Additional Information. This Statement of Additional Information is incorporated into the Fund’s Prospectus by reference. To obtain copies of Prospectus or the Fund’s Annual Report or Semi-Annual Report at no charge, write the Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530, or call (800) 257-8787. You can also find the Fund’s Prospectus, Statement of Additional Information, and Annual Report online at www.nuveen.com. Please retain this Statement of Additional Information for future reference.
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69 | ||||
Reduction or Elimination of Up-Front Sales Charge on Class A Shares | 69 | |||
71 | ||||
Reduction or Elimination of Contingent Deferred Sales Charge | 71 | |||
72 | ||||
73 | ||||
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76 | ||||
77 |
Appendix A: Rating of Investments
Appendix B: Proxy Voting Policies and Procedures
3
Nuveen Investment Funds, Inc. (“NIF”) was incorporated in the State of Maryland on August 20, 1987 under the name “SECURAL Mutual Funds, Inc.” The Board of Directors and shareholders, at meetings held January 10, 1991, and April 2, 1991, respectively, approved amendments to the Articles of Incorporation providing that the name “SECURAL Mutual Funds, Inc.” be changed to “First American Investment Funds, Inc.” At a meeting held February 27, 2011, the Board of Directors approved the name “First American Investment Funds, Inc.” be changed to “Nuveen Investment Funds, Inc.” At a meeting held February 27, 2011, the Board of Directors approved the name “First American Investment Funds, Inc.” be changed to “Nuveen Investment Funds, Inc.”
NIF is organized as a series fund and currently issues its shares in 38 series. Each series of shares represents a separate investment portfolio with its own investment objective and policies (in essence, a separate mutual fund). The series of NIF to which this Statement of Additional Information (“SAI”) relates is Nuveen Short Term Bond Fund. Also, when the Fund is discussed herein, the word “Nuveen” is dropped from the beginning of its name. This series is referred to in this SAI as the “Fund.”
The Fund is a diversified open-end management investment company. The Fund was formerly advised by FAF Advisors, Inc. (“FAF”), a wholly-owned subsidiary of U.S. Bank National Association (“U.S. Bank”). On December 31, 2010, pursuant to an agreement among U.S. Bank, FAF, Nuveen Investments, Inc. (“Nuveen Investments”) and certain Nuveen affiliates, Nuveen Funds Advisors, Inc., (the “Adviser” or “Nuveen Funds Advisors”) acquired a portion of the asset management business of FAF and was selected as the investment adviser of the Fund (the “Transaction”).
Shareholders may purchase shares of the Fund through four separate classes, Class A, Class C, Class R3 and Class I, which provide for variations in distribution costs, shareholder servicing fees, voting rights and dividends. To the extent permitted by the Investment Company Act of 1940, as amended (“1940 Act”), the Fund may also provide for variations in other costs among the classes. In addition, a sales load is imposed on the sale of Class A and Class C shares of the Fund. Except for the foregoing differences among the classes pertaining to costs and fees, each share of the Fund represents an equal proportionate interest in the Fund.
The Articles of Incorporation and Bylaws of NIF provide that meetings of shareholders be held as determined by the Board of Directors and as required by the 1940 Act. Maryland corporation law requires a meeting of shareholders to be held upon the written request of shareholders holding 10% or more of the voting shares of NIF, with the cost of preparing and mailing the notice of such meeting payable by the requesting shareholders. The 1940 Act requires a shareholder vote for, among other things, all amendments to fundamental investment policies and restrictions, for approval of investment advisory contracts and amendments thereto, and for amendments to Rule 12b-1 distribution plans.
Additional Information Concerning Fund Investments
The principal investment strategies of the Fund are set forth in the Fund’s Prospectus. Additional information concerning principal investment strategies of the Fund, and other investment strategies that may be used by the Fund, is set forth below. The Fund has attempted to identify investment strategies that will be employed in pursuing the Fund’s investment objective. Additional information concerning the Fund’s investment restrictions is set forth below under “Investment Restrictions.”
If a percentage limitation on investments by the 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. The Fund, which is limited to investing in securities with specified ratings or of a certain credit quality, is not required to sell a security if its
4
rating is reduced or its credit quality declines after purchase, but may consider doing so. Descriptions of the rating categories of Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”), Fitch, Inc. (“Fitch”) and Moody’s Investors Service, Inc. (“Moody’s”) are contained in Appendix A.
References in this section to the Adviser also apply, to the extent applicable, to the sub-adviser of the Fund.
The Fund may invest in asset-backed securities as a principal investment strategy. 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.
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 entity’s 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.
To the extent required by Securities and Exchange Commission (“SEC”) guidelines, the 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 Fund’s 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 Fund, futures contracts and options on futures contracts, forward currency contracts, swaps and
5
when-issued and delayed delivery transactions. Assets used as offsetting positions, designated on the Fund’s 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.
Collateralized Debt Obligations
The Fund may invest in Collateralized Debt Obligations (“CDOs”) as a principal investment strategy. Similar to CMOs described below under “—Mortgage-Backed Securities,” CDOs are debt obligations typically issued by a private special-purpose entity and collateralized principally by debt securities (including, for example, high-yield, high-risk bonds, structured finance securities including asset-backed securities, CDOs, mortgage-backed securities and REITs) or corporate loans. The special purpose entity typically issues one or more classes (sometimes referred to as “tranches”) of rated debt securities, one or more unrated classes of debt securities that are generally treated as equity interests, and a residual equity interest. The tranches of CDOs typically have different interest rates, projected weighted average lives and ratings, with the higher rated tranches paying lower interest rates. One or more forms of credit enhancement are almost always necessary in a CDO structure to obtain the desired credit ratings for the most highly rated debt securities issued by the CDO. The types of credit enhancement used include “internal” credit enhancement provided by the underlying assets themselves, such as subordination, excess spread and cash collateral accounts, hedges provided by interest rate swaps, and “external” credit enhancement provided by third parties, principally financial guaranty insurance issued by monoline insurers. Despite this credit enhancement, CDO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and the disappearance of lower rated protecting tranches, market anticipation of defaults, as well as aversion to CDO securities as a class. CDOs can be less liquid than other publicly held debt issues, and require additional structural analysis.
The Fund may invest in corporate debt securities as a principal investment strategy. 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 issuer’s 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 issuer’s debt securities. As a result of the added debt burden, the credit quality and market value of an issuer’s existing debt securities may decline significantly.
Debt Obligations Rated Less Than Investment Grade
The Fund may invest in both investment grade and non-investment grade debt obligations as principal investment strategies. Debt obligations rated less than “investment grade” are sometimes referred to as “high yield securities” or “junk bonds.” To be consistent with the ratings methodology used by Barclays, the provider of the benchmarks of the Fund, a debt obligation is considered to be rated “investment grade” if two of Moody’s, Standard & Poor’s and Fitch rate the security investment-grade (i.e. at least Baa, BBB and BBB, respectively). If ratings are provided by only two of those rating agencies, the more conservative rating is used to determine whether the security is investment-grade. If only one of those rating agencies provides a rating, that rating is used. The Fund may not invest in non-investment grade debt obligations rated by two of Standard & Poor’s,
6
Fitch and Moody’s lower than CCC, CCC or Caa, respectively, unless only one of those rating agencies rates the security, in which case that rating must be at least CCC or Caa, or in unrated securities determined to be of comparable quality by the Adviser.
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. If the issuer of a security held by the Fund defaulted, the Fund might incur additional expenses to seek recovery.
In addition, the secondary trading market for non-investment grade debt obligations may be less developed than the market for investment grade obligations. This may make it more difficult for the Fund to value and dispose of such 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 the Fund’s use of non-investment grade debt obligations may be more dependent on the Adviser’s own credit analysis than is the case with investment grade obligations.
The Fund may use derivative instruments as a principal investment strategy, as described below. 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 domestic and foreign indices. Derivative instruments that the Fund may use include options contracts, futures contracts, options on futures contracts, forward currency contracts and swap transactions, all of which are described in more detail below.
The Fund may use derivatives for a variety of reasons, including as a substitute for investing directly in securities and currencies, as an alternative to selling a security short, as part of a hedging strategy (that is, for the purpose of reducing risk to the Fund), to manage the effective duration of the Fund’s portfolio, or for other purposes related to the management of the Fund. Derivatives permit the 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 the Fund’s 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 the Fund invests in derivatives at inopportune times or judges market conditions incorrectly, such investments may lower the Fund’s return or result in a loss. The Fund also could experience losses or limit its gains if the performance of its derivatives is poorly correlated with the underlying instruments or the Fund’s 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.
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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 agency’s 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 the Fund’s initial investment in the derivative. As discussed above under “—Asset Coverage Requirements,” the Fund may be required to segregate permissible liquid assets, or engage in other permitted measures, to “cover” the Fund’s 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, the 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, the Fund is permitted to set aside liquid assets in an amount equal to the Fund’s daily mark-to-market net obligation (i.e., the Fund’s 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 Fund can use are described below. The Fund’s portfolio managers may decide not to employ some or all of these instruments, and there is no assurance that any derivatives strategy used by the Fund will succeed. The Fund may employ new derivative instruments and strategies when they are developed, if those investment methods are consistent with the Fund’s investment objective and are permissible under applicable regulations governing the Fund.
Futures and Options on Futures
The Fund may engage in futures transactions as a principal investment strategy. The Fund may buy and sell futures contracts that relate to: (1) interest rates, (2) debt securities, (3) bond indices, (4) commodities, (5) foreign currencies, (6) stock indices, and (7) individual stocks. The Fund also may buy and write options on the futures contracts in which it may invest (“futures options”) and may write straddles, which consist of a call and a put option on the same futures contract. The Fund will only write options and straddles which are “covered.” This means that, when writing a call option, the 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 Fund’s 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
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also segregate liquid assets equivalent to the amount, if any, by which the put is “in the money.” The Fund 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 the Fund purchases or sells a security, no price is paid or received by the Fund upon the purchase or sale of a futures contract. Initially, the 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 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 the Fund as unrealized gains or losses. At any time prior to expiration of the futures contract, the 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 the Fund, the Fund may be entitled to the return of margin owed to it only in proportion to the amount received by the FCM’s 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”).
Limitations on the Use of Futures and Futures Options. The Commodities Futures Trading Commission has eliminated limitations on futures trading by certain regulated entities including registered investment companies. Consequently, registered investment companies may engage in unlimited futures transactions and options thereon provided they have claimed an exclusion from regulation as a commodity pool operator. NIF, on behalf of each of its series, has claimed such an exclusion. Thus, the Fund may use futures contracts and options thereon to the extent consistent with its investment objective. The requirements for qualification as a regulated investment company may limit the extent to which the Fund may enter into futures transactions. See “Taxation.”
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.
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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 Fund also is subject to the Adviser’s ability to predict correctly movements in the direction of the relevant market. For example, if the 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 the 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 day’s 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.
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 the 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. If the nature of hedgers and speculators in futures markets has shifted when it is time for the Fund to reinvest the proceeds of a maturing contract in a new futures contract, the 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
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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.
Forward Currency Contracts and other Foreign Currency Transactions
The Fund may enter into forward currency contracts as a principal investment strategy. 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 Fund is subject to the credit and performance risk of the counterparties to such contracts.
The following summarizes the principal currency management strategies involving forward contracts that may be used by the Fund. The Fund also may use currency futures contracts and options thereon (see “—Futures and Options on Futures” above), put and call options on foreign currencies (see “—Options Transactions” below) and currency swaps (see “—Swap Transactions” below) for the same purposes.
Transaction Hedges. When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, or when it anticipates receiving dividend payments in a foreign currency, the Fund might wish to lock in the U.S. dollar price of the security or the U.S. dollar equivalent of the dividend payments. To do so, the Fund could enter into a forward contract for the purchase or sale of the amount of foreign currency involved in the underlying transaction at a fixed amount of U.S. dollars per unit of the foreign currency. This is known as a “transaction hedge.” A transaction hedge will protect the Fund against a loss from an adverse change in the currency exchange rate during the period between the date on which the security is purchased or sold or on which the payment is declared, and the date on which the payment is made or received. Forward contracts to purchase or sell a foreign currency may also be used by the Fund in anticipation of future purchases or sales of securities denominated in a foreign currency, even if the specific investments have not yet been selected by the sub-adviser. This strategy is sometimes referred to as “anticipatory hedging.”
Position Hedges. The Fund could also use forward contracts to lock in the U.S. dollar value of portfolio positions. This is known as a “position hedge.” When the Fund believes that a foreign currency might suffer a substantial decline against the U.S. dollar, it could enter into a forward contract to sell an amount of that foreign currency approximating the value of some or all of the Fund’s portfolio securities denominated in that foreign currency. When the Fund believes that the U.S. dollar might suffer a substantial decline against a foreign currency, it could enter into a forward contract to buy that foreign currency for a fixed dollar amount. Alternatively, the Fund could enter into a forward contract to sell a different foreign currency for a fixed U.S. dollar amount if the Fund believes that the U.S. dollar value of that foreign currency will fall whenever there is a decline in the U.S. dollar value of the currency in which portfolio securities of the Fund are denominated. This is referred to as a “cross hedge.”
Shifting Currency Exposure. The Fund may also enter into forward contracts to shift its investment exposure from one currency into another. This may include shifting exposure from U.S. dollars to foreign currency or from one foreign currency to another foreign currency. This strategy tends to limit exposure to the currency sold, and increase exposure to the currency that is purchased, much as if the Fund had sold a security denominated in one currency and purchased an equivalent security denominated in another currency.
Risks Associated with Forward Currency Transactions. The sub-adviser’s decision whether to enter into foreign currency transactions will depend in part on its view regarding the direction and amount in which
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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 sub-adviser’s view regarding future exchange rates proves to have been incorrect, the Fund may realize losses on its foreign currency transactions. Even if a foreign currency hedge is effective in protecting the 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 Fund may purchase put and call options on specific securities (including groups or “baskets” of specific securities), interest rates, stock indices, bond indices, commodity indices, and/or foreign currencies. Options on futures contracts are discussed above under “— Futures and Options on Futures.”
Options on Securities. As a principal investment strategy, the Fund 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.
The Fund may purchase put options to hedge against a decline in the value of its portfolio. By using put options in this way, the 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, the 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. As principal investment strategies, the Fund 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 Fund may purchase put and call options on foreign currencies as a principal investment strategy. 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 the 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,
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however, the amount of the Fund’s 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.
Expiration or Exercise of Options. If an option written by the 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 the 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.
The 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. The 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 the 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 the Fund seeks to close out an option position. If the 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. There is also a risk that, if restrictions on exercise were imposed, the Fund might be unable to exercise an option it had purchased.
Swap Transactions
The Fund may enter into total return, interest rate, currency and credit default swap agreements and interest rate caps, floors and collars as a principal investment strategy. The Fund may also enter into options on the foregoing types of swap agreements (“swap options”) and in bonds issued by special purpose entities that are backed by a pool of swaps.
The Fund may enter into swap transactions for any purpose consistent with its investment objectives and strategies, such as for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost
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than obtaining a return or spread through purchases and/or sales of instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against an increase in the price of securities the Fund anticipates purchasing at a later date, to reduce risk arising from the ownership of a particular security or instrument, or to gain exposure to certain securities, sectors or markets in the most economical way possible.
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. The Fund’s 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 sub-adviser. See “—Asset Coverage Requirements” above.
Interest Rate Swaps, Caps, Collars and Floors. Interest rate swaps are bilateral contracts in which each party agrees to make periodic payments to the other party based on different referenced interest rates (e.g., a fixed rate and a floating rate) applied to a specified notional amount. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index rises above a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. Interest rate collars involve selling a cap and purchasing a floor or vice versa to protect the Fund against interest rate movements exceeding given minimum or maximum levels.
Currency Swaps. A currency swap is an agreement between two parties to exchange equivalent fixed amounts in two different currencies for a fixed period of time. The exchange of currencies at the inception date of the contract takes place at the current spot rate. Such an agreement may provide that, for the duration of the swap, each party pays interest to the other on the received amount at an agreed upon fixed or floating interest rate. When the contract ends, the parties re-exchange the currencies at the initial exchange rate, a specified rate, or the then current spot rate. Some currency swaps may not provide for exchanging currencies, but only for exchanging interest cash flows.
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. The 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 the portfolio managers to assume risk, without the complications of buying the component securities from what may not always be the most liquid of markets.
Credit Default Swaps. A credit default swap is a bilateral contract that enables an investor to buy or sell protection against a defined-issuer credit event. The Fund may enter into credit default swap agreements either as a buyer or a seller. The Fund may buy protection to attempt to mitigate the risk of default or credit quality deterioration in one or more of its individual holdings or in a segment of the fixed income securities market to which it has exposure, or to take a “short” position in individual bonds, loans or market segments which it does not own. The Fund may sell protection in an attempt to gain exposure to the credit quality characteristics of particular bonds, loans or market segments without investing directly in those bonds, loans or market segments.
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As the buyer of protection in a credit default swap, the Fund will pay a premium (by means of an upfront payment or a periodic stream of payments over the term of the agreement) in return for the right to deliver a referenced bond or group of bonds to the protection seller and receive the full notional or par value (or other agreed upon value) upon a default (or similar event) by the issuer(s) of the underlying referenced obligation(s). If no default occurs, the protection seller would keep the stream of payments and would have no further obligation to the Fund. Thus, the cost to the Fund would be the premium paid with respect to the agreement. If a credit event occurs, however, the Fund may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity that may have little or no value. The Fund bears the risk that the protection seller may fail to satisfy its payment obligations.
If the Fund is a seller of protection in a credit default swap and no credit event occurs, the Fund would generally receive an up-front payment or a periodic stream of payments over the term of the swap. If a credit event occurs, however, generally the Fund would have to pay the buyer the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity that may have little or no value. As the protection seller, the Fund effectively adds economic leverage to its portfolio because, in addition to being subject to investment exposure on its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. Thus, the Fund bears the same risk as it would by buying the reference obligations directly, plus the additional risks related to obtaining investment exposure through a derivative instrument discussed below under “—Risks Associated with Swap Transactions.”
Swap Options. A swap option is a contract that gives a counterparty the right (but not the obligation), in return for payment of a premium, to enter into a new swap agreement or to shorten, extend, cancel, or otherwise modify an existing swap agreement at some designated future time on specified terms. A cash-settled option on a swap gives the purchaser the right, in return for the premium paid, to receive an amount of cash equal to the value of the underlying swap as of the exercise date. The Fund may write (sell) and purchase put and call swap options. Depending on the terms of the particular option agreement, the Fund generally will incur a greater degree of risk when it writes a swap option than when it purchases a swap option. When the Fund purchases a swap option, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when the Fund writes a swap option, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement.
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 the 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, the Fund effectively adds economic leverage to its portfolio because, in addition to being subject to investment exposure on its total net assets, the Fund is subject to investment exposure on the notional amount of the swap. The 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 the 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, the 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 the Fund’s ability to terminate existing swap or other agreements or to realize amounts to be received under such agreements.
The Fund may enter into mortgage “dollar rolls” in which the Fund sells mortgage-backed securities and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. During the period between the sale and repurchase (the “roll period”), the Fund forgoes principal and interest paid on the mortgage-backed securities. However, the Fund
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would benefit to the extent of any difference between the price received for the securities sold and the lower forward price for the future purchase (often referred to as the “drop”) plus any fee income received. Unless such benefits exceed the income, capital appreciation and gain or loss due to mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the investment performance of the Fund will be less than what the performance would have been without the use of the mortgage dollar roll. The Fund will segregate until the settlement date cash or liquid securities in an amount equal to the forward purchase price.
The Fund, as a non-principal investment strategy, may invest in debt securities which are convertible into or exchangeable for, or which carry warrants or other rights to acquire, common or preferred stocks. Equity interests acquired through conversion, exchange or exercise of rights to acquire stock will be disposed of by the Fund as soon as practicable in an orderly manner (except that the Fund may invest in common stocks and/or preferred stocks directly are not required to dispose of any stock so acquired).
General
The Fund may invest in foreign securities as a principal investment strategy. The Fund may invest up to 25% of total assets in foreign securities payable in U.S. dollars. These securities may include securities issued or guaranteed by (i) the Government of Canada, any Canadian Province or any instrumentality and political subdivision thereof; (ii) any other foreign government agency or instrumentality; (iii) foreign subsidiaries of U.S. corporations and (iv) foreign issuers having total capital and surplus at the time of investment of at least $1 billion. In addition, up to 10% of the total assets of the Fund may be invested in 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 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 Fund may invest in securities issued by the governmental and corporate issuers that are located in emerging market countries as a principal investment strategy. 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
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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 the Fund’s 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 Party’s 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, the 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 Fund 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.
Authoritarian governments in certain countries may require that a governmental or quasi-governmental authority act as custodian of the Fund’s assets invested in such country. To the extent such governmental or quasi-governmental authorities do not satisfy the requirements of the 1940 Act to act as foreign custodians of the Fund’s cash and securities, the Fund’s investment in such countries may be limited or may be required to be effected through intermediaries. The risk of loss through governmental confiscation may be increased in such countries.
Depositary Receipts
The Fund’s investments in foreign securities may include investment in depositary receipts, including American Depositary Receipts (ADRs) and European Depositary Receipts (EDRs). U.S. dollar-denominated ADRs, which are traded in the United States on exchanges or over-the-counter, are issued by domestic banks. ADRs represent the right to receive securities of foreign issuers deposited in a domestic bank or a correspondent bank. ADRs do not eliminate all the risk inherent in investing in the securities of foreign issuers. However, by investing in ADRs rather than directly in foreign issuers’ stock, the Fund can avoid currency risks during the settlement period for either purchases or sales. In general, there is a large, liquid market in the United States for many ADRs. The information available for ADRs is subject to the accounting, auditing and financial reporting standards of the domestic market or exchange on which they are traded, which standards are more uniform and more exacting than those to which many foreign issuers may be subject. The Fund also may invest in EDRs and in other similar instruments representing securities of foreign companies. EDRs are securities that are typically issued by foreign banks or foreign trust companies, although U.S. banks or U.S. trust companies may issue them. EDRs are structured similarly to the arrangements of ADRs. EDRs, in bearer form, are designed for use in European securities markets and are not necessarily denominated in the currency of the underlying security.
Certain depositary receipts, typically those denominated as unsponsored, require the holders thereof to bear most of the costs of the facilities while issuers of sponsored facilities normally pay more of the costs thereof.
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The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited securities or to pass through the voting rights to facility holders in respect to the deposited securities, whereas the depository of a sponsored facility typically distributes shareholder communications and passes through voting rights.
Guaranteed Investment Contracts
The Fund may purchase investment-type insurance products such as Guaranteed Investment Contracts (“GICs”) as a non-principal investment strategy. A GIC is a deferred annuity under which the purchaser agrees to pay money to an insurer (either in a lump sum or in installments) and the insurer promises to pay interest at a guaranteed rate for the life of the contract. GICs may have fixed or variable interest rates. A GIC is a general obligation of the issuing insurance company. The purchase price paid for a GIC becomes part of the general assets of the insurer, and the contract is paid at maturity from the general assets of the insurer. In general, GICs are not assignable or transferable without the permission of the issuing insurance companies and can be redeemed before maturity only at a substantial discount or penalty. GICs, therefore, are usually considered to be illiquid investments. Short Term Bond Fund will purchase only GICs which are obligations of insurance companies with a policyholder’s rating of A or better by A.M. Best Company.
Lending of Portfolio Securities
In order to generate additional income, as a principal investment strategy, the Fund may lend portfolio securities representing up to one-third of the value of its total assets to broker-dealers, banks or other institutional borrowers of securities. As with other extensions of credit, there may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, the Fund will only enter into domestic loan arrangements with broker-dealers, banks, or other institutions which the Adviser has determined are creditworthy under guidelines established by the Board of Directors. The Fund will pay a portion of the income earned on the lending transaction to the placing broker and may pay administrative and custodial fees in connection with these loans.
In these loan arrangements, the Fund will receive collateral in the form of cash, U.S. government securities or other high-grade debt obligations equal to at least 102% of the value of the securities loaned as determined at the time of loan origination. This collateral must be valued daily by the Adviser or the applicable Fund’s lending agent and, if the market value of the loaned securities increases, the borrower must furnish additional collateral to the lending Fund. During the time portfolio securities are on loan, the borrower pays the lending Fund any dividends or interest paid on the securities. Loans are subject to termination at any time by the lending Fund or the borrower. While the Fund does not have the right to vote securities on loan, it would terminate the loan and regain the right to vote if that were considered important with respect to the investment.
When the Fund lends portfolio securities to a borrower, payments in lieu of dividends made by the borrower to the Fund will not constitute “qualified dividends” taxable at the same rate as long-term capital gains, even if the actual dividends would have constituted qualified dividends had the Fund held the securities. See “Taxation.”
The Fund may invest in mortgage-backed securities as a principal investment strategy. 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.
Agency Pass-Through Certificates
Agency pass-through certificates are mortgage pass-through certificates representing undivided interests in pools of residential mortgage loans. Distribution of principal and interest on the mortgage loans underlying an
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agency pass-through certificate is an obligation of or guaranteed by the Government National Mortgage Association (GNMA, or Ginnie Mae), the Federal National Mortgage Association (FNMA, or Fannie Mae) or the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac). GNMA is a wholly owned corporate instrumentality of the United States within the Department of Housing and Urban Development. The guarantee of GNMA with respect to GNMA certificates is backed by the full faith and credit of the United States, and GNMA is authorized to borrow from the U.S. Treasury in an amount which is at any time sufficient to enable GNMA, with no limitation as to amount, to perform its guarantee.
FNMA is a federally chartered and privately owned corporation organized and existing under federal law. Although the Secretary of the Treasury of the United States has discretionary authority to lend funds to FNMA, neither the United States nor any agency thereof is obligated to finance FNMA’s operations or to assist FNMA in any other manner.
FHLMC is a federally chartered corporation organized and existing under federal law, the common stock of which is owned by the Federal Home Loan Banks. Neither the United States nor any agency thereof is obligated to finance FHLMC’s operations or to assist FHLMC in any other manner.
The mortgage loans underlying GNMA certificates are partially or fully guaranteed by the Federal Housing Administration or the Veterans Administration, while the mortgage loans underlying FNMA certificates and FHLMC certificates are conventional mortgage loans which are, in some cases, insured by private mortgage insurance companies. Agency pass-through certificates may be issued in a single class with respect to a given pool of mortgage loans or in multiple classes.
The residential mortgage loans evidenced by agency pass-through certificates and upon which CMOs (as described further below) are based generally are secured by first mortgages on one- to four-family residential dwellings. Such mortgage loans generally have final maturities ranging from 15 to 40 years and generally provide for monthly payments in amounts sufficient to amortize their original principal amounts by the maturity dates. Each monthly payment on such mortgage loans generally includes both an interest component and a principal component, so that the holder of the mortgage loans receives both interest and a partial return of principal in each monthly payment. In general, such mortgage loans can be prepaid by the borrowers at any time without any prepayment penalty. In addition, many such mortgage loans contain a “due-on-sale” clause requiring the loans to be repaid in full upon the sale of the property securing the loans. Because residential mortgage loans generally provide for monthly amortization and may be prepaid in full at any time, the weighted average maturity of a pool of residential mortgage loans is likely to be substantially shorter than its stated final maturity date. The rate at which a pool of residential mortgage loans is prepaid may be influenced by many factors and is not predictable with precision.
Private mortgage pass-through securities (“Private Pass-Throughs”)
Private Pass-Throughs are structured similarly to GNMA, FNMA and FHLMC mortgage pass-through securities and are issued by originators of and investors in mortgage loans, including savings and loan associations, mortgage bankers, commercial banks, investment banks and special purpose subsidiaries of the foregoing. These securities usually are backed by a pool of fixed or adjustable rate loans. Since Private Pass-Throughs typically are not guaranteed by an entity having the credit status of GNMA, FNMA or FHLMC, such securities generally are structured with one or more types of credit enhancement. Such credit support falls into two categories: (i) liquidity protection and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provisions of advances, generally by the entity administering the pool of assets, to ensure that the pass-through of payments due on the underlying pool occurs in a timely fashion. Protection against losses resulting from ultimate default enhances the likelihood of ultimate payment of the obligations on at least a portion of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties,
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through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
The ratings of securities for which third-party credit enhancement provides liquidity protection or protection against losses from default are generally dependent upon the continued creditworthiness of the enhancement provider. The ratings of such securities could be subject to reduction in the event of deterioration in the creditworthiness of the credit enhancement provider even in cases where the delinquency and loss experience on the underlying pool of assets is better than expected.
Collateralized Mortgage Obligations (“CMOs”)
CMOs are debt obligations typically issued by a private special-purpose entity and collateralized by residential or commercial mortgage loans or Agency Pass-Through Certificates. The Fund will invest only in CMOs that are rated within the rating categories in which the Fund is otherwise allowed to invest or which are of comparable quality in the judgment of the Adviser. Because CMOs are debt obligations of private entities, payments on CMOs generally are not obligations of or guaranteed by any governmental entity, and their ratings and creditworthiness typically depend, among other factors, on the legal insulation of the issuer and transaction from the consequences of a sponsoring entity’s bankruptcy.
CMOs generally are issued in multiple classes, with holders of each class entitled to receive specified portions of the principal payments and prepayments and/or of the interest payments on the underlying mortgage loans. These entitlements can be specified in a wide variety of ways, so that the payment characteristics of various classes may differ greatly from one another. For instance, holders may hold interests in CMO tranches called Z-tranches which defer interest and principal payments until one or other classes of the CMO have been paid in full. In addition, for example:
• | In a sequential-pay CMO structure, one class is entitled to receive all principal payments and prepayments on the underlying mortgage loans (and interest on unpaid principal) until the principal of the class is repaid in full, while the remaining classes receive only interest; when the first class is repaid in full, a second class becomes entitled to receive all principal payments and prepayments on the underlying mortgage loans until the class is repaid in full, and so forth. |
• | A planned amortization class (“PAC”) of CMOs is entitled to receive principal on a stated schedule to the extent that it is available from the underlying mortgage loans, thus providing a greater (but not absolute) degree of certainty as to the schedule upon which principal will be repaid. |
• | An accrual class of CMOs provides for interest to accrue and be added to principal (but not be paid currently) until specified payments have been made on prior classes, at which time the principal of the accrual class (including the accrued interest which was added to principal) and interest thereon begins to be paid from payments on the underlying mortgage loans. |
• | An interest-only class of CMOs entitles the holder to receive all of the interest and none of the principal on the underlying mortgage loans, while a principal-only class of CMOs entitles the holder to receive all of the principal payments and prepayments and none of the interest on the underlying mortgage loans. |
• | A floating rate class of CMOs entitles the holder to receive interest at a rate which changes in the same direction and magnitude as changes in a specified index rate. An inverse floating rate class of CMOs 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. Floating rate and inverse floating rate classes also may be subject to “caps” and “floors” on adjustments to the interest rates which they bear. |
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• | A subordinated class of CMOs is subordinated in right of payment to one or more other classes. Such a subordinated class provides some or all of the credit support for the classes that are senior to it by absorbing losses on the underlying mortgage loans before the senior classes absorb any losses. A subordinated class which is subordinated to one or more classes but senior to one or more other classes is sometimes referred to as a “mezzanine” class. A subordinated class generally carries a lower rating than the classes that are senior to it, but may still carry an investment grade rating. |
It generally is more difficult to predict the effect of changes in market interest rates on the return on mortgage-backed securities than to predict the effect of such changes on the return of a conventional fixed-rate debt instrument, and the magnitude of such effects may be greater in some cases. The return on interest-only and principal-only mortgage-backed securities is particularly sensitive to changes in interest rates and prepayment speeds. When interest rates decline and prepayment speeds increase, the holder of an interest-only mortgage-backed security may not even recover its initial investment. Similarly, the return on an inverse floating rate CMO is likely to decline more sharply in periods of increasing interest rates than that of a fixed-rate security. For these reasons, interest-only, principal-only and inverse floating rate mortgage-backed securities generally have greater risk than more conventional classes of mortgage-backed securities.
Commercial Mortgage-Backed Securities
Commercial mortgage-backed securities include securities that reflect an interest in, and are secured by, mortgage loans on commercial property, such as hotels, office buildings, retail stores, hospitals, and other commercial buildings. These securities may have a lower prepayment uncertainty than other mortgage-backed securities because commercial mortgage loans generally prohibit or impose penalties on prepayments of principal. In addition, commercial mortgage-backed securities often are structured with some form of credit enhancement to protect against potential losses on the underlying mortgage loans. Many of the risks of investing in commercial mortgage-backed securities reflect the risks of investing in the real estate securing the underlying mortgage loans. These risks reflect the effects of local and other economic conditions on real estate markets, the ability of tenants to make loan payments, and the ability of a property to attract and retain tenants. Commercial mortgage-backed securities may be less liquid and may exhibit greater price volatility than other types of mortgage-backed securities.
Adjustable Rate Mortgage Securities (“ARMS”)
The Fund may invest in ARMS as a non-principal investment strategy. ARMS are pass-through mortgage securities collateralized by mortgages with interest rates that are adjusted from time to time. ARMS also include adjustable rate tranches of CMOs. The adjustments usually are determined in accordance with a predetermined interest rate index and may be subject to certain limits. While the values of ARMS, like other debt securities, generally vary inversely with changes in market interest rates (increasing in value during periods of declining interest rates and decreasing in value during periods of increasing interest rates), the values of ARMS should generally be more resistant to price swings than other debt securities because the interest rates of ARMS move with market interest rates. The adjustable rate feature of ARMS will not, however, eliminate fluctuations in the prices of ARMS, particularly during periods of extreme fluctuations in interest rates.
ARMS typically have caps which limit the maximum amount by which the interest rate may be increased or decreased at periodic intervals or over the life of the loan. To the extent interest rates increase in excess of the caps, ARMS can be expected to behave more like traditional debt securities and to decline in value to a greater extent than would be the case in the absence of such caps. Also, since many adjustable rate mortgages only reset on an annual basis, it can be expected that the prices of ARMS will fluctuate to the extent changes in prevailing interest rates are not immediately reflected in the interest rates payable on the underlying adjustable rate mortgages. The extent to which the prices of ARMS fluctuate with changes in interest rates will also be affected by the indices underlying the ARMS.
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Municipal Bonds and Other Municipal Obligations
The Fund may invest in such securities as a non-principal investment strategy. 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 issuer’s 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 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 in which the Fund may invest.
Refunded Bonds
The Fund may invest in 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 issuer’s 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 Fund also may purchase municipal lease obligations, primarily through certificates of participation. Certificates of participation in municipal leases are undivided interests in a lease, installment purchase contract
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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. In addition, disposition upon non-appropriation or foreclosure might not result in recovery by the Fund of the full principal amount represented by an obligation.
In light of these concerns, the Fund has adopted and follows procedures for determining whether municipal lease obligations purchased by the Fund are liquid and for monitoring the liquidity of municipal lease securities held in the Fund’s portfolio. These procedures require that a number of factors be used in evaluating the liquidity of a municipal lease security, including the frequency of trades and quotes for the security, the number of dealers willing to purchase or sell the security and the number of other potential purchasers, the willingness of dealers to undertake to make a market in security, the nature of the marketplace in which the security trades, and other factors which the Adviser may deem relevant. As set forth in “Investment Restrictions” below, the Fund is subject to limitations on the percentage of illiquid securities it can hold.
Derivative Municipal Securities
The Fund may also acquire 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 provider’s short-term rating and the underlying bond’s 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.
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Variable Rate Demand Notes (“VRDNs”)
VRDNs are long-term municipal obligations that have variable or floating interest rates and provide the Fund with the right to tender the security for repurchase at its stated principal amount plus accrued interest. 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 the Fund to demand the repurchase of the security on not more than seven days prior notice. Other notes only permit the Fund 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 Fund may invest in 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.
The Fund may invest in other investment companies, such as mutual funds, closed-end funds, and exchange-traded funds (“ETFs”). Under the 1940 Act, the Fund’s 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 the Fund’s total assets with respect to any one investment company; and 10% of the Fund’s total assets in the aggregate. The Fund will only invest in other investment companies that invest in Fund-eligible investments. The Fund’s 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.
If the Fund invests in other investment companies, Fund shareholders will bear not only their proportionate share of the Fund’s expenses, but also, indirectly, the similar expenses of the underlying investment companies. 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. Shares of certain closed-end funds may at times be acquired only at market prices representing premiums to their net asset values. Shares acquired at a premium to their net asset value may be more likely to subsequently decline in price, resulting in a loss to the Fund and its shareholders. The underlying securities in an ETF may not follow the price movements of the industry or sector the ETF is designed to track. Trading in an ETF may be halted if the trading in one or more of the ETF’s underlying securities is halted, which could result in the ETF being more volatile.
The Fund may invest in repurchase agreements as a non-principal investment strategy. Ordinarily, the Fund does not expect its investment in repurchase agreements to exceed 10% of its total assets. However, because the Fund may invest without limit in cash and short-term securities for temporary defensive purposes, there is no limit on the Fund’s ability to invest in repurchase agreements. A repurchase agreement involves the purchase by the Fund of securities with the agreement that after a stated period of time, the original seller will buy back the same securities (“collateral”) at a predetermined price or yield. Repurchase agreements involve
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certain risks not associated with direct investments in securities. If the original seller defaults on its obligation to repurchase as a result of its bankruptcy or otherwise, the purchasing Fund will seek to sell the collateral, which could involve costs or delays. Although collateral (which may consist of any fixed income security which is an eligible investment for the Fund entering into the repurchase agreement) will at all times be maintained in an amount equal to the repurchase price under the agreement (including accrued interest), the Fund would suffer a loss if the proceeds from the sale of the collateral were less than the agreed-upon repurchase price. The Adviser will monitor the creditworthiness of the firms with which the Fund enters into repurchase agreements.
The Fund’s custodian will hold the securities underlying any repurchase agreement, or the securities will be part of the Federal Reserve/Treasury Book Entry System. The market value of the collateral underlying the repurchase agreement will be determined on each business day. If at any time the market value of the collateral falls below the repurchase price under the repurchase agreement (including any accrued interest), the Fund will promptly receive additional collateral (so the total collateral is an amount at least equal to the repurchase price plus accrued interest).
The Fund may invest in publicly-traded royalty trusts as a non-principal investment strategy. Royalty trusts are income-oriented equity investments that indirectly, through the ownership of trust units, provide investors (called “unit holders”) with exposure to energy sector assets such as coal, oil and natural gas. Royalty trusts are structured similarly to REITs. A royalty trust generally acquires an interest in natural resource companies or chemical companies and distributes the income it receives to the investors of the royalty trust. A sustained decline in demand for crude oil, natural gas and refined petroleum products could adversely affect income and royalty trust revenues and cash flows. Factors that could lead to a decrease in market demand include a recession or other adverse economic conditions, an increase in the market price of the underlying commodity, higher taxes or other regulatory actions that increase costs, or a shift in consumer demand for such products. A rising interest rate environment could adversely impact the performance of royalty trusts. Rising interest rates could limit the capital appreciation of royalty trusts because of the increased availability of alternative investments at more competitive yields.
Short-Term Temporary Investments
In an attempt to respond to adverse market, economic, political or other conditions, the 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 the 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.
The 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 Fund 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.
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Short-term investments and repurchase agreements may be entered into on a joint basis by the Fund and other funds advised by the Adviser to the extent permitted by an exemptive order issued by the SEC with respect to the Fund. A brief description of certain kinds of short-term instruments follows:
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 the Prospectus, the Fund may purchase commercial paper consisting of issues rated at the time of purchase within the two highest rating categories by Standard & Poor’s, Fitch or Moody’s, or which have been assigned an equivalent rating by another nationally recognized statistical rating organization. The Fund 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. For a description of the rating categories of Standard & Poor’s, Fitch and Moody’s, see Appendix A.
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 the Fund and the issuer, they are not normally traded. Although there is no secondary market in the notes, the 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.
The Fund may invest in trust preferred securities as a non-principal investment strategy. Trust preferred securities are preferred securities typically issued by a special purpose trust subsidiary and backed by subordinated debt of that subsidiary’s parent corporation. Trust preferred securities may have varying maturity dates, at times in excess of 30 years, or may have no specified maturity date with an onerous interest rate adjustment if not called on the first call date. Dividend payments of the trust preferred securities generally coincide with interest payments on the underlying subordinated debt. Trust preferred securities generally have a yield advantage over traditional preferred stocks, but unlike preferred stocks, distributions are treated as interest rather than dividends for federal income tax purposes and therefore, are not eligible for the dividends-received deduction. See “Taxation.” Trust preferred securities are subject to unique risks, which include the fact that
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dividend payments will only be paid if interest payments on the underlying obligations are made, which interest payments are dependent on the financial condition of the parent corporation and may be deferred for up to 20 consecutive quarters. There is also the risk that the underlying obligations, and thus the trust preferred securities, may be prepaid after a stated call date or as a result of certain tax or regulatory events, resulting in a lower yield to maturity.
The Fund invests in U.S. government securities as a principal investment strategy. The U.S. government securities in which the Fund may invest are either issued or guaranteed by the U.S. government, its agencies or instrumentalities. The U.S. government securities in which the Fund invest principally are:
• | direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds; |
• | 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; |
• | notes, bonds, and discount notes of U.S. government agencies or instrumentalities which receive or have access to federal funding; |
• | notes, bonds, and discount notes of other U.S. government instrumentalities supported only by the credit of the instrumentalities; and |
• | obligations that are issued by private issuers and guaranteed under the Federal Deposit Insurance Corporation Temporary Liquidity Guarantee Program. |
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 in which the Fund may invest are backed in a variety of ways by the U.S. government or its agencies or instrumentalities. Some of these securities, such as Government National Mortgage Association (“GNMA”) mortgage-backed securities, are backed by the full faith and credit of the U.S. government. Other securities, such as obligations of the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corporation (“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 and the Fund that may invest in them.
Variable, Floating, and Fixed Rate Debt Obligations
The debt obligations in which the Fund invests as either a principal or non-principal investment strategy 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
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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, the 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.
When-Issued and Delayed Delivery Transactions
The Fund may purchase securities on a when-issued or delayed delivery basis as a non-principal investment strategy. When such a transaction is negotiated, the purchase price is fixed at the time the purchase commitment is entered, but delivery of and payment for the securities take place at a later date. The Fund will not accrue income with respect to securities purchased on a when-issued or delayed delivery basis prior to their stated delivery date.
The purchase of securities on a when-issued or delayed delivery basis exposes the Fund to risk because the securities may decrease in value prior to delivery. In addition, the Fund’s purchase of securities on a when-issued or delayed delivery basis while remaining substantially fully invested could increase the amount of the Fund’s total assets that are subject to market risk, resulting in increased sensitivity of net asset value to changes in market prices. A seller’s failure to deliver securities to the Fund could prevent the Fund from realizing a price or yield considered to be advantageous.
When the Fund agrees to purchase securities on a when-issued or delayed delivery basis, the Fund will segregate cash or liquid securities in an amount sufficient to meet the Fund’s purchase commitments. It may be expected that the Fund’s net assets will fluctuate to a greater degree when it sets aside securities to cover such purchase commitments than when it sets aside cash. In addition, because the Fund will set aside cash or liquid securities to satisfy its purchase commitments, its liquidity and the ability of the Adviser to manage it might be affected in the event its commitments to purchase when-issued or delayed delivery securities ever became significant. Under normal market conditions, however, the Fund’s commitments to purchase when-issued or delayed delivery securities will not exceed 25% of the value of its total assets.
Zero Coupon and Step Coupon Securities
The Fund may invest in zero coupon and step coupon securities as a non-principal investment strategy. 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
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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. In addition, while such securities generate income for purposes of generally accepted accounting standards, they do not generate cash flow and thus could cause the Fund to be forced to liquidate securities at an inopportune time in order to distribute cash, as required by the Code.
In addition to the investment objectives and policies set forth in the Prospectus and under the caption “Additional Information Concerning Fund Investments” above, the Fund is subject to the investment restrictions set forth below. The investment restrictions set forth in paragraphs 1 through 8 below are fundamental and cannot be changed with respect to the Fund without approval by the holders of a majority of the outstanding shares of the Fund as defined in the 1940 Act, i.e., by the lesser of the vote of (a) 67% of the shares of the Fund present at a meeting where more than 50% of the outstanding shares are present in person or by proxy, or (b) more than 50% of the outstanding shares of the Fund.
The Fund will not:
1. | Concentrate its investments in a particular industry, except that the Fund with one or more industry concentrations implied by its name shall, in normal market conditions, concentrate in securities of issues within that industry or industries. For purposes of this limitation, the U.S. Government, and state or municipal governments and their political subdivisions are not considered members of any industry. Whether the Fund is concentrating in an industry shall be determined in accordance with the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction. |
2. | Borrow money or issue senior securities, except as permitted under the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction. |
3. | With respect to 75% of its total assets, purchase securities of an issuer (other than (i) securities issued by other investment companies, (ii) securities issued by the U.S. Government, its agencies, instrumentalities or authorities, or (iii) repurchase agreements fully collateralized by U.S. Government securities) if (a) such purchase would, at the time, cause more than 5% of the Fund’s total assets taken at market value to be invested in the securities of such issuer; or (b) such purchase would, at the time, result in more than 10% of the outstanding voting securities of such issuer being held by the Fund. |
4. | Invest in companies for the purpose of control or management. |
5. | Purchase physical commodities or contracts relating to physical commodities. |
6. | Purchase or sell real estate unless as a result of ownership of securities or other instruments, but this shall not prevent the Fund from investing in securities or other instruments backed by real estate or interests therein or in securities of companies that deal in real estate or mortgages. |
7. | Act as an underwriter of securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, it may be deemed an underwriter under applicable laws. |
8. | Make loans except as permitted under the 1940 Act, as interpreted or modified from time to time by any regulatory authority having jurisdiction. |
For purposes of applying the limitation set forth in number 1 above, according to the current interpretation by the SEC, the Fund would be concentrated in an industry if 25% or more of its total assets, based
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on current market value at the time of purchase, were invested in that industry. The Fund will use industry classifications provided by Bloomberg, Barclays, or other similar sources to determine its compliance with this limitation.
For purposes of applying the limitation set forth in number 2 above, under the 1940 Act as currently in effect, the Fund is not permitted to issue senior securities, except that the Fund may borrow from any bank if immediately after such borrowing the value of the Fund’s total assets is at least 300% of the principal amount of all of the Fund’s borrowings (i.e., the principal amount of the borrowings may not exceed 33 1/3% of the Fund’s 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 8 above, there are no limitations with respect to unsecured loans made by the Fund to an unaffiliated party. However, when the 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 following restrictions are non-fundamental and may be changed by NIF’s Board of Directors without a shareholder vote:
The Fund will not:
1. | Invest more than 15% of its net assets in all forms of illiquid investments. |
2. | Borrow money in an amount exceeding 10% of the borrowing Fund’s total assets. The Fund will not borrow money for leverage purposes. For the purpose of this investment restriction, the use of options and futures transactions and the purchase of securities on a when-issued or delayed delivery basis shall not be deemed the borrowing of money. The Fund will not make additional investments while its borrowings exceed 5% of total assets. |
3. | Make short sales of securities. |
4. | Lend portfolio securities representing in excess of one-third of the value of its total assets. |
5. | Pledge any assets, except in connection with any permitted borrowing and then in amounts not in excess of one-third of the Fund’s total assets, provided that for the purposes of this restriction, margin deposits, security interests, liens and collateral arrangements with respect to options, futures contracts, options on futures contracts, and other permitted investments and techniques are not deemed to be a pledge of assets for purposes of this limitation. |
6. | 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. |
With respect to the non-fundamental restriction set forth in number 1 above, the Fund will monitor portfolio liquidity on an ongoing basis and, in the event more than 15% of the Fund’s net assets are invested in illiquid investments, the Fund will reduce its holdings of illiquid securities in an orderly fashion in order to maintain adequate liquidity.
The Board of Directors has adopted guidelines and procedures under which the Fund’s investment adviser is to determine whether the following types of securities which may be held by the Fund are “liquid” and to
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report to the Board concerning its determinations: (i) securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933; (ii) commercial paper issued in reliance on the “private placement” exemption from registration under Section 4(2) of the Securities Act of 1933, whether or not it is eligible for resale pursuant to Rule 144A; (iii) interest-only and principal-only, inverse floating and inverse interest-only securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities; and (iv) municipal leases and securities that represent interests in municipal leases.
For determining compliance with its investment restriction relating to industry concentration, the 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 Companies — Automobile. 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 Banks — Automobile. Thus, an issuer or sponsor may be included in more than one “industry” classification, as may a particular type of collateral.
The Fund has adopted an investment strategy pursuant to Rule 35d-1 of the 1940 Act, whereby at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) must be invested in a strategy suggested by the Fund’s name. Accordingly, a policy has been adopted by the Fund to provide shareholders with at least 60 days notice in the event of a planned change to the investment strategy. Such notice to shareholders will meet the requirements of Rule 35d-1(c).
Disclosure of Portfolio Holdings
The Nuveen Mutual Funds have adopted a portfolio holdings disclosure policy which governs the dissemination of the Fund’s portfolio holdings. In accordance with this policy, the Fund 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 Fund’s publicly accessible website, www.nuveen.com. Currently, the Fund generally makes available complete portfolio holdings information on the Fund’s website following the end of each month with an approximately one-month lag. Additionally, the Fund publishes on the website a list of its 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 Fund files with the SEC its Form N-CSR or Form N-Q for the period that includes the date as of which the website information is current.
Additionally, the Fund may disclose portfolio holdings information that has not been included in a filing with the SEC or posted on the Fund’s 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 recipient’s duties to the Fund 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 Fund may disclose on an ongoing basis non-public portfolio holdings information in the normal course of its 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 RMG, ADP Investor Communication Services, and Glass, Lewis & Co.), and to the legal counsel for the Fund’s independent directors (Chapman and Cutler LLP). Also, the Adviser may transmit to Vestek Systems, Inc. daily non-public portfolio holdings information on
31
a next-day basis to enable the Adviser to perform portfolio attribution analysis using Vestek’s 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 Fund’s 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 Fund, and the recipient is obligated to maintain the confidentiality of the information and not misuse it.
Compliance officers of the Fund 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 Fund’s policy. Reports are made to the Fund’s Board of Directors on an annual basis.
There is no assurance that the Fund’s policies on portfolio holdings information will protect the Fund from the potential misuse of portfolio holdings information by individuals or firms in possession of such information.
The following parties currently receive Undisclosed 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, Inc.
Barclays Capital, Inc.
Barra
Bloomberg
BNP Paribas Prime Brokerage, Inc.
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.
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
Jefferies & Company, Inc.
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J.P. Morgan Clearing Corp.
J.P. Morgan Securities, Inc.
Lazard Asset Management, Inc.
Lipper Inc.
Merrill Lynch, Pierce, Fenner & Smith
Moody’s
Morgan Stanley & Co., Inc.
Morningstar, Inc.
MS Securities Services, Inc.
Newedge USA, LLC
Nuveen Asset Management, LLC
Nuveen Fund Advisors, Inc.
Pershing, LLC
PricewaterhouseCoopers
Raymond James & Associates, Inc.
RBC Capital Markets Corporation
RBS Securities, Inc.
RMG
R.R. Donnelley Financial
Scotia Capital (USA), Inc.
SG Ameritas Securities, LLC
Societe Generale, New York Branch
Standard & Poor’s
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
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The management of NIF, including general supervision of the duties performed for the Fund by the Adviser under the Management Agreement, is the responsibility of the Board of Directors. The number of directors of NIF 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 directors”). None of the independent directors 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 directors and officers of the Fund, 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 directors of NIF are directors or trustees, as the case may be, of 112 Nuveen-sponsored open-end funds (the “Nuveen Mutual Funds”) and 133 Nuveen-sponsored closed-end funds (collectively with the Nuveen Mutual Funds, the “Nuveen Funds”).
NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) FIVE YEARS | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
INDEPENDENT DIRECTORS: | ||||||||||
Robert P. Bremner* 333 West Wacker Drive Chicago, IL 60606 (8/22/40) | Chairman of the Board and Director | Term— Indefinite** Length of Service—Since 2011 | 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. | 245 | N/A | |||||
Jack B. Evans 333 West Wacker Drive Chicago, IL 60606 (10/22/48) | Director | Term— Indefinite** Length of Service—Since 2011 | President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); President Pro Tem of the 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. | 245 | Director and Chairman, United Fire Group, a publicly held company; formerly, Director, Alliant Energy. |
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) FIVE YEARS | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
William C. Hunter 333 West Wacker Drive Chicago, IL 60606 (3/6/48) | Director | Term— Indefinite** Length of Service—Since 2011 | Dean (since 2006), Tippie College of Business, University of Iowa; Director (since 2005) of Beta Gamma Sigma 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). | 245 | Director (since 2004) of Xerox Corporation. | |||||
David J. Kundert* 333 West Wacker Drive Chicago, IL 60606 (10/28/42) | Director | Term—Indefinite** Length of Service—Since 2011 | 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. | 245 | N/A |
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) FIVE YEARS | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
William J. Schneider* 333 West Wacker Drive Chicago, IL 60606 (9/24/44) | Director | Term—Indefinite** Length of Service—Since 2011 | 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. | 245 | N/A | |||||
Judith M. Stockdale 333 West Wacker Drive Chicago, IL 60606 (12/29/47) | Director | Term—Indefinite** Length of Service—Since 2011 | Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994). | 245 | N/A | |||||
Carole E. Stone* 333 West Wacker Drive Chicago, IL 60606 (6/28/47) | Director | Term—Indefinite** Length of Service—Since 2011 | Director, Chicago Board Options Exchange (since 2006); 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). | 245 | Director, Chicago Board Options Exchange (since 2006). |
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) FIVE YEARS | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
Virginia L. Stringer 333 West Wacker Drive Chicago, IL 60606 (8/16/44) | Director | Term- Indefinite** Length of Service- Since 1987 | Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institute’s 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. | 245 | Previously, Independent Director (1987-2010) and Chair (1997-2010), First American Fund Complex. | |||||
Terence J. Toth* 333 West Wacker Drive Chicago, IL 60606 (9/29/59) | Director | Term— Indefinite** Length of Service—Since 2011 | 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: Goodman Theatre Board (since 2004), Chicago Fellowship Board (since 2005) and Catalyst Schools of Chicago Board (since 2008); 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). | 245 | N/A |
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NAME, BUSINESS ADDRESS AND BIRTHDATE | POSITION(S) NIF | TERM OF OFFICE AND LENGTH OF TIME SERVED WITH NIF | PRINCIPAL OCCUPATION(S) FIVE YEARS | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY DIRECTOR | OTHER DIRECTORSHIPS HELDBY DIRECTOR DURING PAST FIVE YEARS | |||||
INTERESTED DIRECTOR: | ||||||||||
John P. Amboian*** 333 West Wacker Drive Chicago, IL 60606 (6/14/61) | Director | Term— Indefinite** Length of Service—Since 2011 | 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, Inc. | 245 | N/A |
* | Also serves as a trustee of Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate of the Adviser. |
** | Each director serves an indefinite term until his or her successor is elected. |
*** | Mr. Amboian is an “interested person” of NIF, 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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NAME, BUSINESS ADDRESS | POSITION(S) | TERM OF | PRINCIPAL OCCUPATION(S) | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
OFFICERS OF THE FUND: | ||||||||
Gifford R. Zimmerman 333 West Wacker Drive Chicago, IL 60606 (9/9/56) | Chief Administrative Officer | Term—Until August 2011 Length of Service—Since 2011 | Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Securities, LLC; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; 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 Tradewinds Global Investors, LLC and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007), and of Winslow Capital Management, Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2010) of Nuveen Commodities Asset Management LLC; Chartered Financial Analyst. | 245 | ||||
Margo L. Cook 333 West Wacker Drive Chicago, IL 60606 (4/11/64) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Executive Vice President (since 2008) of Nuveen Investments, Inc. and Nuveen Fund Advisors, Inc. (since 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. | 245 | ||||
Lorna C. Ferguson 333 West Wacker Drive Chicago, IL 60606 (10/24/45) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Managing Director (since 2005) of Nuveen Fund Advisors, Inc. | 245 | ||||
Stephen D. Foy 333 West Wacker Drive Chicago, IL 60606 (5/31/54) | Vice President and Controller | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.; Certified Public Accountant. | 245 |
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NAME, BUSINESS ADDRESS | POSITION(S) | TERM OF | PRINCIPAL OCCUPATION(S) | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
Scott S. Grace 333 West Wacker Drive Chicago, IL 60606 (8/20/70) | Vice President and Treasurer | Term—Until August 2011 Length of Service—Since 2011 | Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Securities, LLC; Managing Director and Treasurer (since 2009) of Nuveen Investment Solutions, Inc., Nuveen Investments Advisers Inc., Nuveen Investment Holdings, Inc., Nuveen Fund Advisors, Inc., 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, Inc.; 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 Stanley’s Global Financial Services Group (2000-2003); Chartered Accountant. | 245 | ||||
Walter M. Kelly 333 West Wacker Drive Chicago, IL 60606 (2/24/70) | Vice President and Chief Compliance Officer | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2008) and Assistant Secretary (since 2003), formerly, Vice President (2006-2008) of Nuveen Fund Advisors, Inc. | 245 | ||||
Tina M. Lazar 333 West Wacker Drive Chicago, IL 60606 (8/27/61) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc. | 245 |
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NAME, BUSINESS ADDRESS | POSITION(S) | TERM OF | PRINCIPAL OCCUPATION(S) | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
Larry W. Martin 333 West Wacker Drive Chicago, IL 60606 (7/27/51) | Vice President and Assistant Secretary | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2010), formerly, Vice President (1993-2010), Assistant Secretary and Assistant General Counsel of Nuveen Securities, LLC; Senior Vice President (since 2011) of Nuveen Asset Management, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010) and Assistant Secretary of Nuveen Investments, Inc.; Senior Vice President (since 2010), formerly, Vice President (2005-2010) and Assistant Secretary (since 1997) of Nuveen Fund Advisors, Inc.; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002), NWQ Investment Management Company, LLC, Symphony Asset Management LLC (since 2003), Tradewinds Global Investors, LLC, Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Assistant Secretary of Nuveen Commodities Asset Management, LLC (since 2010). | 245 | ||||
Kevin J. McCarthy 333 West Wacker Drive Chicago, IL 60606 (3/26/66) | Vice President and Secretary | Term—Until August 2011 Length of Service—Since 2011 | Managing Director (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, Inc.; 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, Tradewinds Global Investors, LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC, Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. and Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007). | 245 |
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NAME, BUSINESS ADDRESS | POSITION(S) | TERM OF | PRINCIPAL OCCUPATION(S) | NUMBEROF PORTFOLIOS IN FUND COMPLEX OVERSEENBY OFFICER | ||||
Kathleen L. Prudhomme 800 Nicollet Mall Minneapolis, MN 55402 (3/30/53) | Vice President and Assistant Secretary | Term—Until August 2011 Length of Service—Since 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, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Deputy General Counsel, FAF Advisors, Inc. (2004-2010). | 245 | ||||
Jeffrey M. Wilson 333 West Wacker Drive Chicago, IL 60606 (3/13/56) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President of Nuveen Investments (since 2011); formerly, Senior Vice President of FAF Advisors, Inc. (2000-2010). | 112 |
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Board Leadership Structure and Risk Oversight
In connection with the Transaction, the committees of the Fund and the members of the Board of Directors, referred to hereafter as the “Board” or “Board of Directors,” were changed. Each of the Committees were newly formed and constituted in connection with the Transaction. The Board of Directors oversees the operations and management of the Fund, including the duties performed for the Fund 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 Nuveen Fund complex. In adopting a unitary board structure, the directors 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 directors consider, not only the candidate’s particular background, skills and experience, among other things, but also whether such background, skills and experience enhance the Board’s diversity and at the same time complement the Board given its current composition and the mix of skills and experiences of the incumbent directors. 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 Board’s knowledge and expertise with respect to the many aspects of fund operations that are complex-wide in nature. The unitary structure also enhances the Board’s 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 director. 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 Board’s 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 directors have elected Robert P. Bremner as the independent Chairman of the Board. 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 directors are carried into effect; and (iii) maintaining records of and, whenever necessary, certifying all proceedings of the directors 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 directors 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 directors among the different committees allows the directors to gain additional and different perspectives of a Nuveen Fund’s operations. The Board has established five standing committees: the Executive Committee, the Dividend Committee, the Audit Committee, the Compliance, Risk Management and Regulatory Oversight Committee and the Nominating and Governance 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.
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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.
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 Adviser’s 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 Board’s general supervision of such actions, the Audit Committee addresses any valuation issues, oversees the Nuveen Funds’ pricing procedures and actions taken by the Adviser’s 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 Adviser’s 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 directors, 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 director of the Nuveen Funds.
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 Board’s governance of the Nuveen Funds.
In addition, the Nominating and Governance Committee, among other things, makes recommendations concerning the continuing education of directors; 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 director compensation. In the event of a vacancy on the Board, the Nominating and Governance Committee receives suggestions from various sources, 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
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Drive, Chicago, IL 60606. The Nominating and Governance Committee sets appropriate standards and requirements for nominations for new directors and reserves the right to interview any and all candidates and to make the final selection of any new directors. In considering a candidate’s 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 director 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 directors 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 directors 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.
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.
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 committee’s 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 Adviser’s 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, 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
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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.
Prior to the Transaction, the Fund had an Audit Committee, a Pricing Committee and a Governance Committee. The following table presents the number of times each Committee met during the fiscal year ended June 30, 2010.
Committee | Number of Committee Meetings Held During NIF’s Fiscal Year Ended June 30, 2010 | |
Audit Committee | 5 | |
Pricing Committee | 4 | |
Governance Committee | 3 |
Board Diversification and Director Qualifications
In determining that a particular director was qualified to serve on the Board, the Board has considered each director’s background, skills, experience and other attributes in light of the composition of the Board with no particular factor controlling. The Board believes that directors 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 director satisfies this standard. An effective director 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 director should continue to serve in that capacity. References to the experiences, qualifications, attributes and skills of directors are pursuant to requirements of the Securities and Exchange Commission, do not constitute holding out the Board or any director 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 director 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 firm’s 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 Bachelor’s 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, Children’s 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.
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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 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 the Source Media Group, is President Pro Tem of the Board of Regents for the State of Iowa University System, is a Life Trustee of Coe College and is a member of the Advisory Council of the Department of Finance in the Tippie College of Business, University of Iowa. He has a Bachelor of Arts degree from Coe College and an MBA from the University of Iowa.
William C. Hunter
Mr. Hunter was appointed Dean of the Henry B. Tippie College of Business at the University of Iowa effective 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 Bank’s Chief Economist and was an Associate Economist on the Federal Reserve System’s 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 President-Elect 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
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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 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 Governor’s 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 Chair of the Public Authorities Control 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 Governing Board of the Investment Company Institute’s Independent Directors Council and 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 immediate past board chair of the Oak Leaf Trust, director and immediate past board chair of the Saint Paul Riverfront Corporation and is immediate past President of the Minneapolis Club’s 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 Board on Judicial Standards and recently served on a Minnesota Supreme Court Judicial Advisory Committee to reform the state’s judicial disciplinary process. She is a member of the International Women’s Forum and attended the London Business School as an International Business Fellow. Ms. Stringer also served as board chair of the Human
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Resource Planning Society, the Minnesota Women’s Campaign Fund and the Minnesota Women’s 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 Boards of the Goodman Theatre and Chicago Fellowship, and is Chairman of the Board of Catalyst Schools of Chicago. 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.
Fund Shares Owned by the Directors
The information in the table below discloses the dollar ranges of (i) each Director’s beneficial ownership in the Fund, and (ii) each Director’s aggregate beneficial ownership in all funds within the Nuveen Funds complex, including in each case the value of fund shares elected by Directors in the directors’ deferred compensation plan, based on the value of fund shares as of June 30, 2010.
Directors | ||||||||||||||||||||
Bremner1 | Evans1 | Hunter1 | Kundert1 | Schneider1 | Stockdale1 | Stone1 | Stringer | Toth1 | Amboian1 | |||||||||||
Aggregate Holdings – Fund Complex | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | Over $100,000 | ||||||||||
Short Term Bond Fund | — | — | — | — | — | — | — | — | — | — |
1 All directors, except for Ms. Stringer, were appointed to the Board of Directors effective January 1, 2011.
As of October 15, 2010, none of the Independent Directors or their immediate family members owned, beneficially, or of record, any securities in (i) an investment adviser or principal underwriter of the Fund 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 Fund.
The following table shows, for each independent director, (1) the aggregate compensation paid by the Fund for the calendar year ended December 31, 2010, (2) the amount of total compensation paid by the Fund that has been deferred, and (3) the total compensation paid to each director by the Nuveen Funds during the fiscal year ended June 30, 2010.
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Name of Director | Aggregate Compensation From Fund | Amount of Total Compensation that Has Been Deferred | Total Compensation From Nuveen Funds Paid to Director | |||||
Robert P. Bremner1 | $250,207 | |||||||
Jack B. Evans1 | 220,308 | |||||||
William C. Hunter1 | 174,765 | |||||||
David J. Kundert1 | 200,116 | |||||||
William J. Schneider1 | 207,055 | |||||||
Judith M. Stockdale1 | 199,738 | |||||||
Carole E. Stone1 | 180,750 | |||||||
Virginia L. Stringer | $5,318 | 288,500 | ||||||
Terence J. Toth1 | 209,278 |
1 All directors, except for Ms. Stringer, were appointed to the Board of Directors effective January 1, 2011.
Independent directors receive 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 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; 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 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. In addition to the payments described above, the Chairman of the Board receives $75,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee receive $10,000 each and the chairperson of the Nominating and Governance Committee receives $5,000 as additional retainers. Independent directors 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.
NIF does not have a retirement or pension plan. NIF has a deferred compensation plan (the “Deferred Compensation Plan”) that permits any independent director to elect to defer receipt of all or a portion of his or her compensation as an independent director. The deferred compensation of a participating director is credited to a book reserve account of NIF when the compensation would otherwise have been paid to the director. The value of the director’s 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 director’s deferral account, the independent director may elect to receive distributions in a lump sum or over a period of five years. NIF will not be liable for any other fund’s obligations to make distributions under the Deferred Compensation Plan.
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The Fund has no employees. The officers of NIF and the director of NIF who is not an independent director serve without any compensation from the Fund.
Directors of the Fund and certain other Fund affiliates may purchase the Fund’s Class I shares. See the Fund’s Prospectus for details.
The Fund, the other Nuveen Funds, the Adviser, Nuveen Asset Management, and other related entities have adopted codes of ethics which essentially prohibit all Nuveen Funds management personnel, including the Fund’s portfolio managers, from engaging in personal investments which compete or interfere with, or attempt to take advantage of, the Fund’s anticipated or actual portfolio transactions, and are designed to assure that the interests of the shareholders are placed before the interests of Nuveen personnel in connection with personal investment transactions. Each of these codes of ethics permits personnel to invest in securities for their own accounts, including securities that may be purchased or held by the Fund. These codes of ethics are on public file with, and are available from, the SEC.
The Adviser has been delegated the authority by the board of directors of NIF to vote proxies with respect to the investments held in the Fund. The Adviser has delegated the responsibility of voting proxies to Nuveen Asset Management, LLC (the “Sub-Adviser” or “Nuveen Asset Management”). The Sub-Adviser is responsible for developing and enforcing proxy voting policies with regard to the Fund. The Adviser will review these policies annually. The policies and procedures that the Adviser and the Sub-Adviser use to determine how to vote proxies relating to their portfolio securities are set forth in Appendix B. Each year the Fund files its proxy voting records with the SEC and makes them available by August 31 for the 12-month period ending June 30 of that year. The records can be obtained without charge through www.nuveen.com and/or the SEC’s website at www.sec.gov.
The investment adviser of the fund is Nuveen Fund Advisors, Inc. The Adviser, located at 333 West Wacker Drive, Chicago, Illinois 60606, serves as the manager of the Fund, with responsibility for the overall management of the Fund. The Adviser is also responsible for managing the Fund’s business affairs and providing day-to-day administrative services to the Fund.
The Adviser is an affiliate of the Distributor, which is also 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.
Each Fund is dependent upon services and resources provided by the Adviser and therefore the Adviser’s parent, Nuveen Investments. Nuveen Investments increased its level of debt in connection with the MDP Acquisition. Nuveen Investments believes that monies generated from operations and cash on hand will be adequate to fund debt service requirements, capital expenditures and working capital requirements for the
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foreseeable future; however, Nuveen Investments’ ability to continue to fund these items, to service its debt and to maintain compliance with covenants in its debt agreements may be affected by general economic, financial, competitive, legislative, legal and regulatory factors and by its ability to refinance or repay outstanding indebtedness with scheduled maturities beginning in 2014. In the event that Nuveen Investments breaches certain of the covenants included in its debt agreements, the breach of such covenants may result in the accelerated payment of its outstanding debt, increase the cost of such debt or generally have an adverse effect on the financial condition of Nuveen Investments.
For the management services and facilities furnished by the Adviser, the Fund has agreed to pay an annual management fee at a rate set forth in the Prospectus under “Who Manages the Fund.” In addition, the Adviser has agreed to waive all or a portion of its management fee or reimburse certain expenses of the Fund.
The Fund’s management fee is divided into two components—a complex-level fee based on the aggregate amount of all eligible Fund assets managed by the Adviser and its affiliates, and a specific fund-level fee based only on the amount of assets within the Fund. This pricing structure enables Fund shareholders to benefit from growth in the assets within the 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 the Fund paying management fees at a rate higher than would otherwise have been applicable had the complex-wide management fee structure not been implemented.
The Fund has agreed to pay an annual fund-level management fee, payable monthly, based upon the average daily net assets of the Fund as set forth in the Prospectus.
The Fund’s complex-level fee is payable monthly and is additive to the fund-level fee. It is determined by taking the current overall complex-level fee rate, which is based on the aggregate amount of the “eligible assets” of all Nuveen Funds, and making, as appropriate, an upward adjustment to that rate based upon the percentage of the Fund’s assets that are not “eligible assets.” The current overall complex-level fee schedule is as follows:
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 component of the management fee for the Fund is calculated based upon the aggregate daily “eligible assets” of all Nuveen Funds. Eligible assets exclude assets attributable to investments in other Nuveen Funds and assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser’s 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 |
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borrowings and 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 the TOB trust that has been effectively financed by the trust’s 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 managed assets in certain circumstances. |
The Fund’s complex-level fee rate will not exceed the maximum overall complex-level fee rate of 0.2000%. As of March 31, 2011, the Fund’s complex-level fees was 0.1982%
As noted, FAF served as the Fund’s investment adviser prior to the consummation of the Transaction. The following table sets forth total advisory fees paid to FAF before waivers and after waivers for the Fund for the fiscal years ended June 30, 2008, June 30, 2009, and June 30, 2010:
Fiscal Year Ended June 30, 2008 | Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | ||||||||||||||||||||||
Fund | Advisory Fee Before Waivers | Advisory Fee After Waivers | Advisory Fee Before Waivers | Advisory Fee After Waivers | Advisory Fee Before Waivers | Advisory Fee After Waivers | ||||||||||||||||||
Short Term Bond Fund | 1,727,361 | 1,004,154 | 1,616,835 | 911,949 | 2,769,260 | 1,700,712 |
In addition to the Adviser’s management fee, the Fund also pays a portion of the Trust’s general expenses allocated in proportion to the net assets of the Fund. All fees and expenses are accrued daily and deducted before payment of dividends to investors.
The Adviser has selected its affiliate, Nuveen Asset Management, LLC, located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to manage the investment portfolio of the Fund. The Adviser pays Nuveen Asset Management a portfolio management fee equal to 40.0000% of the advisory fee paid to the Adviser for its services to the Fund (net of any waivers, reimbursement payments, supermarket fees and alliance fees waived, reimbursed or paid by the Adviser in respect of the Fund).
Additional Payments to Financial Intermediaries
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 Fund within the Intermediary’s organization by, for example, placing the Fund on a list of preferred or recommended funds and/or granting the Adviser and/or the Distributor preferential or enhanced opportunities to promote the Fund in various ways within the Intermediary’s 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 the 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 Fund’s Prospectus and described above because they are not paid by the Fund.
The categories of payments described below are not mutually exclusive, and a single Intermediary may receive payments under all categories.
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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 Intermediary’s personnel about the Nuveen Mutual Funds in connection with shareholder financial planning needs, placement on the Intermediary’s 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 Nuveen representatives 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 Intermediary’s 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. (which was the parent company of a firm a portion of whose business has since been acquired by the Adviser) to Great-West Life & Annuity Insurance Company (“Great-West”), the Adviser 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 their expense, may provide other compensation to Intermediaries that sell or arrange for the sale of shares of the Fund, 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
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an Intermediary charges its representatives for effecting transactions in Fund shares) of up to $25 per purchase or exchange order, operational charges (e.g., fees that an Intermediary charges for establishing the Fund on its trading system), and literature printing and/or distribution costs; and (iv) at the direction of a retirement plan’s sponsor, reimburse or pay direct expenses of an employee benefit plan that would otherwise be payable by the plan.
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 they deem appropriate, subject to their internal guidelines and applicable law. Wholesale representatives of the Distributor may receive additional compensation if they meet certain targets for sales of one or more Nuveen Mutual Funds.
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 firm’s 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.
Certain third parties, affiliates of the Adviser and employees of the Adviser or its affiliates may receive cash compensation from the Adviser and/or the Distributor in connection with establishing new client relationships with the Nuveen Mutual Funds. Such compensation may vary by product and by Intermediary. Total compensation of employees of the Adviser and its affiliates with marketing and/or sales responsibilities is based in part on their generation of new client relationships, including new client relationships with the Nuveen Mutual Funds, and such employees may receive additional compensation if they meet certain targets for sales of one or more Nuveen Mutual Funds.
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 June 17, 2011:
ADP Broker-Dealer, Inc.
American Enterprise Investment Services, Inc.
American United Life Insurance Company
Ameriprise Financial Services, Inc.
Ascensus (formerly BISYS Retirement Services, Inc.)
Banc of America Investment Services, Inc.
Benefit Plans Administrative Services, Inc.
Benefit Trust Company
Charles Schwab & Co., Inc.
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Citigroup Global Markets Inc. / Morgan Stanley Smith Barney LLC
Commonwealth Equity Services, LLP, DBA Commonwealth Financial Network
Country Trust Bank
CPI Qualified Plan Consultants, Inc.
Digital Retirement Solutions, Inc.
Dyatech, LLC
ExpertPlan, Inc.
Fidelity Brokerage Services LLC / National Financial Services LLC
Fidelity Investments Institutional Operations Company, Inc.
Genesis Employee Benefits, Inc. DBA America’s VEBA Solution
GWFS Equities, Inc.
Hartford Life Insurance Company
Hartford Securities Distribution Company, Inc.
Hewitt Associates LLC
ICMA Retirement Corporation
ING Institutional Plan Services, LLC / ING Investment Advisors, LLC (formerly CitiStreet LLC / CitiStreet Advisors LLC)
ING Life Insurance and Annuity Company / ING Institutional Plan Services LLC
J.P. Morgan Retirement Plan Services, LLC
Janney Montgomery Scott LLC
Leggette Actuaries, Inc.
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.
MetLife Securities, 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 Dain Rauscher, Inc.
Reliance Trust Company
Retirement Plan Company, LLC (The)
Robert W. Baird & Co., Inc.
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.
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Unified Trust Company, N.A.
VALIC Retirement Services Company (formerly AIG Retirement Services Company)
Vanguard Group, Inc.
Wachovia Bank, N.A.
Wachovia Securities, LLC
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 June 17, 2011 are not reflected in the list.
Prior to the Transaction, FAF served as Administrator pursuant to an Administration Agreement between the FAF and NIF, dated July 1, 2006 and U.S. Bancorp Fund Services, LLC (“USBFS”), 615 East Michigan Street, Milwaukee, WI 53202, served as sub-administrator pursuant to a Sub-Administration Agreement between the FAF and USBFS dated July 1, 2005. USBFS is a subsidiary of U.S. Bancorp. As of December 31, 2010, the Fund no longer has an administrator or sub-administrator. The following table sets forth total administrative fees, after waivers, paid by the Fund to FAF and USBFS for the fiscal years ended June 30, 2008, June 30, 2009, and June 30, 2010:
Fund | Fiscal Year Ended June 30, 2008 | Fiscal Year June 30, 2009 | Fiscal Year June 30, 2010 | |||||||||
Short Term Bond Fund | $ | 764,278 | $ | 704,284 | $ | 1,223,974 |
USBFS (“Transfer Agent”) serves as the Fund’s transfer agent pursuant to a Transfer Agency and Shareholder Servicing Agreement (the “Transfer Agent Agreement”) between Transfer Agent and NIF dated September 19, 2006. As transfer agent, the Transfer Agent maintains records of shareholder accounts, processes purchases and redemptions of the Fund’s shares, acts as dividend and capital gain distribution disbursing agent, and performs other related transfer agent functions. The Fund pays transfer agent fees on a per shareholder account basis, at annual rates paid monthly, subject to a minimum annual fee per share class. These fees will be charged to the Fund based on the number of accounts within the Fund. The Fund will continue to reimburse the Transfer Agent for out-of-pocket expenses incurred in providing transfer agent services.
The following table sets forth transfer agent fees, excluding out-of-pocket expenses, paid by the Fund to the Transfer Agent for the fiscal years ended June 30, 2008, June 30, 2009, and June 30, 2010:
Fund | Fiscal Year Ended June 30, 2008 | Fiscal Year Ended June 30, 2009 | Fiscal Year Ended June 30, 2010 | |||||||||
Short Term Bond Fund | $ | 102,261 | $ | 91,017 | $ | 105,310 |
Nuveen Securities, LLC, 333 West Wacker Drive, Chicago, Illinois 60606, serves as the distributor for the Fund’s shares pursuant to a “best efforts” arrangement as provided by a Distribution Agreement dated January 1, 2011 (the “Distribution Agreement”). Pursuant to the Distribution Agreement, the Fund appointed the Distributor to be its agent for the distribution of the Fund’s shares on a continuous offering basis.
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Prior to the Transaction, Quasar Distributors, LLC (“Quasar”) 615 East Michigan Street, Milwaukee, WI 53202, served as the distributor for the Fund’s shares pursuant to a Distribution Agreement dated July 1, 2007 (the “Quasar Distribution Agreement”). Quasar is a wholly owned subsidiary of U.S. Bancorp. Fund shares and other securities distributed by Quasar are not deposits or obligations of, or endorsed or guaranteed by, any bank, and are not insured by the Bank Insurance Fund, which is administered by the Federal Deposit Insurance Corporation.
The following tables set forth the amount of underwriting commissions paid by the Fund and the amount of such commissions retained by Quasar, during the fiscal years ended June 30, 2008, June 30, 2009, and June 30, 2010:
Total Underwriting Commissions | ||||||||||||
Fund | Fiscal Year Ended June 30, 2008 | Fiscal Year June 30, 2009 | Fiscal Year June 30, 2010 | |||||||||
Short Term Bond Fund | $ | 5,947 | $ | 149,811 | $ | 421,176 |
Underwriting Commissions Retained by Quasar | ||||||||||||
Fund | Fiscal Year Ended June 30, 2008 | Fiscal Year June 30, 2009 | Fiscal Year June 30, 2010 | |||||||||
Short Term Bond Fund | $ | 917 | $ | 15,688 | $ | 50,607 |
Quasar received the following compensation from the Fund during the Fund’s most recent fiscal year ended June 30, 2010:
Fund | Net Underwriting Discounts and Commissions | Compensation on Repurchases | Brokerage Commissions | Other Compensation 1 | ||||||||||||
Short Term Bond Fund | $ | 50,607 | $ | 5,334 | – | – |
1 | Fees paid by the Fund under NIF’s Rule 12b-1 Distribution and Service Plan are provided below. Quasar was also compensated from fees earned by USBFS under a separate arrangement as part of the Sub-Administration Agreement between FAF and USBFS. |
Distribution and Service Plan
NIF has adopted a Distribution and Service Plan with respect to the Class A, Class C and Class R3 shares of the Fund pursuant to Rule 12b-1 under the 1940 Act (the “Plan”). Rule 12b-1 provides in substance that a mutual fund may not engage directly or indirectly in financing any activity which is primarily intended to result in the sale of shares, except pursuant to a plan adopted under the Rule. The Plan authorizes the Fund to pay the Distributor distribution and/or shareholder servicing fees on the Fund’s Class A, Class C and Class R3 shares as described below. The distribution fees under the Plan are used for primary purpose of compensating participating intermediaries for their sales of the Fund. The shareholder servicing fees are used primarily for the purpose of providing compensation for the ongoing servicing and/or maintenance of shareholder accounts.
The Class A shares pay to the Distributor a shareholder servicing fee at an annual rate of 0.25% of the average daily net assets of the Class A shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class A shares. The shareholder servicing fee is intended to compensate the Distributor for ongoing servicing and/or maintenance of shareholder accounts and may be used by the Distributor to provide compensation to participating intermediaries through whom shareholders hold their shares for ongoing servicing and/or maintenance of shareholder accounts. This fee is calculated and paid each month based on average daily net assets of Class A shares of the Fund for that month.
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The Class C shares pay to the Distributor a shareholder servicing fee at the annual rate of 0.25% of the average daily net assets of the Class C shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class C shares. This fee is calculated and paid each month based on average daily net assets of the Class C shares. The Class C shares pay to the Distributor a distribution fee at the annual rate of 0.75% of the average daily net assets of the Class C shares. The Distributor may use the distribution fee to provide compensation to participating intermediaries through which shareholders hold their shares beginning one year after purchase.
The Class R3 shares pay to the Distributor a shareholder servicing fee at the annual rate of 0.25% of the average daily net assets of the Class R3 shares. The fee may be used by the Distributor to provide compensation for shareholder servicing activities with respect to the Class R3 shares. This fee is calculated and paid each month based on average daily net assets of the Class R3 shares. The Class R3 shares also pay to the Distributor a distribution fee at the annual rate of 0.25% of the average daily net assets of Class R3 shares. The fee may be used by the Distributor to provide initial and ongoing sales compensation to its investment executives and to participating intermediaries in connection with sales of Class R3 shares and to pay for advertising and other promotional expenses in connection with the distribution of Class R3 shares. This fee is calculated and paid each month based on average daily net assets of the Class R3 shares.
The Distributor receives no compensation for distribution of the Class I shares.
The Plan is a “compensation-type” plan under which the Distributor is entitled to receive the distribution and shareholder servicing fees regardless of whether its actual distribution and shareholder servicing expenses are more or less than the amount of the fees. It is therefore possible that the Distributor may realize a profit in a particular year as a result of these payments. The Plan recognizes that the Distributor and the Adviser, in their discretion, may from time to time use their own assets to pay for certain additional costs of distributing Class A, Class C and Class R3 shares. Any such arrangements to pay such additional costs may be commenced or discontinued by the Distributor or the Adviser at any time. With the exception of the Distributor and its affiliates, no “interested person” of NIF, as that term is defined in the 1940 Act, and no Director of NIF has a direct or indirect financial interest in the operation of the Plan or any related agreement.
Under the Plan, the Fund’s Treasurer reports the amounts expended under the Plan and the purposes for which such expenditures were made to the Board of Directors for their review on a quarterly basis. The Plan provides that it will continue in effect for a period of more than one year from the date of its execution only so long as such continuance is specifically approved at least annually by the vote of a majority of the Board members of NIF and by the vote of the majority of those Board members of NIF who are not “interested persons” of NIF (as that term is defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Plan or in any agreement related to such plan. For the fiscal year ended June 30, 2010, the Fund paid the following 12b-1 fees to Quasar with respect to the Class A shares, Class C shares and Class R3 shares of the Fund. The table also describes the activities for which such payments were used. As noted above, no 12b-1 fees are paid with respect to Class I shares.
Fund | Total 12b-1 Fees Paid to Quasar | Amount Retained by Quasar1 | Compensation Paid to Participating Intermediaries | |||||||||
Short Term Bond Fund | ||||||||||||
Class A | 121,292 | 8,566 | 112,726 | |||||||||
Class C | 11,266 | 10,675 | 591 |
1 | The amounts retained by Quasar were used to pay for various distribution and shareholder servicing expenses, including advertising, marketing, wholesaler support, and printing prospectuses. |
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If the Fund closes to new investors, it may continue to make payments under the Plan. Such payments would be made for the various services provided to existing shareholders by the Participating Intermediaries receiving such payments.
Custodian and Independent Registered Public Accounting Firm
Custodian
U.S. Bank, 60 Livingston Avenue, St. Paul, MN 55101, acts as the custodian for the Fund (the “Custodian”). U.S. Bank is a subsidiary of U.S. Bancorp. The Custodian takes no part in determining the investment policies of the Fund or in deciding which securities are purchased or sold by the Fund. All of the instruments representing the investments of the Fund and all cash are held by the Custodian. The Custodian delivers securities against payment upon sale and pays for securities against delivery upon purchase. The Custodian also remits Fund assets in payment of Fund expenses, pursuant to instructions of NIF’s officers or resolutions of the Board of Directors.
As compensation for its services as custodian to the Fund, the Custodian is paid a monthly fee calculated on an annual basis equal to 0.005% of the Fund’s average daily net assets. In addition, the Custodian is reimbursed for its out-of-pocket expenses incurred while providing services to the Fund. The Custodian continues to serve so long as its appointment is approved at least annually by the Board of Directors including a majority of the directors who are not “interested persons” of NIF, as that term is defined in the 1940 Act.
Independent Registered Public Accounting Firm
Ernst & Young LLP, 220 South Sixth Street, Suite 1400, Minneapolis, Minnesota 55402, serves as the Fund’s independent registered public accounting firm, providing audit services, including audits of the annual financial statements.
The following table sets forth the number and total assets of the mutual funds and accounts managed by the Fund’s portfolio managers as of June 30, 2010.
Portfolio Manager | Type of Account Managed | Number of Accounts | Assets | Amount Subject to Performance-Based Fee | ||||||||||
Peter L. Agrimson1 | Registered Investment Company | 0 | 0 | 0 | ||||||||||
Other Pooled Investment Vehicles | 0 | 0 | 0 | |||||||||||
Other Accounts | 0 | 0 | 0 | |||||||||||
Chris J. Neuharth | Registered Investment Company | 5 | $ | 646.4 million | 0 | |||||||||
Other Pooled Investment Vehicles | 1 | $ | 915.6 million | 0 | ||||||||||
Other Accounts | 9 | $ | 925.0 million | 1 - $105.5 million |
1 Information is as of October 15, 2010.
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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 the 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.
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.
Portfolio Manager Compensation
Portfolio manager compensation consists primarily of base pay, an annual cash incentive and long term incentive payments.
Base pay is determined based upon an analysis of the portfolio manager’s general performance, experience, and market levels of base pay for such position.
The Fund’s portfolio managers are paid an annual cash incentive based upon investment performance, generally over the past one- and three-year periods unless the portfolio manager’s tenure is shorter. The maximum potential annual cash incentive is equal to a multiple of base pay, determined based upon the portfolio manager’s performance and experience, and market levels of base pay for such position.
The portion of the maximum potential annual cash incentive that is paid out is based upon performance relative to the portfolio’s benchmark and performance relative to an appropriate Lipper industry peer group. Generally, the threshold for payment of an annual cash incentive is (i) benchmark performance and (ii) median
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performance versus the peer group, and the maximum annual cash incentive is attained at (i) a spread over the benchmark which the Adviser believes will, over time, deliver top quartile performance and (ii) top quartile performance versus the Lipper industry peer group.
Investment performance is measured on a pre-tax basis, gross of fees for the Fund’s results and for its Lipper industry peer group.
Payments pursuant to a long term incentive plan are paid to portfolio managers on an annual basis based upon general performance and expected contributions to the success of the Adviser.
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 above.
The following table indicates as of June 30, 2010 the value, within the indicated range, of shares beneficially owned by the portfolio managers in the Fund 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
Portfolio Manager
| Fund
| Ownership in Fund
| Ownership in Fund
Complex | |||
Peter L. Agrimson1 | Short Term Bond Fund | A | A | |||
Chris J. Neuharth | Short Term Bond Fund | A |
1 Information is as of October 15, 2010.
Decisions with respect to which securities are to be bought or sold, the total amount of securities to be bought or sold, the broker-dealer with or through which the securities transactions are to be effected and the commission rates applicable to the trades are made by Nuveen Asset Management.
In selecting a broker-dealer to execute securities transactions, Nuveen Asset Management considers a variety of factors, including the execution capability, financial responsibility and responsiveness of the broker-dealer in seeking best price and execution. Subject to the satisfaction of its obligation to seek best execution, other factors Nuveen Asset Management may consider include a broker-dealer’s access to initial public offerings and the nature and quality of any brokerage and research products and services the broker-dealer provides. However, Nuveen Asset Management may cause the Fund to pay a broker-dealer a commission in excess of that which another broker-dealer might have charged for effecting the same transaction (a practice commonly referred to as “paying up”). However, Nuveen Asset Management may cause the Fund to pay up in recognition of the value of brokerage and research products and services provided to Nuveen Asset Management by the broker-dealer. The broker-dealer may directly provide such products or services to the Adviser or purchase them form a third party and provide them to the Adviser. In such cases, the Fund is in effect paying for the brokerage and research products and services in so-called “soft-dollars”. However, Nuveen Asset Management
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will authorize the Fund to pay an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged only if Nuveen Asset Management determined in good faith that the amount of such commission was reasonable in relation to the value of the brokerage and research products and services provided by such broker or dealer, viewed in terms of either that particular transaction or the overall responsibilities of the Adviser with respect to the managing its accounts.
The types of research products and services Nuveen Asset Management receives include economic analysis and forecasts, financial market analysis and forecasts, industry and company specific analysis, interest rate forecasts, and other services that assist in the investment decision making process. Research products and services are received primarily in the form of written reports, computer-generated services, telephone contacts and personal meetings with security analysts. Research services may also be provided in the form of meetings arranged with corporate and industry spokespersons or may be generated by third parties but are provided to Nuveen Asset Management by, or through, broker-dealers.
The research products and services Nuveen Asset Management receives from broker-dealers are supplemental to, and do not necessarily reduce, the Adviser’s own normal research activities. As a practical matter, however, it would be impossible for Nuveen Asset Management to generate all of the information presently provided by broker-dealers. The expenses of Nuveen Asset Management would be materially increased if they attempted to generate such additional information through their own staffs. To the extent that Nuveen Asset Management could use cash to purchase many of the brokerage and research products and services received for allocating securities transactions to broker-dealers, Nuveen Asset Management are relieved of expenses that they might otherwise bear when such services are provided by broker-dealers.
As a general matter, the brokerage and research products and services Nuveen Asset Management receive from broker-dealers are used to service all of their respective accounts. However, any particular brokerage and research product or service may not be used to service each and every client account, and may not benefit the particular accounts that generated the brokerage commissions. For example, equity commissions may pay for brokerage and research products and services utilized in managing fixed income accounts.
In some cases, Nuveen Asset Management may receive brokerage or research products or services that are used for both brokerage or research purposes and other purposes, such as accounting, record keeping, administration or marketing. In such cases, Nuveen Asset Management will make a good faith effort to decide the relative proportion of the cost of such products or services used for non-brokerage or research purposes and will pay for such portion from its own funds. In such circumstance, Nuveen Asset Management has a conflict of interest in making such decisions.
Many of the Fund’s portfolio transactions involve payment of a brokerage commission by the Fund. In some cases, transactions are with dealers or issuers who act as principal for their own accounts and not as brokers. Transactions effected on a principal basis, other than certain transactions effected on a so-called riskless principal basis, are made without the payment of brokerage commissions but at net prices which usually include a spread or markup. In effecting transactions in over-the-counter securities, the Fund typically deals with market makers unless it appears that better price and execution are available elsewhere.
Foreign equity securities may be held in the form of American Depositary Receipts, or ADRs, European Depositary Receipts, or EDRs, or securities convertible into foreign equity securities. ADRs and EDRs may be listed on stock exchanges or traded in the over-the-counter markets in the United States or overseas. The foreign and domestic debt securities and money market instruments in which the Fund may invest are generally traded in the over-the-counter markets.
The Fund does not effect any brokerage transactions in its portfolio securities with any broker or dealer affiliated directly or indirectly with Nuveen Asset Management or Distributor unless such transactions, including the frequency thereof, the receipt of commission payable in connection therewith, and the selection of the affiliated broker or dealer effecting such transactions are not unfair or unreasonable to the shareholders of the
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Fund, as determined by the Board of Directors. Any transactions with an affiliated broker or dealer must be on terms that are both at least as favorable to the Fund as the Fund can obtain elsewhere and at least as favorable as such affiliated broker or dealer normally gives to others.
When two or more clients of Nuveen Asset Management are simultaneously engaged in the purchase or sale of the same security, the prices and amounts are allocated in a manner considered by Nuveen Asset Management to be equitable to each client. In some cases, this system could have a detrimental effect on the price or volume of the security as far as each client is concerned. In other cases, however, the ability of the clients to participate in volume transactions may produce better executions for each client.
The Fund paid no brokerage commissions during the fiscal years ended June 30, 2008, June 30, 2009, and June 30, 2010:
At June 30, 2010, the Fund held the securities of its “regular brokers or dealers” as follows:
Fund | Regular Broker or Dealer Issuing Securities | Amount of Securities Held by Fund (000) | Type of Securities | |||||
Short Term Bond | Bank of America | $17,506 | Corporate Obligations | |||||
Citigroup | 18,523 | Corporate Obligations | ||||||
Credit Suisse First Boston | 2,599 | Corporate Obligations | ||||||
Deutsche Bank | 2,066 | Corporate Obligations | ||||||
Goldman Sachs | 8,074 | Corporate Obligations | ||||||
JPMorgan Chase | 19,507 | Corporate Obligations | ||||||
Morgan Stanley | 11,105 | Corporate Obligations | ||||||
UBS Warburg | 995 | Corporate Obligations |
Each share of the Fund’s $.01 par value common stock is fully paid, nonassessable, and transferable. Shares may be issued as either full or fractional shares. Fractional shares have pro rata the same rights and privileges as full shares. Shares of the Fund have no preemptive or conversion rights.
Each share of the Fund has one vote. On some issues, such as the election of directors, all shares of all NIF funds vote together as one series. The shares do not have cumulative voting rights. On issues affecting only a particular Fund, the shares of that Fund will vote as a separate series. Examples of such issues would be proposals to alter a fundamental investment restriction pertaining to the Fund or to approve, disapprove or alter a distribution plan.
The Bylaws of NIF provide that annual shareholders meetings are not required and that meetings of shareholders need only be held with such frequency as required under Maryland law and the 1940 Act.
As of July 6, 2011, the directors and officers of NIF as a group owned less than 1% of the Fund’s outstanding shares and the Fund was aware that the following persons owned of record 5% or more of the outstanding shares of each class of stock of the Fund:
Percentage of Outstanding Shares | ||||||||
Fund | Class A | Class C | Class R3 | Class I | ||||
Short Term Bond Fund | ||||||||
MERRILL LYNCH PIERCE FENNER & SMITH SAFEKEEPING ATTN PHYSICAL TEAM 4800 DEER LAKE DR E JACKSONVILLE FL 32246-6484 | 9.53% | |||||||
U S BANCORP INVESTMENTS INC 60 LIVINGSTON AVE SAINT PAUL MN 55107-2292 | 6.50% |
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Percentage of Outstanding Shares | ||||||||
Fund | Class A | Class C | Class R3 | Class I | ||||
BAND & CO C/O US BANK PO BOX 1787 MILWAUKEE WI 53201-1787 | 70.40% | |||||||
CAPINCO C/O US BANK PO BOX 1787 MILWAUKEE WI 53201-1787 | 14.56% | |||||||
WASHINGTON & CO C/O US BANK PO BOX 1787 MILWAUKEE WI 53201-1787 | 10.16% |
The Fund’s net asset value is determined as set forth in its Prospectus under “General Information—Net Asset Value.”
On June 30, 2010, the net asset values per share for each class of shares were calculated as follows.
Fund | Net Assets | Shares Outstanding | Net Asset Value Per Share | |||||||||
Short Term Bond Fund | ||||||||||||
Class A | 87,630,954 | 8,779,690 | 9.98 | |||||||||
Class C | 3,111,027 | 310,978 | 10.00 | |||||||||
Class I | 629,150,909 | 63,004,777 | 9.99 |
The public offering price of the shares of the Fund generally equals the Fund’s net asset value plus any applicable sales charge. A summary of any applicable sales charge assessed on Fund share purchases is set forth in the Fund’s Prospectus. The public offering price of the Class A Shares of the Fund as of June 30, 2010 was as set forth below. Please note that the public offering prices of Class C, Class R3, and Class I Shares are the same as net asset value since no sales charges are imposed on the purchase of such shares.
Fund | Public Offering Price Class A | |
Short Term Bond Fund | 10.21 |
This section summarizes some of the main U.S. federal income tax consequences of owning shares of the Fund. This section is current as of the date of this Statement of Additional Information. 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. 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 Fund. The Internal Revenue Service could disagree with any conclusions set forth in this section. In addition, Fund’s 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 Fund. 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.
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Fund Status
The Fund intends to qualify as a “regulated investment company” under the federal tax laws. If the 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.
Qualification as a Regulated Investment Company
As a regulated investment company, the Fund will not be subject to federal income tax on the portion of its investment company taxable income, as that term is defined in the Code, 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) 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 described below. The 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, the Fund must derive 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 “qualified publicly traded partnerships” (as such term is defined in the Code). The 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 the Fund’s taxable year, (1) 50% or more of the value of the Fund’s assets must be represented by cash, 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 Fund’s assets and 10% of the outstanding voting securities of such issuer and (2) not more than 25% of the value of the Fund’s 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 minimus, and certain corrective action is taken and certain tax payments are made by the Fund.
Distributions
After the end of each year, you will receive a tax statement that separates the Fund’s distributions into ordinary income distributions and capital gains dividends. In addition, certain of the Tax Free Income Funds may pay exempt-interest dividends. Exempt-interest dividends generally are excluded from your gross income for federal income tax purposes. Some or all of the exempt-interest dividends, however, may be taken into account in determining your alternative minimum tax and may have other tax consequences (e.g., they may affect the amount of your social security benefits that are taxed). Ordinary income distributions are generally taxed at your ordinary tax rate. 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, the 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 the Fund is not affected by whether you reinvest your distributions in additional shares or receive them in cash. The income from the 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
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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. Interest that is excluded from gross income and exempt-interest dividends are generally not included in your net investment income for purposes of this tax.
Dividends Received Deduction
A corporation that owns shares generally will not be entitled to the dividends received deduction with respect to dividends received from the Fund because the dividends received deduction is generally not available for distributions from regulated investment companies.
If You Sell or Redeem Your 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. Further, if you hold your shares for six months or less, any loss incurred by you related to the disposition of such a share will be disallowed to the extent of the exempt-interest dividends you received, except as otherwise described in the next section.
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. For later periods, 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.
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. If you hold a share for six months or less, any loss incurred by you related to the disposition of such share will be disallowed to the extent of the exempt-interest dividends you received, except in the case of a regular dividend paid by the Fund if the Fund declares exempt-interest dividends on a daily basis in an amount equal to at least 90 percent of its net tax-exempt interest and distributes such dividends on a monthly or more frequent basis. To the extent, if any, it is not disallowed, it will be recharacterized as long-term capital loss to the extent of any 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 Internal Revenue Code treats certain capital gains as ordinary income in special situations.
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 the 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.
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Exchanges
If you exchange shares of the 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 the Fund will generally not be treated as income taxable to you. In some cases, however, you may be required to treat your portion of the Fund expenses as income. In these cases you may be able to take a deduction for these expenses. However, certain 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 individual’s adjusted gross income. Further, in the case of Fund that pays exempt-interest dividends, which are treated as exempt interest for federal income tax purposes, you will not be able to deduct some of your interest expense for debt that you incur or continue to purchase or carry your shares.
Foreign Investors
If you are a foreign 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 the Fund will be characterized as dividends for federal income tax purposes (other than dividends which the Fund properly reports as capital gain dividends) and, other than exempt-interest dividends, will be subject to U.S. income taxes, including withholding taxes, subject to certain exceptions described below. However, distributions received by a foreign investor from the Fund that are properly reported by the Fund as capital gain dividends may not be subject to U.S. federal income taxes, including withholding taxes, provided that the Fund makes certain elections and certain other conditions are met. In the case of dividends with respect to taxable years of the Fund beginning prior to 2012, distributions from the Fund that are properly reported by the Fund as an interest-related dividend attributable to certain interest income received by the Fund or as a short-term capital gain dividend attributable to certain net short-term capital gain income received by the Fund may not be subject to U.S. federal income taxes, including withholding taxes when received by certain foreign investors, provided that the Fund makes certain elections and certain other conditions are met. Distributions after December 31, 2012 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 entity’s U.S. owners.
Purchase and Redemption of Fund Shares
As described in the Prospectus, the Fund provides you with alternative ways of purchasing Fund shares based upon your individual investment needs and preferences.
Each class of shares of the Fund represents an interest in the same portfolio of investments. Each class of shares is identical in all respects except that each class bears its own class expenses, including distribution and administration expenses, and each class has exclusive voting rights with respect to any distribution or service plan applicable to its shares. As a result of the differences in the expenses borne by each class of shares, net income per share, dividends per share and net asset value per share will vary among the Fund’s classes of shares. There are no conversion, preemptive or other subscription rights.
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.
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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) directors’ fees or expenses incurred as a result of issues relating to a specific class of shares, (vii) accounting expenses relating to a specific class of shares and (viii) any additional incremental expenses subsequently identified and determined to be properly allocated to one or more classes of 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 of the Fund are also subject to an annual service fee of 0.25%. See “Distribution and Service Plan.”
Reduction or Elimination of Up-Front Sales Charge on Class A Shares
Rights of Accumulation
You may qualify for a reduced sales charge on a purchase of Class A shares of the Fund if the amount of your purchase, when added to the value that day of all of your 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 Fund’s transfer agent of any cumulative discount whenever you plan to purchase Class A shares of the Fund that you wish to qualify for a reduced sales charge.
Letter of Intent
You may qualify for a reduced sales charge on a purchase of Class A shares of the Fund if you plan to purchase Class A shares of Nuveen Mutual Funds over the next 13 months and the total amount of your purchases would, if purchased at one time, qualify you for one of the reduced sales charges shown in the Class A Sales Charges and Commissions table in “How 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 Fund’s 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��I and Class C shares of a Nuveen Mutual Fund that you purchase over the next 13 months towards completion of your investment program, but you will receive a reduced sales charge only on new Class A shares you purchase with a sales charge over the 13 months. You cannot count towards completion of your investment program Class A shares that you purchase without a sales charge through investment of distributions from a Nuveen Mutual Fund or a Nuveen Defined Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class A shares of the Fund following execution of the Letter of Intent will be at least 5% of the total amount of your intended purchases. You further agree that shares representing 5% of the total amount of your intended purchases will be held in escrow pending completion of these purchases. All dividends and capital gains distributions on Class A shares held in escrow will be credited to your account. If total purchases, less redemptions, prior to the expiration of the 13 month period equal or exceed the amount specified in your Letter of Intent, the Class A shares held in escrow
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will be transferred to your account. If the total purchases, less redemptions, exceed the amount specified in your Letter of Intent and thereby qualify for a lower sales charge than the sales charge specified in your Letter of Intent, you will receive this lower sales charge retroactively, and the difference between it and the higher sales charge paid will be used to purchase additional Class A shares on your behalf. If the total purchases, less redemptions, are less than the amount specified, you must pay 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 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 Fund’s 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 dependent children, 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 the Fund may be purchased at net asset value without a sales charge by the following categories of investors:
• | investors purchasing $1,000,000 or more; |
• | officers, trustees and former trustees of the Nuveen Funds; |
• | bona fide, full-time and retired employees 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- and daughters-in-law, siblings, a sibling’s spouse and a spouse’s siblings); |
• | any person who, for at least the last 90 days, has been an officer, director or bona fide employee of any financial intermediary, or their immediate family members; |
• | bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity; |
• | investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; |
• | clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services; and |
• | employer-sponsored retirement plans except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans. |
Any Class A shares purchased pursuant to a special sales charge waiver must be acquired for investment purposes and on the condition that they will not be transferred or resold except through redemption by the Fund. You or your financial advisor must notify the Distributor or the Fund’s transfer agent whenever you make a purchase of Class A shares of the Fund that you wish to be covered under these special sales charge waivers.
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Class A shares of the Fund may be issued at net asset value without a sales charge in connection with the acquisition by the Fund of another investment company. All purchases under the special sales charge waivers will be subject to minimum purchase requirements as established by the Fund.
The reduced sales charge programs may be modified or discontinued by the Fund 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.
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 year’s distribution fee of 0.75% plus an advance on the first year’s 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 purchaser’s shares of any class of any Nuveen Mutual Fund, cause the purchaser’s 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. Class C shares do not convert.
Redemption of Class C shares within 12 months of purchase may be subject to a CDSC of 1% of the lower of the purchase price or redemption proceeds. Because Class C shares do not convert to Class A shares and continue to pay an annual distribution fee indefinitely, Class C shares should normally not be purchased by an investor who expects to hold shares for significantly longer than eight years.
Reduction or Elimination of Contingent Deferred Sales Charge
Class A shares are normally redeemed at net asset value, without any CDSC. However, in the case of Class A shares purchased at net asset value without a sales charge because the purchase amount exceeded $1 million, where the financial intermediary did not waive the sales commission, 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 the shareholder’s financial advisor agreed to waive the right to receive an advance of the first year’s distribution and service fee).
In determining whether a CDSC is payable, the 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
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(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 account’s net asset value depending on the frequency of the plan as designated by the shareholder; (iv) involuntary redemptions caused by operation of law; (v) redemptions in connection with a payment of account or plan fees; (vi) redemptions in connection with the exercise of a reinstatement privilege whereby the proceeds of a redemption of the Fund’s shares subject to a sales charge are reinvested in shares of certain Funds within a specified number of days; (vii) redemptions in connection with the exercise of the Fund’s right to redeem all shares in an account that does not maintain a certain minimum balance or that the Board of Directors has determined may have material adverse consequences to the shareholders of the Fund; (viii) in whole or in part for redemptions of shares by shareholders with accounts in excess of specified breakpoints that correspond to the breakpoints under which the up-front sales charge on Class A shares is reduced pursuant to Rule 22d-1 under the Act; (ix) redemptions of shares purchased under circumstances or by a category of investors for which Class A shares could be purchased at net asset value without a sales charge; (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 (a) you purchase shares after committing to hold the shares for less than one year and (b) your advisor consents up front to receiving the appropriate service and distribution fee on the Class C shares on an ongoing basis instead of having the first year’s fees advanced by the Distributor; and (xii) redemptions of Class A shares where the Distributor did not pay a sales commission when such shares were purchased. If the Fund waives or reduces the CDSC, such waiver or reduction would be uniformly applied to all Fund shares in the particular category. In waiving or reducing a CDSC, the Fund 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 employer’s plan or IRA; and (iv) redemptions resulting from the return of an excess contribution. The CDSC will also be waived in connection with the following redemptions of shares held in an IRA account: (i) for redemptions made pursuant to an IRA systematic withdrawal based on the shareholder’s life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 59 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 shareholder’s Nuveen IRA accounts).
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, from the Fund. Class R3 shares are subject to annual distribution and service fees of 0.50% of the Fund’s 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 associated 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 Fund through omnibus accounts (either at the retirement plan level or at the level of the retirement plan’s 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.
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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 the 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 plan’s 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 Fund or by contacting any financial intermediary authorized to sell Class R3 shares of the Fund. 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 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 Fund.
Financial intermediaries and retirement plans may have omnibus accounts and similar arrangements with the 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 Fund 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 Fund 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 Statement of Additional Information should be read in conjunction with the retirement plan’s and/or the financial intermediary’s materials regarding their fees and services.
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.
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Class I shares also are available for purchase, with no minimum initial investment, by the following categories of investors:
• | employer-sponsored retirement plans, except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans; |
• | 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; |
• | Advisory accounts of Nuveen Fund Advisors and its affiliates, including other Nuveen Mutual Funds whose investment policies permit investments in other investment companies. |
• | trustees/directors and former trustees/directors of any Nuveen Fund, and their immediate family members (“immediate family members” are defined as spouses, parents, children, grandparents, grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a sibling’s spouse and a spouse’s siblings); |
• | officers, directors and former directors of Nuveen Investments and its affiliates, and their immediate family members; |
• | full-time and retired employees of Nuveen Investments and its affiliates, and their immediate family members; |
• | 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; |
(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 the Fund).
Holders of Class I shares may purchase additional Class I shares using dividends and capital gains distributions on their shares. In addition, shareholders of Nuveen Defined Portfolios may reinvest their distributions in Class I shares, if, before September 6, 1994 (or before June 13, 1995 in the case of Nuveen Intermediate Duration Municipal Bond Fund), such shareholders had elected to reinvest distributions in Nuveen Mutual Fund 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.
Exchange Privilege
You may exchange shares of a class of the Fund for shares of the same class of any other Nuveen Mutual Fund with reciprocal exchange privileges, at net asset value without a sales charge, by either sending a written request to the Fund, c/o Nuveen Investor Services, P.O. Box 8530, Boston, Massachusetts 02266-8530 or by
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calling Nuveen Investor Services toll free at (800) 257-8787. 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. An exchange between classes of shares of the same Fund may be done in writing to the address stated above.
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.
The shares to be purchased through an exchange must be offered in your state of residence. The total value of exchanged shares must at least equal the minimum investment requirement of the Nuveen Mutual Fund being purchased. If your shares are held with a financial intermediary, the financial intermediary must have the operational capability to support exchanges. 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 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. The exchange privilege may be modified or discontinued by the Fund at any time.
The exchange privilege is not intended to permit the 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, the 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 the 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
The Fund may suspend the right of redemption of Fund shares or delay payment more than seven days (a) during any period when 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 Fund’s 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.
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Redemption In-Kind
The Fund has reserved the right to redeem in-kind (that is, to pay redemption requests in cash and portfolio securities, or wholly in portfolio securities), although the Fund has no present intention to redeem in-kind. The Fund voluntarily has 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 the Fund at the beginning of the 90-day period.
The Fund’s 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 Fund recognizes 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 the Fund. Subject to certain exceptions noted below, the Fund limits an investor to four Round Trips per trailing 12-month period and may also restrict the trading privileges of an investor who makes a Round Trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
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 investor’s financial advisor) who has violated these policies from opening new accounts with the Fund and may restrict the investor’s 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 Fund. The Fund 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 Fund’s Frequent Trading Policy. In addition, the Fund may rely on a financial intermediary’s policy to restrict market timing and excessive trading if
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the Fund believes that the policy is reasonably designed to prevent market timing that is detrimental to the Fund. Such policy may be more or less restrictive than the Fund’s Policy. The Fund cannot ensure that these financial intermediaries will in all cases apply the Fund’s 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 account’s 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 the Fund’s 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 the 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 employer’s plan or IRA or changes in a plan’s 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 shareholder’s life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 59 1/2; and (ii) redemptions to satisfy required minimum distributions after age 70 1/2 from an IRA account.
The financial statements of NIF included in its Annual Report to shareholders for the fiscal year ended June 30, 2010 and the financial statements included in its Semi-Annual Report to shareholders for the fiscal period ended December 31, 2010 are incorporated herein by reference.
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APPENDIX A
RATING OF INVESTMENTS
Standard & Poor’s Ratings Group—A brief description of the applicable Standard & Poor’s (“S&P”) rating symbols and their meanings (as published by S&P) follows:
Issue Credit Ratings
A S&P issue credit rating is a forward looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.
The opinion reflects S&P’s view of the obligor’s capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days-including commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following considerations:
1. Likelihood of payment—capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights.
Issue rating are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
AAA | An obligation rated ‘AAA’ has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. |
AA | An obligation rated ‘AA’ differs from the highest rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong. |
A | An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. |
BBB | An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. |
Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’ and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
A-1
BB | An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. |
B | An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation. |
CCC | An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. |
CC | An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. |
C | A ‘C’ rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the ‘C’ rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par. |
D | An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. An obligation’s rating is lowered to ‘D’ upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par. |
Plus (+) or Minus (–): The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
NR | This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy. |
Short-Term Issue Credit Ratings
A-1 | A short-term obligation rated ‘A-1’ is rated in the highest category by S&P. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong. |
A-2 | A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory. |
A-3 | A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. |
B | A short-term obligation rated ‘B’ is regarded as having significant speculative characteristics. Ratings of ‘B-1’, ‘B-2’ and ‘B-3’ may be assigned to indicate finer distinctions within the ‘B’ category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. |
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B-1 | A short-term obligation rated ‘B-1’ is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. |
B-2 | A short-term obligation rated ‘B-2’ is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. |
B-3 | A short-term obligation rated ‘B-3’ is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. |
C | A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. |
D | A short-term obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. |
Moody’s Investors Service, Inc.—A brief description of the applicable Moody’s Investors Service, Inc. (“Moody’s”) rating symbols and their meanings (as published by Moody’s) follows:
Long Term Obligation Ratings
Aaa | Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk. |
Aa | Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. |
A | Obligations rated A are considered upper-medium grade and are subject to low credit risk. |
Baa | Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. |
Ba | Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk. |
B | Obligations rated B are considered speculative and are subject to high credit risk. |
Caa | Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk. |
Ca | Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. |
C | Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest. |
Note: Moody’s applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Medium-Term Note Ratings
Moody’s assigns ratings to medium-term note (MTN) programs and to individual debt securities issued from them (referred to as drawdowns or notes). These ratings may be expressed on Moody’s general long-term or short-term rating scale, depending upon the intended tenor of the notes to be issued. MTN program ratings are intended to reflect the ratings likely to be assigned to drawdowns issued from the program with the specified priority of claim (e.g. senior or subordinated). However, the rating assigned to a drawdown from a rated MTN program may differ from the program rating if the draw-down is exposed to additional credit risks besides the issuer’s default, such as links to the defaults of other issuers, or has other structural features that warrant a different rating. In some circumstances, no rating may be assigned to a drawdown.
Market participants must determine whether any particular note is rated, and if so, at what rating level. Moody’s encourages market participants to contact Moody’s Ratings Desks or visit www.moodys.com directly if
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they have questions regarding ratings for specific notes issued under a medium-term note program. Unrated notes issued under an MTN program may be assigned an NR (not rated) symbol.
Short-Term Ratings
Moody’s short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.
Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:
P-1 | Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations. |
P-2 | Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations. |
P-3 | Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations. |
NP | Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories. |
U.S. Municipal Short-Term Debt and Demand Obligation Ratings
Short-Term Debt Ratings
In municipal debt issuance, there are three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (MIG) and are divided into three levels—MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation.
MIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing. |
MIG 2 | This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group. |
MIG 3 | This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established. |
SG | This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection. |
Demand Obligation Ratings
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned; a long or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of the degree of risk associated with the ability to receive purchase price upon demand (“demand feature”), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or VMIG rating.
When either the long-or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/-VMIG 1.
VMIG rating expirations are a function of each issue’s specific structural or credit features.
VMIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. |
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VMIG 2 | This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. |
VMIG 3 | This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. |
SG | This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand. |
Fitch Ratings—A brief description of the applicable Fitch Ratings (“Fitch”) ratings symbols and meanings (as published by Fitch) follows:
Fitch provides an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Credit ratings are used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. The agency’s credit ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.
The terms “investment grade” and “speculative grade” have established themselves over time as shorthand to describe the categories ‘AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade). The terms “investment grade” and “speculative grade” are market conventions, and do not imply any recommendation or endorsement of a specific security for investment purposes. “Investment grade” categories indicate relatively low to moderate credit risk, while ratings in the “speculative” categories either signal a higher level of credit risk or that a default has already occurred.
A designation of “Not Rated” or “NR” is used to denote securities not rated by Fitch where Fitch has rated some, but not all, securities comprising an issuance capital structure.
Credit ratings express risk in relative rank order, which is to say they are ordinal measures of credit risk and are not predictive of a specific frequency of default or loss.
Fitch Ratings’ credit ratings do not directly address any risk other than credit risk. In particular, ratings do not deal with the risk of a market value loss on a rated security due to changes in interest rates, liquidity and other market considerations. However, in terms of payment obligation on the rated liability, market risk may be considered to the extent that it influences the ability of an issuer to pay upon a commitment. Ratings nonetheless do not reflect market risk to the extent that they influence the size or other conditionality of the obligation to pay upon a commitment (for example, in the case of index-linked bonds).
In the default components of ratings assigned to individual obligations or instruments, the agency typically rates to the likelihood of non-payment or default in accordance with the terms of that instrument’s documentation. In limited cases, Fitch Ratings may include additional considerations (i.e., rate to a higher or lower standard than that implied in the obligation’s documentation). In such cases, the agency will make clear the assumptions underlying the agency’s opinion in the accompanying rating commentary.
International Long-Term Ratings
Issuer Credit Rating Scales
Investment Grade
AAA | Highest credit quality. ‘AAA’ ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. |
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AA | Very high credit quality. ‘AA’ ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. |
A | High credit quality. ‘A’ ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. |
BBB | Good credit quality. ‘BBB’ ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. |
Speculative Grade
BB | Speculative. ‘BB’ ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments. Securities rated in this category are not investment grade. |
B | Highly speculative. ‘B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment. |
CCC | Default is a real possibility. |
CC | Default of some kind appears probable. |
C | Default is imminent or inevitable, or the issuer is in standstill. Conditions that are indicative of a ‘C’ category rating for an issuer include: |
• | the issuer has entered into a grace or cure period following non-payment of a material financial obligation; |
• | the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; and |
• | Fitch Ratings otherwise believes a condition of ‘RD’ or ‘D’ to be imminent or inevitable, including through the formal announcement of a coercive debt exchange. |
RD | Restricted default. ‘RD’ ratings indicate an issuer that in Fitch Ratings’ opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased business. This would include: |
• | the selective payment default on a specific class or currency of debt; |
• | the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial obligation; |
• | the extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations, either in series or in parallel; and |
• | execution of a coercive debt exchange on one or more material financial obligations. |
D | ‘D’ ratings indicate an issuer that in Fitch Ratings’ opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business. |
Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a coercive debt exchange. |
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“Imminent” default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a coercive debt exchange, but the date of the exchange still lies several days or weeks in the immediate future. |
In all cases, the assignment of a default rating reflects the agency’s opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuer’s financial obligations or local commercial practice. |
International Short-Term Ratings
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream, and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as “short term” based on market convention. Typically, this means up to 13 months for corporate, structured and sovereign obligations, and up to 36 months for obligations in US public finance markets.
F1 | Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature. |
F2 | Good short-term credit quality. A good intrinsic capacity for timely payment of financial commitments. |
F3 | Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate. |
B | Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near-term adverse changes in financial and economic conditions. |
C | High short-term default risk. Default is a real possibility. |
RD | Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only. |
D | Default. Indicates a broad-based default event for an entity, or the default of a specific short-term obligation. |
Notes to Long-Term and Short-Term Ratings
The modifiers “+” or “-“ may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ obligation category, or to categories below ‘B’.
A designation of “Not Rated” or ‘NR’ is used to denote securities not rated by Fitch where Fitch has rated some, but not all, securities comprising an issuance capital structure.
‘WD’ indicates that the rating has been withdrawn and is no longer rated by Fitch.
Rating Watch: Rating Watches indicate that there is a heightened probability of a rating change and the likely direction of such a change. These are designated as “Positive”, indicating a potential upgrade, “Negative”, for a potential downgrade, or “Evolving”, if ratings may be raised, lowered or affirmed. However, ratings that are not on Rating Watch can be raised or lowered without being placed on Rating Watch first if circumstances warrant such an action. A Rating Watch is typically event-driven and, as such, it is generally resolved over a relatively short period.
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Appendix B
Nuveen Funds Advisors, Inc.
Proxy Voting Policies and Procedures
Effective Date: January 1, 2011
I. INTRODUCTION
Nuveen Funds Advisors, Inc. (“Adviser”) is an investment adviser for the Nuveen Funds (the “Funds”) and for other accounts (collectively, with the Funds, “Accounts”). As such, Accounts may confer upon Adviser complete discretion to vote proxies. It is Adviser’s duty to vote proxies in the best interests of its clients (which may involve affirmatively deciding that voting the proxies may not be in the best interests of certain clients on certain matters). In voting proxies, Adviser also seeks to enhance total investment return for its clients.
When Adviser contracts with another investment adviser to act as a sub-adviser for its Accounts, Adviser delegates proxy voting responsibility to the sub-adviser (each a “Sub-Adviser”). Where Adviser has delegated proxy voting responsibility, the Sub-Adviser will be responsible for developing and adhering to its own proxy voting policies, subject to oversight by Adviser.
II. POLICIESAND PROCEDURES
Consistent with its oversight responsibilities, Adviser has adopted the following Sub-Adviser oversight policies and procedures:
1. Prior to approval of any sub-advisory contract by Adviser or the Board of Directors of the Funds, as applicable, Adviser’s Compliance reviews the Sub-Adviser’s proxy voting policy (each a “Sub-Adviser Policy”) to ensure that such Sub-Adviser Policy is designed in the best interests of Adviser’s clients. Thereafter, at least annually, Adviser’s Compliance reviews and approves material changes to each Sub-Adviser Policy.
2. On a quarterly basis, Adviser’s Investment Operations will request and review reports from each Sub-Adviser reflecting any overrides of its Sub-Adviser Policy or conflicts of interest addressed during the previous quarter, and other matters Adviser’s Investment Operations deems appropriate. Any material issues arising from such review will be reported to Adviser’s management and if appropriate, the Board of Directors of the Funds.
III. POLICY OWNER
Chief Compliance Officer
IV. RESPONSIBLE PARTIES
Compliance
Investment Operations
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Nuveen Asset Management, LLC
Proxy Voting Policies and Procedures
Effective Date: January 1, 2011
I. GENERAL PRINCIPLES
A. Nuveen Asset Management, LLC (“Adviser”) is an investment sub-adviser for certain of the Nuveen Funds (the “Funds”) and investment adviser for institutional and other separately managed accounts (collectively, with the Fund, “Client Accounts”). As such, Client Accounts may confer upon Adviser complete discretion to vote proxies. It is Adviser’s duty to vote proxies in the best interests of its clients (which may involve affirmatively deciding that voting the proxies may not be in the best interests of certain clients on certain matters1). In voting proxies, Adviser also seeks to enhance total investment return for its clients.
B. If Adviser contracts with another investment adviser to act as a sub-adviser for a Client Account, Adviser may delegate proxy voting responsibility to the sub-adviser. Where Adviser has delegated proxy voting responsibility, the sub-adviser will be responsible for developing and adhering to its own proxy voting policies, subject to oversight by Adviser.
C. Adviser’s Investment Policy Committee (“IPC”), comprised of the firm’s most senior investment professionals, is charged with oversight of the proxy voting policies and procedures. The IPC is responsible for (1) approving the proxy voting policies and procedures, and (2) oversight of the activities of Adviser’s Proxy Voting Committee (“PVC”). The PVC is responsible for providing an administrative framework to facilitate and monitor Adviser’s exercise of its fiduciary duty to vote client proxies and fulfill the obligations of reporting and recordkeeping under the federal securities laws.
II. POLICIES
The IPC, after reviewing and concluding that such policies are reasonably designed to vote proxies in the best interests of clients, has approved and adopted the proxy voting policies of Institutional Shareholder Services, Inc. (“ISS”), a leading national provider of proxy voting administrative and research services. As a result, such policies set forth Adviser’s positions on recurring proxy issues and criteria for addressing non-recurring issues. These policies are reviewed periodically by ISS, and therefore are subject to change. Even though it has adopted ISS policies, Adviser maintains the fiduciary responsibility for all proxy voting decisions.
III. PROCEDURES
A. Supervision of Proxy Voting Service. The PVC shall supervise the relationship with Adviser’s proxy voting service, ISS. ISS apprises Adviser of shareholder meeting dates, provides research on proxy proposals and voting recommendations, and casts the actual proxy votes. ISS also serves as Adviser’s proxy voting record keeper and generates reports on how proxies were voted.
1 | Adviser may not vote proxies associated with the securities of any issuer if as a result of voting, subsequent purchases or sales of such securities would be blocked. However, Adviser may decide, on an individual security basis that it is in the best interests of its clients to vote the proxy associated with such a security, taking into account the loss of liquidity. In addition, Adviser may not to vote proxies where the voting would in Adviser’s judgment result in some other financial, legal, regulatory disability or burden to the client (such as imputing control with respect to the issuer) or subject to resolution of any conflict of interest as provided herein, to Adviser. |
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B. Conflicts of Interest.
1. The following relationships or circumstances may give rise to conflicts of interest:2
a. | The issuer or proxy proponent (e.g., a special interest group) is Madison Dearborn Partners, a private equity firm and affiliate of Adviser (“MDP”), or a company that controls, is controlled by or is under common control with MDP. |
b. | The issuer is an entity in which an executive officer of Adviser or a spouse or domestic partner of any such executive officer is or was (within the past three years of the proxy vote) an executive officer or director. |
c. | The issuer is a registered or unregistered fund for which Adviser or another Nuveen adviser serves as investment adviser or sub-adviser. |
d. | Any other circumstances that Adviser is aware of where Adviser’s duty to serve its clients’ interests, typically referred to as its “duty of loyalty,” could be materially compromised. |
2. Adviser will vote proxies in the best interest of its clients regardless of such real or perceived conflicts of interest. By adopting ISS policies, Adviser believes the risk related to conflicts will be minimized.
3. To further minimize this risk, the IPC will review ISS’ conflict avoidance policy at least annually to ensure that it adequately addresses both the actual and perceived conflicts of interest the proxy voting service may face.
4. In the event that ISS faces a material conflict of interest with respect to a specific vote, the PVC shall direct ISS how to vote. The PVC shall receive voting direction from the Head of Research, who will seek voting direction from appropriate investment personnel. Before doing so, however, the PVC will confirm that Adviser faces no material conflicts of its own with respect to the specific proxy vote.
5. If the PVC concludes that a material conflict does exist, it will recommend to the IPC a course of action designed to address the conflict. Such actions could include, but are not limited to:
a. | Obtaining instructions from the affected client(s) on how to vote the proxy; |
b. | Disclosing the conflict to the affected client(s) and seeking their consent to permit Adviser to vote the proxy; |
c. | Voting in proportion to the other shareholders; |
d. | Recusing an IPC member from all discussion or consideration of the matter, if the material conflict is due to such person’s actual or potential conflict of interest; or |
e. | Following the recommendation of a different independent third party. |
6. In addition to all of the above-mentioned and other conflicts, members of the IPC and the PVC must notify Adviser’s Chief Compliance Officer of any direct, indirect or perceived improper influence exerted by any employee, officer or director within the MDP affiliate or Fund complex with regard to how Adviser should vote proxies. The Chief Compliance Officer will investigate the allegations and will report the findings to Adviser’s President and the General Counsel. If it is determined that improper influence was attempted, appropriate action shall be taken. Such appropriate action may include disciplinary action, notification of the appropriate senior managers within the MDP affiliate, or notification of the appropriate regulatory authorities. In all cases, the IPC shall not consider any improper influence in determining how to vote proxies, and will vote in the best interests of clients.
2 | A conflict of interest shall not be considered material for the purposes of these Policies and Procedures in respect of a specific vote or circumstance if the matter to be voted on relates to a restructuring of the terms of existing securities or the issuance of new securities or a similar matter arising out of the holding of securities, other than common equity, in the context of a bankruptcy or threatened bankruptcy of the issuer, even if a conflict described in III.B.1a.-d is present. |
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C. Proxy Vote Override. From time to time, a portfolio manager of a Client Account (a “Portfolio Manager”) may initiate action to override the ISS recommendation for a particular vote. Any such override by a NAM Portfolio Manager (but not a sub-adviser Portfolio Manager) shall be reviewed by Adviser’s Legal Department for material conflicts. If the Legal Department determines that no material conflicts exist, the approval of one investment professional on the IPC or the Head of Equity Research shall authorize the override. If a material conflict exists the conflict and, ultimately, the override recommendation will be addressed pursuant to the procedures described above under “Conflicts of Interest.”
D. Securities Lending.
1. In order to generate incremental revenue, some clients may participate in a securities lending program. If a client has elected to participate in the lending program then it will not have the right to vote the proxies of any securities that are on loan as of the shareholder meeting record date. A client, or a Portfolio Manager, may place restrictions on loaning securities and/or recall a security on loan at any time. Such actions must be affected prior to the record date for a meeting if the purpose for the restriction or recall is to secure the vote.
2. Portfolio Managers and/or analysts who become aware of upcoming proxy issues relating to any securities in portfolios they manage, or issuers they follow, will consider the desirability of recalling the affected securities that are on loan or restricting the affected securities prior to the record date for the matter. If the proxy issue is determined to be material, and the determination is made prior to the shareholder meeting record date the Portfolio Manager(s) will contact the Securities Lending Agent to recall securities on loan or restrict the loaning of any security held in any portfolio they manage, if they determine that it is in the best interest of shareholders to do so. Training regarding the process to recall securities on loan or restrict the loaning of securities is given to all Portfolio Managers and analysts.
E. Proxy Voting for ERISA Clients. If a proxy voting issue arises for an ERISA client, Adviser is prohibited from voting shares with respect to any issue advanced by a party in interest of the ERISA client.
F. Proxy Voting Records. As required by Rule 204-2 of the Investment Advisers Act of 1940, Adviser shall make and retain five types of records relating to proxy voting; (a) proxy voting policies and procedures; (b) proxy statements received for client and fund securities; (c) records of votes cast on behalf of clients and funds; (d) records of written requests for proxy voting information and written responses from the Adviser to either a written or oral request; and (e) any documents prepared by the adviser that were material to making a proxy voting decision or that memorialized the basis for the decision. Adviser may rely on ISS to make and retain on Adviser’s behalf records pertaining to the rule.
G. Fund of Fund Provision. In instances where Adviser provides investment advice to a fund of funds that acquires shares of affiliated funds or three percent or more of the outstanding voting securities of an unaffiliated fund, the acquiring fund shall vote the shares in the same proportion as the vote of all other shareholders of the acquired fund. If compliance with this policy results in a vote of any shares in a manner different than the ISS recommendation, such vote will not require compliance with the Proxy Vote Override procedures set forth above.
H. Legacy Securities. To the extent that Adviser receives proxies for securities that are transferred into a Client Account’s portfolio that were not recommended or selected by Adviser and are sold or expected to be sold promptly in an orderly manner (“legacy securities”), Adviser will generally instruct ISS to refrain from voting such proxies. In such circumstances, since legacy securities are expected to be sold promptly, voting proxies on such securities would not further Adviser’s interest in maximizing the value of client investments. Adviser may agree to an institutional Client Account’s special request to vote a legacy security proxy, and would instruct ISS to vote such proxy in accordance with its guidelines.
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I. Review and Reports.
1. The PVC shall maintain a review schedule. The schedule shall include reviews for the proxy voting policy (including the policies of any sub-adviser), the proxy voting record, account maintenance, and other reviews as deemed appropriate by the PVC. The PVC shall review the schedule at least annually.
2. The PVC will report to the IPC with respect to all identified conflicts and how they were addressed. These reports will include all Client Accounts, including those that are sub-advised. With respect to the review of votes cast on behalf of investments by the Fund, such review will also be reported to the Board of Directors of the Fund at each of their regularly scheduled meetings. Adviser also shall provide the Fund that it sub-advises with information necessary for preparing Form N-PX.
K. Vote Disclosure to Clients.
Adviser’s institutional and separately managed account clients can contact their relationship manager for more information on Adviser’s policies and the proxy voting record for their account. The information available includes name of issuer, ticker/CUSIP, shareholder meeting date, description of item and Adviser’s vote.
IV. POLICY OWNER
IPC
V. RESPONSIBLE PARTIES
IPC
PVC
ADV Review Team
RiskMetrics Group’s U.S. Proxy Voting Guidelines Concise Summary
(Digest of Selected Key Guidelines)
January 22, 2010
1. Routine/Miscellaneous:
Auditor Ratification
Vote FOR proposals to ratify auditors, unless any of the following apply:
¨ | An auditor has a financial interest in or association with the company, and is therefore not independent; |
¨ | There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position; |
¨ | Poor accounting practices are identified that rise to a serious level of concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures; or |
¨ | Fees for non-audit services (“Other” fees) are excessive. |
Non-audit fees are excessive if:
¨ | Non-audit (“other”) fees exceed audit fees + audit-related fees + tax compliance/preparation fees |
Vote CASE-BY-CASE on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.
Vote CASE-BY-CASE on shareholder proposals asking for audit firm rotation, taking into account:
¨ | The tenure of the audit firm; |
¨ | The length of rotation specified in the proposal; |
¨ | Any significant audit-related issues at the company; |
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¨ | The number of Audit Committee meetings held each year; |
¨ | The number of financial experts serving on the committee; and |
¨ | Whether the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price. |
2. Board of Directors:
Votes on director nominees should be determined on a CASE-BY-CASE basis.
Four fundamental principles apply when determining votes on director nominees:
Board Accountability
Board Responsiveness
Director Independence
Director Competence
Board Accountability
Problematic Takeover Defenses
VOTE WITHHOLD/AGAINST1 the entire board of directors (except new nominees2, who should be considered on a CASE-by-CASE basis), if:
¨ | The board is classified, and a continuing director responsible for a problematic governance issue at the board/committee level that would warrant a withhold/against vote recommendation is not up for election -- any or all appropriate nominees (except new) may be held accountable; |
¨ | The company’s poison pill has a “dead-hand” or “modified dead-hand” feature. Vote withhold/against every year until this feature is removed; |
¨ | The board adopts a poison pill with a term of more than 12 months (“long-term pill”), or renews any existing pill, including any “short-term” pill (12 months or less), without shareholder approval. A commitment or policy that puts a newly-adopted pill to a binding shareholder vote may potentially offset an adverse vote recommendation. Review such companies with classified boards every year, and such companies with annually-elected boards at least once every three years, and vote AGAINST or WITHHOLD votes from all nominees if the company still maintains a non-shareholder-approved poison pill. This policy applies to all companies adopting or renewing pills after the announcement of this policy (Nov 19, 2009); |
¨ | The board makes a material adverse change to an existing poison pill without shareholder approval. |
Vote CASE-By-CASE on all nominees if the board adopts a poison pill with a term of 12 months or less (“short-term pill”) without shareholder approval, taking into account the following factors:
¨ | The date of the pill’s adoption relative to the date of the next meeting of shareholders- i.e. whether the company had time to put the pill on ballot for shareholder ratification given the circumstances; |
¨ | The issuer’s rationale; |
¨ | The issuer’s governance structure and practices; and |
¨ | The issuer’s track record of accountability to shareholders. |
Problematic Audit-Related Practices
Generally, vote AGAINST or WITHHOLD from the members of the Audit Committee if:
¨ | The non-audit fees paid to the auditor are excessive (see discussion under “Auditor Ratification”); |
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¨ | The company receives an adverse opinion on the company’s financial statements from its auditor; or |
¨ | There is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm. |
Vote CASE-by-CASE on members of the Audit Committee and/or the full board if:
¨ | Poor accounting practices are identified that rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures. Examine the severity, breadth, chronological sequence and duration, as well as the company’s efforts at remediation or corrective actions, in determining whether WITHHOLD/AGAINST votes are warranted. |
Problematic Compensation Practices
VOTE WITHHOLD/AGAINST the members of the Compensation Committee and potentially the full board if:
¨ | There is a negative correlation between chief executive pay and company performance (see Pay for Performance Policy); |
1 | In general, companies with a plurality vote standard use “Withhold” as the valid contrary vote option in director elections; companies with a majority vote standard use “Against”. However, it will vary by company and the proxy must be checked to determine the valid contrary vote option for the particular company. |
2 | A “new nominee” is any current nominee who has not already been elected by shareholders and who joined the board after the problematic action in question transpired. If RMG cannot determine whether the nominee joined the board before or after the problematic action transpired, the nominee will be considered a “new nominee” if he or she joined the board within the 12 months prior to the upcoming shareholder meeting. |
¨ | The company reprices underwater options for stock, cash, or other consideration without prior shareholder approval, even if allowed in the firm’s equity plan; |
¨ | The company fails to submit one-time transfers of stock options to a shareholder vote; |
¨ | The company fails to fulfill the terms of a burn rate commitment made to shareholders; |
¨ | The company has problematic pay practices. Problematic pay practices may warrant withholding votes from the CEO and potentially the entire board as well. |
Other Problematic Governance Practices
VOTE WITHHOLD/AGAINST the entire board of directors (except new nominees, who should be considered on a CASE-by-CASE basis), if:
¨ | The company’s proxy indicates that not all directors attended 75 percent of the aggregate board and committee meetings, but fails to provide the required disclosure of the names of the director(s) involved. If this information cannot be obtained, withhold from all incumbent directors; |
¨ | The board lacks accountability and oversight, coupled with sustained poor performance relative to peers. Sustained poor performance is measured by one- and three-year total shareholder returns in the bottom half of a company’s four-digit GICS industry group (Russell 3000 companies only). Take into consideration the company’s five-year total shareholder return and five-year operational metrics. Problematic provisions include but are not limited to: |
- A classified board structure;
- A supermajority vote requirement;
- Majority vote standard for director elections with no carve out for contested elections;
- The inability for shareholders to call special meetings;
- The inability for shareholders to act by written consent;
- A dual-class structure; and/or
- A non-shareholder approved poison pill.
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Under extraordinary circumstances, vote AGAINST or WITHHOLD from directors individually, committee members, or the entire board, due to:
¨ | Material failures of governance, stewardship, or fiduciary responsibilities at the company; |
¨ | Failure to replace management as appropriate; or |
¨ | Egregious actions related to the director(s)’ service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests of shareholders at any company. |
Board Responsiveness
Vote WITHHOLD/AGAINST the entire board of directors (except new nominees, who should be considered on a CASE-by-CASE basis), if:
¨ | The board failed to act on a shareholder proposal that received approval by a majority of the shares outstanding the previous year (a management proposal with other than a FOR recommendation by management will not be considered as sufficient action taken); |
¨ | The board failed to act on a shareholder proposal that received approval of the majority of shares cast for the previous two consecutive years (a management proposal with other than a FOR recommendation by management will not be considered as sufficient action taken); |
¨ | The board failed to act on takeover offers where the majority of the shareholders tendered their shares; or |
¨ | At the previous board election, any director received more than 50 percent withhold/against votes of the shares cast and the company has failed to address the issue(s) that caused the high withhold/against vote. |
Director Independence
Vote WITHHOLD/AGAINST Inside Directors and Affiliated Outside Directors (per the Categorization of Directors in the Summary Guidelines) when:
¨ | The inside or affiliated outside director serves on any of the three key committees: audit, compensation, or nominating; |
¨ | The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee; |
¨ | The company lacks a formal nominating committee, even if the board attests that the independent directors fulfill the functions of such a committee; or |
¨ | The full board is less than majority independent. |
Director Competence
Vote AGAINST or WITHHOLD from individual directors who:
¨ | Attend less than 75 percent of the board and committee meetings without a valid excuse, such as illness, service to the nation, work on behalf of the company, or funeral obligations. If the company provides meaningful public or private disclosure explaining the director’s absences, evaluate the information on a CASE-BY-CASE basis taking into account the following factors: |
- Degree to which absences were due to an unavoidable conflict;
- Pattern of absenteeism; and
- Other extraordinary circumstances underlying the director’s absence;
¨ | Sit on more than six public company boards; |
¨ | Are CEOs of public companies who sit on the boards of more than two public companies besides their own-- withhold only at their outside boards. |
Voting for Director Nominees in Contested Elections
Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors:
¨ | Long-term financial performance of the target company relative to its industry; |
¨ | Management’s track record; |
¨ | Background to the proxy contest; |
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¨ | Qualifications of director nominees (both slates); |
¨ | Strategic plan of dissident slate and quality of critique against management; |
¨ | Likelihood that the proposed goals and objectives can be achieved (both slates); |
¨ | Stock ownership positions. |
Independent Chair (Separate Chair/CEO)
Generally vote FOR shareholder proposals requiring that the chairman’s position be filled by an independent director, unless the company satisfies all of the following criteria:
The company maintains the following counterbalancing features:
¨ | Designated lead director, elected by and from the independent board members with clearly delineated and comprehensive duties. (The role may alternatively reside with a presiding director, vice chairman, or rotating lead director; however the director must serve a minimum of one year in order to qualify as a lead director.) The duties should include, but are not limited to, the following: |
- presides at all meetings of the board at which the chairman is not present, including executive sessions of the independent directors;
- serves as liaison between the chairman and the independent directors;
- approves information sent to the board;
- approves meeting agendas for the board;
- approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;
- has the authority to call meetings of the independent directors;
- if requested by major shareholders, ensures that he is available for consultation and direct communication;
¨ | Two-thirds independent board; |
¨ | All independent key committees; |
¨ | Established governance guidelines; |
¨ | A company in the Russell 3000 universe must not have exhibited sustained poor total shareholder return (TSR) performance, defined as one- and three-year TSR in the bottom half of the company’s four-digit GICS industry group within the Russell 3000 only), unless there has been a change in the Chairman/CEO position within that time; |
¨ | The company does not have any problematic governance or management issues, examples of which include, but are not limited to: |
- Egregious compensation practices;
- Multiple related-party transactions or other issues putting director independence at risk;
- Corporate and/or management scandals;
- Excessive problematic corporate governance provisions; or
- Flagrant board or management actions with potential or realized negative impact on shareholders.
3. Shareholder Rights & Defenses:
Net Operating Loss (NOL) Protective Amendments
For management proposals to adopt a protective amendment for the stated purpose of protecting a company’s net operating losses (“NOLs”), the following factors should be considered on a CASE-BY-CASE basis:
¨ | The ownership threshold (NOL protective amendments generally prohibit stock ownership transfers that would result in a new 5-percent holder or increase the stock ownership percentage of an existing five-percent holder); |
¨ | The value of the NOLs; |
¨ | Shareholder protection mechanisms (sunset provision or commitment to cause expiration of the protective amendment upon exhaustion or expiration of the NOL); |
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¨ | The company’s existing governance structure including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance concerns; and |
¨ | Any other factors that may be applicable. |
Poison Pills- Shareholder Proposals to put Pill to a Vote and/or Adopt a Pill Policy
Vote FOR shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it UNLESS the company has: (1) A shareholder approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:
¨ | Shareholders have approved the adoption of the plan; or |
¨ | The board, in its exercise of its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that would result from seeking stockholder approval (i.e., the “fiduciary out” provision). A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within 12 months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate. |
If the shareholder proposal calls for a time period of less than 12 months for shareholder ratification after adoption, vote FOR the proposal, but add the caveat that a vote within 12 months would be considered sufficient implementation.
Poison Pills- Management Proposals to Ratify Poison Pill
Vote CASE-by-CASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:
¨ | No lower than a 20% trigger, flip-in or flip-over; |
¨ | A term of no more than three years; |
¨ | No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill; |
¨ | Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill. |
In addition, the rationale for adopting the pill should be thoroughly explained by the company. In examining the request for the pill, take into consideration the company’s existing governance structure, including: board independence, existing takeover defenses, and any problematic governance concerns.
Poison Pills- Management Proposals to ratify a Pill to preserve Net Operating Losses (NOLs)
Vote CASE-BY-CASE on management proposals for poison pill ratification. For management proposals to adopt a poison pill for the stated purpose of preserving a company’s net operating losses (“NOLs”), the following factors are considered on a CASE-BY-CASE basis:
¨ | The ownership threshold to transfer (NOL pills generally have a trigger slightly below 5%); |
¨ | The value of the NOLs; |
¨ | The term; |
¨ | Shareholder protection mechanisms (sunset provision, or commitment to cause expiration of the pill upon exhaustion or expiration of NOLs); |
¨ | The company’s existing governance structure including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance concerns; and |
¨ | Any other factors that may be applicable. |
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Shareholder Ability to Call Special Meetings
Vote AGAINST management or shareholder proposals to restrict or prohibit shareholders’ ability to call special meetings.
Generally vote FOR management or shareholder proposals that provide shareholders with the ability to call special meetings taking into account the following factors:
¨ | Shareholders’ current right to call special meetings; |
¨ | Minimum ownership threshold necessary to call special meetings (10% preferred); |
¨ | The inclusion of exclusionary or prohibitive language; |
¨ | Investor ownership structure; and |
¨ | Shareholder support of and management’s response to previous shareholder proposals. |
Supermajority Vote Requirements
Vote AGAINST proposals to require a supermajority shareholder vote.
Vote FOR management or shareholder proposals to reduce supermajority vote requirements. However, for companies with shareholder(s) who have significant ownership levels, vote CASE-BY-CASE, taking into account:
¨ | Ownership structure; |
¨ | Quorum requirements; and |
¨ | Supermajority vote requirements. |
4. Capital Restructuring:
Common Stock Authorization
Vote CASE-BY-CASE on proposals to increase the number of shares of common stock authorized for issuance. Take into account company-specific factors which include, at a minimum, the following:
¨ | Past Board Performance: |
- The company’s use of authorized shares during the last three years;
- One- and three-year total shareholder return; and
- The board’s governance structure and practices;
¨ | The Current Request: |
- Disclosure in the proxy statement of the specific reasons for the proposed increase;
- The dilutive impact of the request as determined through an allowable cap generated by RiskMetrics’ quantitative model, which examines the company’s need for shares and its three-year total shareholder return; and
- Risks to shareholders of not approving the request.
Vote AGAINST proposals at companies with more than one class of common stock to increase the number of authorized shares of the class that has superior voting rights.
Preferred Stock
Vote CASE-BY-CASE on proposals to increase the number of shares of preferred stock authorized for issuance. Take into account company-specific factors that include, at a minimum, the following:
¨ | Past Board Performance: |
- The company’s use of authorized preferred shares during the last three years;
- One- and three-year total shareholder return; and
- The board’s governance structure and practices;
¨ | The Current Request: |
- Disclosure in the proxy statement of specific reasons for the proposed increase;
- In cases where the company has existing authorized preferred stock, the dilutive impact of the request as determined through an allowable cap generated by RiskMetrics’ quantitative model, which examines the company’s need for shares and three-year total shareholder return; and
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- Whether the shares requested are blank check preferred shares, and whether they are declawed.
Vote AGAINST proposals at companies with more than one class or series of preferred stock to increase the number of authorized shares of the class or series that has superior voting rights.
Mergers and Acquisitions
Vote CASE–BY–CASE on mergers and acquisitions. Review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:
¨ | Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic rationale. |
¨ | Market reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal. |
¨ | Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions. |
¨ | Negotiations and process - Were the terms of the transaction negotiated at arm’s-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation “wins” can also signify the deal makers’ competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value. |
¨ | Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend the merger. The change-in-control figure presented in the “RMG Transaction Summary” section of this report is an aggregate figure that can in certain cases be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure appears to be excessive, analyze the underlying assumptions to determine whether a potential conflict exists. |
¨ | Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance. |
5. Compensation:
Executive Pay Evaluation
Underlying all evaluations are five global principles that most investors expect corporations to adhere to in designing and administering executive and director compensation programs:
1. Maintain appropriate pay-for-performance alignment, with emphasis on long-term shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract, retain, and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration, among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; and equity-based plan costs;
2. Avoid arrangements that risk “pay for failure”: This principle addresses the appropriateness of long or indefinite contracts, excessive severance packages, and guaranteed compensation;
3. Maintain an independent and effective compensation committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience, and a sound process for compensation decision-making (e.g., including access to independent expertise and advice when needed);
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4. Provide shareholders with clear, comprehensive compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to evaluate executive pay practices fully and fairly;
5. Avoid inappropriate pay to non-executive directors: This principle recognizes the interests of shareholders in ensuring that compensation to outside directors does not compromise their independence and ability to make appropriate judgments in overseeing managers’ pay and performance. At the market level, it may incorporate a variety of generally accepted best practices.
Equity Compensation Plans
Vote CASE-BY-CASE on equity-based compensation plans. Vote AGAINST the equity plan if any of the following factors apply:
¨ | The total cost of the company’s equity plans is unreasonable; |
¨ | The plan expressly permits the repricing of stock options/stock appreciate rights (SARs) without prior shareholder approval; |
¨ | The CEO is a participant in the proposed equity-based compensation plan and there is a disconnect between CEO pay and the company’s performance where over 50 percent of the year-over-year increase is attributed to equity awards (see Pay-for-Performance); |
¨ | The company’s three year burn rate exceeds the greater of 2% or the mean plus one standard deviation of its industry group; |
¨ | Liberal Change of Control Definition: The plan provides for the acceleration of vesting of equity awards even though an actual change in control may not occur (e.g., upon shareholder approval of a transaction or the announcement of a tender offer); or |
¨ | The plan is a vehicle for problematic pay practices. |
Other Compensation Proposals and Policies
Advisory Votes on Executive Compensation- Management Proposals (Management Say-on-Pay)
In general, the management say on pay (MSOP) ballot item is the primary focus of voting on executive pay practices- dissatisfaction with compensation practices can be expressed by voting against the MSOP rather than withholding or voting against the compensation committee. However, if there is no MSOP on which to express the dissatisfaction, then the secondary target will be members of the compensation committee. In addition, in egregious cases, or if the board fails to respond to concerns raised by a prior MSOP proposal; then vote withhold or against compensation committee member (or, if the full board is deemed accountable, to all directors). If the negative factors impact equity-based plans, then vote AGAINST an equity-based plan proposal presented for shareholder approval.
Evaluate executive pay and practices, as well as certain aspects of outside director compensation, on a CASE-BY-CASE basis.
Vote AGAINST management say on pay (MSOP) proposals, AGAINST/WITHHOLD on compensation committee members (or, in rare cases where the full board is deemed responsible, all directors including the CEO), and/or AGAINST an equity-based incentive plan proposal if:
¨ | There is a misalignment between CEO pay and company performance (pay for performance); |
¨ | The company maintains problematic pay practices; |
¨ | The board exhibits poor communication and responsiveness to shareholders. |
Additional CASE-BY-CASE considerations for the management say on pay (MSOP) proposals:
¨ | Evaluation of performance metrics in short-term and long-term plans, as discussed and explained in the Compensation Discussion & Analysis (CD&A). Consider the measures, goals, and target awards reported by the company for executives’ short- and long-term incentive awards: disclosure, explanation of their alignment with the company’s business strategy, and whether goals appear to be sufficiently challenging in relation to resulting payouts; |
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¨ | Evaluation of peer group benchmarking used to set target pay or award opportunities. Consider the rationale stated by the company for constituents in its pay benchmarking peer group, as well as the benchmark targets it uses to set or validate executives’ pay (e.g., median, 75th percentile, etc.,) to ascertain whether the benchmarking process is sound or may result in pay “ratcheting” due to inappropriate peer group constituents (e.g., much larger companies) or targeting (e.g., above median); and |
¨ | Balance of performance-based versus non-performance-based pay. Consider the ratio of performance-based (not including plain vanilla stock options) vs. non-performance-based pay elements reported for the CEO’s latest reported fiscal year compensation, especially in conjunction with concerns about other factors such as performance metrics/goals, benchmarking practices, and pay-for-performance disconnects. |
Pay for Performance
Evaluate the alignment of the CEO’s pay with performance over time, focusing particularly on companies that have underperformed their peers over a sustained period. From a shareholders’ perspective, performance is predominantly gauged by the company’s stock performance over time. Even when financial or operational measures are utilized in incentive awards, the achievement related to these measures should ultimately translate into superior shareholder returns in the long-term.
Focus on companies with sustained underperformance relative to peers, considering the following key factors:
¨ | Whether a company’s one-year and three-year total shareholder returns (“TSR”) are in the bottom half of its industry group (i.e., four-digit GICS – Global Industry Classification Group); and |
¨ | Whether the total compensation of a CEO who has served at least two consecutive fiscal years is aligned with the company’s total shareholder return over time, including both recent and long-term periods. |
If a company falls in the bottom half of its four-digit GICS, further analysis of the CD&A is required to better understand the various pay elements and whether they create or reinforce shareholder alignment. Also assess the CEO’s pay relative to the company’s TSR over a time horizon of at least five years. The most recent year-over-year increase or decrease in pay remains a key consideration, but there will be additional emphasis on the long term trend of CEO total compensation relative to shareholder return. Also consider the mix of performance-based compensation relative to total compensation. In general, standard stock options or time-vested restricted stock are not considered to be performance-based. If a company provides performance-based incentives to its executives, the company is highly encouraged to provide the complete disclosure of the performance measure and goals (hurdle rate) so that shareholders can assess the rigor of the performance program. The use of non-GAAP financial metrics also makes it very challenging for shareholders to ascertain the rigor of the program as shareholders often cannot tell the type of adjustments being made and if the adjustments were made consistently. Complete and transparent disclosure helps shareholders to better understand the company’s pay for performance linkage.
Problematic Pay Practices
The focus is on executive compensation practices that contravene the global pay principles, including:
¨ | Problematic practices related to non-performance-based compensation elements; |
¨ | Incentives that may motivate excessive risk-taking; and |
¨ | Options Backdating. |
Non-Performance based Compensation Elements
Companies adopt a variety of pay arrangements that may be acceptable in their particular industries, or unique for a particular situation, and all companies are reviewed on a case-by-case basis. However, there are certain adverse practices that are particularly contrary to a performance-based pay philosophy, including guaranteed pay and excessive or inappropriate non-performance-based pay elements.
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While not exhaustive, this is the list of practices that carry greatest weight in this consideration and may result in negative vote recommendations on a stand-alone basis. For more details, please refer to RMG’s Compensation FAQ document: http://www.riskmetrics.com/policy/2010_compensation_FAQ:
¨ | Multi-year guarantees for salary increases, non-performance based bonuses, and equity compensation; |
¨ | Including additional years of unworked service that result in significant additional benefits, without sufficient justification, or including long-term equity awards in the pension calculation; |
¨ | Perquisites for former and/or retired executives, and extraordinary relocation benefits (including home buyouts) for current executives; |
¨ | Change-in-control payments exceeding 3 times base salary and target bonus; change-in-control payments without job loss or substantial diminution of duties (“Single Triggers”); new or materially amended agreements that provide for “modified single triggers” (under which an executive may voluntarily leave for any reason and still receive the change-in-control severance package); new or materially amended agreements that provide for an excise tax gross-up (including “modified gross-ups”); |
¨ | Tax Reimbursements related to executive perquisites or other payments such as personal use of corporate aircraft, executive life insurance, bonus, etc; (see also excise tax gross-ups above) |
¨ | Dividends or dividend equivalents paid on unvested performance shares or units; |
¨ | Executives using company stock in hedging activities, such as “cashless” collars, forward sales, equity swaps or other similar arrangements; or |
¨ | Repricing or replacing of underwater stock options/stock appreciation rights without prior shareholder approval (including cash buyouts and voluntary surrender/subsequent regrant of underwater options). |
Incentives that may Motivate Excessive Risk-Taking
Assess company policies and disclosure related to compensation that could incentivize excessive risk-taking, for example:
¨ | Guaranteed bonuses; |
¨ | A single performance metric used for short- and long-term plans; |
¨ | Lucrative severance packages; |
¨ | High pay opportunities relative to industry peers; |
¨ | Disproportionate supplemental pensions; or |
¨ | Mega annual equity grants that provide unlimited upside with no downside risk. |
Factors that potentially mitigate the impact of risky incentives include rigorous claw-back provisions and robust stock ownership/holding guidelines.
Options Backdating
Vote CASE-by-CASE on options backdating issues. Generally, when a company has recently practiced options backdating, WITHHOLD from or vote AGAINST the compensation committee, depending on the severity of the practices and the subsequent corrective actions on the part of the board. When deciding on votes on compensation committee members who oversaw questionable options grant practices or current compensation committee members who fail to respond to the issue proactively, consider several factors, including, but not limited to, the following:
¨ | Reason and motive for the options backdating issue, such as inadvertent vs. deliberate grant date changes; |
¨ | Duration of options backdating; |
¨ | Size of restatement due to options backdating; |
¨ | Corrective actions taken by the board or compensation committee, such as canceling or re-pricing backdated options, the recouping of option gains on backdated grants; and |
¨ | Adoption of a grant policy that prohibits backdating, and creates a fixed grant schedule or window period for equity grants in the future. |
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A CASE-by-CASE analysis approach allows distinctions to be made between companies that had “sloppy” plan administration versus those that acted deliberately and/or committed fraud, as well as those companies that subsequently took corrective action. Cases where companies have committed fraud are considered most egregious.
Board Communications and Responsiveness
Consider the following factors on a CASE-BY-CASE basis when evaluating ballot items related to executive pay:
¨ | Poor disclosure practices, including: |
- Unclear explanation of how the CEO is involved in the pay setting process;
- Retrospective performance targets and methodology not discussed;
- Methodology for benchmarking practices and/or peer group not disclosed and explained.
¨ | Board’s responsiveness to investor input and engagement on compensation issues, for example: |
- Failure to respond to majority-supported shareholder proposals on executive pay topics; or
- Failure to respond to concerns raised in connection with significant opposition to MSOP proposals.
Option Exchange Programs/Repricing Options
Vote CASE-by-CASE on management proposals seeking approval to exchange/reprice options, taking into consideration:
¨ | Historic trading patterns--the stock price should not be so volatile that the options are likely to be back “in-the-money” over the near term; |
¨ | Rationale for the re-pricing--was the stock price decline beyond management’s control? |
¨ | Is this a value-for-value exchange? |
¨ | Are surrendered stock options added back to the plan reserve? |
¨ | Option vesting--does the new option vest immediately or is there a black-out period? |
¨ | Term of the option--the term should remain the same as that of the replaced option; |
¨ | Exercise price--should be set at fair market or a premium to market; |
¨ | Participants--executive officers and directors should be excluded. |
If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the company’s total cost of equity plans and its three-year average burn rate.
In addition to the above considerations, evaluate the intent, rationale, and timing of the repricing proposal. The proposal should clearly articulate why the board is choosing to conduct an exchange program at this point in time. Repricing underwater options after a recent precipitous drop in the company’s stock price demonstrates poor timing. Repricing after a recent decline in stock price triggers additional scrutiny and a potential AGAINST vote on the proposal. At a minimum, the decline should not have happened within the past year. Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price.
Vote FOR shareholder proposals to put option repricings to a shareholder vote.
Shareholder Proposals on Compensation
Advisory Vote on Executive Compensation (Say-on-Pay)
Generally, vote FOR shareholder proposals that call for non-binding shareholder ratification of the compensation of the Named Executive Officers and the accompanying narrative disclosure of material factors provided to understand the Summary Compensation Table.
Golden Coffins/Executive Death Benefits
Generally vote FOR proposals calling companies to adopt a policy of obtaining shareholder approval for any future agreements and corporate policies that could oblige the company to make payments or awards following
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the death of a senior executive in the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites and other payments or awards made in lieu of compensation. This would not apply to any benefit programs or equity plan proposals that the broad-based employee population is eligible.
Recoup Bonuses
Vote on a CASE-BY-CASE on proposals to recoup unearned incentive bonuses or other incentive payments made to senior executives if it is later determined that the figures upon which incentive compensation is earned later turn out to have been in error. This is line with the clawback provision in the Trouble Asset Relief Program. Many companies have adopted policies that permit recoupment in cases where fraud, misconduct, or negligence significantly contributed to a restatement of financial results that led to the awarding of unearned incentive compensation. RMG will take into consideration:
¨ | If the company has adopted a formal recoupment bonus policy; |
¨ | If the company has chronic restatement history or material financial problems; or |
¨ | If the company’s policy substantially addresses the concerns raised by the proponent. |
Stock Ownership or Holding Period Guidelines
Generally vote AGAINST shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board. While RMG favors stock ownership on the part of directors, the company should determine the appropriate ownership requirement.
Vote on a CASE-BY-CASE on shareholder proposals asking companies to adopt policies requiring Named Executive Officers to retain 75% of the shares acquired through compensation plans while employed and/or for two years following the termination of their employment, and to report to shareholders regarding this policy. The following factors will be taken into account:
¨ | Whether the company has any holding period, retention ratio, or officer ownership requirements in place. These should consist of: |
- Rigorous stock ownership guidelines, or
- A holding period requirement coupled with a significant long-term ownership requirement, or
- A meaningful retention ratio,
¨ | Actual officer stock ownership and the degree to which it meets or exceeds the proponent’s suggested holding period/retention ratio or the company’s own stock ownership or retention requirements. |
¨ | Problematic pay practices, current and past, which may promote a short-term versus a long-term focus. |
A rigorous stock ownership guideline should be at least 10x base salary for the CEO, with the multiple declining for other executives. A meaningful retention ratio should constitute at least 50 percent of the stock received from equity awards (on a net proceeds basis) held on a long-term basis, such as the executive’s tenure with the company or even a few years past the executive’s termination with the company.
6. Social/Environmental Issues:
Overall Approach
When evaluating social and environmental shareholder proposals, RMG considers the following factors:
¨ | Whether adoption of the proposal is likely to enhance or protect shareholder value; |
¨ | Whether the information requested concerns business issues that relate to a meaningful percentage of the company’s business as measured by sales, assets, and earnings; |
¨ | The degree to which the company’s stated position on the issues raised in the proposal could affect its reputation or sales, or leave it vulnerable to a boycott or selective purchasing; |
¨ | Whether the issues presented are more appropriately/effectively dealt with through governmental or company-specific action; |
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¨ | Whether the company has already responded in some appropriate manner to the request embodied in the proposal; |
¨ | Whether the company’s analysis and voting recommendation to shareholders are persuasive; |
¨ | What other companies have done in response to the issue addressed in the proposal; |
¨ | Whether the proposal itself is well framed and the cost of preparing the report is reasonable; |
¨ | Whether implementation of the proposal’s request would achieve the proposal’s objectives; |
¨ | Whether the subject of the proposal is best left to the discretion of the board; |
¨ | Whether the requested information is available to shareholders either from the company or from a publicly available source; and |
¨ | Whether providing this information would reveal proprietary or confidential information that would place the company at a competitive disadvantage. |
Board Diversity
Generally vote FOR requests for reports on the company’s efforts to diversify the board, unless:
¨ | The gender and racial minority representation of the company’s board is reasonably inclusive in relation to companies of similar size and business; and |
¨ | The board already reports on its nominating procedures and gender and racial minority initiatives on the board and within the company. |
Vote CASE-BY-CASE on proposals asking the company to increase the gender and racial minority representation on its board, taking into account:
¨ | The degree of existing gender and racial minority diversity on the company’s board and among its executive officers; |
¨ | The level of gender and racial minority representation that exists at the company’s industry peers; |
¨ | The company’s established process for addressing gender and racial minority board representation; |
¨ | Whether the proposal includes an overly prescriptive request to amend nominating committee charter language; |
¨ | The independence of the company’s nominating committee; |
¨ | The company uses an outside search firm to identify potential director nominees; and |
¨ | Whether the company has had recent controversies, fines, or litigation regarding equal employment practices. |
Gender Identity, Sexual Orientation, and Domestic Partner Benefits
Generally vote FOR proposals seeking to amend a company’s EEO statement or diversity policies to prohibit discrimination based on sexual orientation and/or gender identity, unless the change would result in excessive costs for the company.
Generally vote AGAINST proposals to extend company benefits to, or eliminate benefits from domestic partners. Decisions regarding benefits should be left to the discretion of the company.
Greenhouse Gas (GHG) Emissions
Generally vote FOR proposals requesting a report on greenhouse gas (GHG) emissions from company operations and/or products and operations, unless:
¨ | The company already provides current, publicly-available information on the impacts that GHG emissions may have on the company as well as associated company policies and procedures to address related risks and/or opportunities; |
¨ | The company’s level of disclosure is comparable to that of industry peers; and |
¨ | There are no significant, controversies, fines, penalties, or litigation associated with the company’s GHG emissions. |
Vote CASE-BY-CASE on proposals that call for the adoption of GHG reduction goals from products and operations, taking into account:
¨ | Overly prescriptive requests for the reduction in GHG emissions by specific amounts or within a specific time frame; |
B-18
¨ | Whether company disclosure lags behind industry peers; |
¨ | Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to GHG emissions; |
¨ | The feasibility of reduction of GHGs given the company’s product line and current technology and; |
¨ | Whether the company already provides meaningful disclosure on GHG emissions from its products and operations. |
Political Contributions and Trade Association Spending
Generally vote AGAINST proposals asking the company to affirm political nonpartisanship in the workplace so long as:
¨ | There are no recent, significant controversies, fines or litigation regarding the company’s political contributions or trade association spending; and |
¨ | The company has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and prohibits coercion. |
Vote AGAINST proposals to publish in newspapers and public media the company’s political contributions. Such publications could present significant cost to the company without providing commensurate value to shareholders.
Vote CASE-BY-CASE on proposals to improve the disclosure of a company’s political contributions and trade association spending, considering:
¨ | Recent significant controversy or litigation related to the company’s political contributions or governmental affairs; and |
¨ | The public availability of a company policy on political contributions and trade association spending including information on the types of organizations supported, the business rationale for supporting these organizations, and the oversight and compliance procedures related to such expenditures of corporate assets. |
Vote AGAINST proposals barring the company from making political contributions. Businesses are affected by legislation at the federal, state, and local level and barring political contributions can put the company at a competitive disadvantage.
Vote AGAINST proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders.
Labor and Human Rights Standards
Generally vote FOR proposals requesting a report on company or company supplier labor and/or human rights standards and policies unless such information is already publicly disclosed.
Vote CASE-BY-CASE on proposals to implement company or company supplier labor and/or human rights standards and policies, considering:
¨ | The degree to which existing relevant policies and practices are disclosed; |
¨ | Whether or not existing relevant policies are consistent with internationally recognized standards; |
¨ | Whether company facilities and those of its suppliers are monitored and how; |
¨ | Company participation in fair labor organizations or other internationally recognized human rights initiatives; |
¨ | Scope and nature of business conducted in markets known to have higher risk of workplace labor/human rights abuse; |
¨ | Recent, significant company controversies, fines, or litigation regarding human rights at the company or its suppliers; |
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¨ | The scope of the request; and |
¨ | Deviation from industry sector peer company standards and practices. |
Sustainability Reporting
Generally vote FOR proposals requesting the company to report on its policies, initiatives, and oversight mechanisms related to social, economic, and environmental sustainability, unless:
¨ | The company already discloses similar information through existing reports or policies such as an Environment, Health, and Safety (EHS) report; a comprehensive Code of Corporate Conduct; and/or a Diversity Report; or |
¨ | The company has formally committed to the implementation of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame. |
RiskMetrics Group’s International Proxy Voting Guidelines Summary
(Digest of Selected Key Guidelines)
December 31, 2009
1. Operational Items:
Financial Results/Director and Auditor Reports
Vote FOR approval of financial statements and director and auditor reports, unless:
¨ | There are concerns about the accounts presented or audit procedures used; or |
¨ | The company is not responsive to shareholder questions about specific items that should be publicly disclosed. |
Appointment of Auditors and Auditor Fees
Vote FOR the reelection of auditors and proposals authorizing the board to fix auditor fees, unless:
¨ | There are serious concerns about the accounts presented or the audit procedures used; |
¨ | The auditors are being changed without explanation; or |
¨ | Non-audit-related fees are substantial or are routinely in excess of standard annual audit-related fees. |
Vote AGAINST the appointment of external auditors if they have previously served the company in an executive capacity or can otherwise be considered affiliated with the company.
Appointment of Internal Statutory Auditors
Vote FOR the appointment or reelection of statutory auditors, unless:
¨ | There are serious concerns about the statutory reports presented or the audit procedures used; |
¨ | Questions exist concerning any of the statutory auditors being appointed; or |
¨ | The auditors have previously served the company in an executive capacity or can otherwise be considered affiliated with the company. |
Allocation of Income
Vote FOR approval of the allocation of income, unless:
¨ | The dividend payout ratio has been consistently below 30 percent without adequate explanation; or |
¨ | The payout is excessive given the company’s financial position. |
Stock (Scrip) Dividend Alternative
Vote FOR most stock (scrip) dividend proposals.
Vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.
Amendments to Articles of Association
Vote amendments to the articles of association on a CASE-BY-CASE basis.
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Change in Company Fiscal Term
Vote FOR resolutions to change a company’s fiscal term unless a company’s motivation for the change is to postpone its AGM.
Lower Disclosure Threshold for Stock Ownership
Vote AGAINST resolutions to lower the stock ownership disclosure threshold below 5 percent unless specific reasons exist to implement a lower threshold.
Amend Quorum Requirements
Vote proposals to amend quorum requirements for shareholder meetings on a CASE-BY-CASE basis.
Transact Other Business
Vote AGAINST other business when it appears as a voting item.
2. Board of Directors:
Director Elections
Vote FOR management nominees in the election of directors, unless:
¨ | Adequate disclosure has not been provided in a timely manner; |
¨ | There are clear concerns over questionable finances or restatements; |
¨ | There have been questionable transactions with conflicts of interest; |
¨ | There are any records of abuses against minority shareholder interests; or |
¨ | The board fails to meet minimum corporate governance standards. |
Vote FOR individual nominees unless there are specific concerns about the individual, such as criminal wrongdoing or breach of fiduciary responsibilities.
Vote AGAINST individual directors if repeated absences at board meetings have not been explained (in countries where this information is disclosed).
Vote on a CASE-BY-CASE basis for contested elections of directors, e.g. the election of shareholder nominees or the dismissal of incumbent directors, determining which directors are best suited to add value for shareholders.
Vote FOR employee and/or labor representatives if they sit on either the audit or compensation committee and are required by law to be on those committees. Vote AGAINST employee and/or labor representatives if they sit on either the audit or compensation committee, if they are not required to be on those committees.
Under extraordinary circumstances, vote AGAINST or WITHHOLD from directors individually, on a committee, or the entire board, due to:
¨ | Material failures of governance, stewardship, or fiduciary responsibilities at the company; or |
¨ | Failure to replace management as appropriate; or |
¨ | Egregious actions related to the director(s)’ service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests of shareholders at any company. |
Discharge of Directors
Generally vote FOR the discharge of directors, including members of the management board and/or supervisory board, unless there is reliable information about significant and compelling controversies that the board is not fulfilling its fiduciary duties warranted by:
¨ | A lack of oversight or actions by board members which invoke shareholder distrust related to malfeasance or poor supervision, such as operating in private or company interest rather than in shareholder interest; or |
B-21
¨ | Any legal issues (e.g. civil/criminal) aiming to hold the board responsible for breach of trust in the past or related to currently alleged actions yet to be confirmed (and not only the fiscal year in question), such as price fixing, insider trading, bribery, fraud, and other illegal actions; or |
¨ | Other egregious governance issues where shareholders will bring legal action against the company or its directors. |
For markets which do not routinely request discharge resolutions (e.g. common law countries or markets where discharge is not mandatory), analysts may voice concern in other appropriate agenda items, such as approval of the annual accounts or other relevant resolutions, to enable shareholders to express discontent with the board.
Director Compensation
Vote FOR proposals to award cash fees to non-executive directors unless the amounts are excessive relative to other companies in the country or industry.
Vote non-executive director compensation proposals that include both cash and share-based components on a CASE-BY-CASE basis.
Vote proposals that bundle compensation for both non-executive and executive directors into a single resolution on a CASE-BY-CASE basis.
Vote AGAINST proposals to introduce retirement benefits for non-executive directors.
Director, Officer, and Auditor Indemnification and Liability Provisions
Vote proposals seeking indemnification and liability protection for directors and officers on a CASE-BY-CASE basis.
Vote AGAINST proposals to indemnify auditors.
Board Structure
Vote FOR proposals to fix board size.
Vote AGAINST the introduction of classified boards and mandatory retirement ages for directors.
Vote AGAINST proposals to alter board structure or size in the context of a fight for control of the company or the board.
3. Capital Structure:
Share Issuance Requests
General Issuances:
Vote FOR issuance requests with preemptive rights to a maximum of 100 percent over currently issued capital.
Vote FOR issuance requests without preemptive rights to a maximum of 20 percent of currently issued capital.
Specific Issuances:
Vote on a CASE-BY-CASE basis on all requests, with or without preemptive rights.
Increases in Authorized Capital
Vote FOR non-specific proposals to increase authorized capital up to 100 percent over the current authorization unless the increase would leave the company with less than 30 percent of its new authorization outstanding.
B-22
Vote FOR specific proposals to increase authorized capital to any amount, unless:
¨ | The specific purpose of the increase (such as a share-based acquisition or merger) does not meet RMG guidelines for the purpose being proposed; or |
¨ | The increase would leave the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances. |
Vote AGAINST proposals to adopt unlimited capital authorizations.
Reduction of Capital
Vote FOR proposals to reduce capital for routine accounting purposes unless the terms are unfavorable to shareholders.
Vote proposals to reduce capital in connection with corporate restructuring on a CASE-BY-CASE basis.
Capital Structures
Vote FOR resolutions that seek to maintain or convert to a one-share, one-vote capital structure.
Vote AGAINST requests for the creation or continuation of dual-class capital structures or the creation of new or additional supervoting shares.
Preferred Stock
Vote FOR the creation of a new class of preferred stock or for issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect the rights of existing shareholders.
Vote FOR the creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion meets RMG guidelines on equity issuance requests.
Vote AGAINST the creation of a new class of preference shares that would carry superior voting rights to the common shares.
Vote AGAINST the creation of blank check preferred stock unless the board clearly states that the authorization will not be used to thwart a takeover bid.
Vote proposals to increase blank check preferred authorizations on a CASE-BY-CASE basis.
Debt Issuance Requests
Vote non-convertible debt issuance requests on a CASE-BY-CASE basis, with or without preemptive rights.
Vote FOR the creation/issuance of convertible debt instruments as long as the maximum number of common shares that could be issued upon conversion meets RMG guidelines on equity issuance requests.
Vote FOR proposals to restructure existing debt arrangements unless the terms of the restructuring would adversely affect the rights of shareholders.
Pledging of Assets for Debt
Vote proposals to approve the pledging of assets for debt on a CASE-BY-CASE basis.
Increase in Borrowing Powers
Vote proposals to approve increases in a company’s borrowing powers on a CASE-BY-CASE basis.
Share Repurchase Plans
Generally vote FOR share repurchase programs/market repurchase authorities, provided that the proposal meets the following parameters:
¨ | Maximum volume: 10 percent for market repurchase within any single authority and 10 percent of outstanding shares to be kept in treasury (“on the shelf”); |
¨ | Duration does not exceed 18 months. |
B-23
For markets that either generally do not specify the maximum duration of the authority or seek a duration beyond 18 months that is allowable under market specific legislation, RMG will assess the company’s historic practice. If there is evidence that a company has sought shareholder approval for the authority to repurchase shares on an annual basis, RMG will support the proposed authority.
In addition, vote AGAINST any proposal where:
¨ | The repurchase can be used for takeover defenses; |
¨ | There is clear evidence of abuse; |
¨ | There is no safeguard against selective buybacks; |
¨ | Pricing provisions and safeguards are deemed to be unreasonable in light of market practice. |
RMG may support share repurchase plans in excess of 10 percent volume under exceptional circumstances, such as one-off company specific events (e.g. capital re-structuring). Such proposals will be assessed case-by-case based on merits, which should be clearly disclosed in the annual report, provided that following conditions are met:
¨ | The overall balance of the proposed plan seems to be clearly in shareholders’ interests; |
¨ | The plan still respects the 10 percent maximum of shares to be kept in treasury. |
Reissuance of Repurchased Shares
Vote FOR requests to reissue any repurchased shares unless there is clear evidence of abuse of this authority in the past.
Capitalization of Reserves for Bonus Issues/Increase in Par Value
Vote FOR requests to capitalize reserves for bonus issues of shares or to increase par value.
4. Other Items:
Reorganizations/Restructurings
Vote reorganizations and restructurings on a CASE-BY-CASE basis.
Mergers and Acquisitions
Vote CASE-BY-CASE on mergers and acquisitions taking into account the following:
For every M&A analysis, RMG reviews publicly available information as of the date of the report and evaluates the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:
¨ | Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, RMG places emphasis on the offer premium, market reaction, and strategic rationale. |
¨ | Market reaction - How has the market responded to the proposed deal? A negative market reaction will cause RMG to scrutinize a deal more closely. |
¨ | Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions. |
¨ | Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? RMG will consider whether any special interests may have influenced these directors and officers to support or recommend the merger. |
¨ | Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance. |
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Vote AGAINST if the companies do not provide sufficient information upon request to make an informed voting decision.
Mandatory Takeover Bid Waivers
Vote proposals to waive mandatory takeover bid requirements on a CASE-BY-CASE basis.
Reincorporation Proposals
Vote reincorporation proposals on a CASE-BY-CASE basis.
Expansion of Business Activities
Vote FOR resolutions to expand business activities unless the new business takes the company into risky areas.
Related-Party Transactions
Vote related-party transactions on a CASE-BY-CASE basis.
In evaluating resolutions that seek shareholder approval on related party transactions (RPTs), vote on a case-by-case basis, considering factors including, but not limited to, the following:
¨ | the parties on either side of the transaction; |
¨ | the nature of the asset to be transferred/service to be provided; |
¨ | the pricing of the transaction (and any associated professional valuation); |
¨ | the views of independent directors (where provided); |
¨ | the views of an independent financial adviser (where appointed); |
¨ | whether any entities party to the transaction (including advisers) is conflicted; and |
¨ | the stated rationale for the transaction, including discussions of timing. |
If there is a transaction that RMG deemed problematic and that was not put to a shareholder vote, RMG may recommend against the election of the director involved in the related-party transaction or the full board.
Compensation Plans
Vote compensation plans on a CASE-BY-CASE basis.
Antitakeover Mechanisms
Generally vote AGAINST all antitakeover proposals, unless they are structured in such a way that they give shareholders the ultimate decision on any proposal or offer.
Shareholder Proposals
Vote all shareholder proposals on a CASE-BY-CASE basis.
Vote FOR proposals that would improve the company’s corporate governance or business profile at a reasonable cost.
Vote AGAINST proposals that limit the company’s business activities or capabilities or result in significant costs being incurred with little or no benefit.
MAI-FSTB-0711D
B-25
NUVEEN HIGH YIELD BOND FUND
NUVEEN MULTI-STRATEGY CORE BOND FUND
NUVEEN SHORT DURATION BOND FUND
NUVEEN SYMPHONY CREDIT OPPORTUNITIES FUND
SUPPLEMENT DATED MARCH 21, 2011
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 18, 2011,
AS PREVIOUSLY SUPPLEMENTED FEBRUARY 7, 2011
The section entitled “Net Asset Value” is hereby replaced in its entirety with the following:
Each Fund’s net asset value is determined as set forth in the Prospectus under “General Information—Net Asset Value.”
PLEASE KEEP THIS WITH YOUR
FUND’S STATEMENT OF ADDITIONAL INFORMATION
FOR FUTURE REFERENCE
MGN-INV3SAI-0311P
SUPPLEMENT DATED FEBRUARY 7, 2011
TOTHE STATEMENTOF ADDITIONAL INFORMATION DATED JANUARY 18, 2011
NUVEEN SHORT DURATION BOND FUND
NUVEEN MULTI-STRATEGY CORE BOND FUND
NUVEEN HIGH YIELD BOND FUND
NUVEEN SYMPHONY CREDIT OPPORTUNITIES FUND
NUVEEN PREFERRED SECURITIES FUND
NUVEEN SYMPHONY LARGE-CAP GROWTH FUND
NUVEEN SYMPHONY LARGE-CAP VALUE FUND
NUVEEN SYMPHONY MID-CAP CORE FUND
NUVEEN SYMPHONY SMALL-MID CAP CORE FUND
NUVEEN SYMPHONY INTERNATIONAL EQUITY FUND
NUVEEN SYMPHONY OPTIMIZED ALPHA FUND
In the section “Purchase and Redemption of Fund Shares—Class A Shares—Reduction or Elimination of Up-Front Sales Charge on Class A Shares—Elimination of Sales Charge on Class A Shares,” the last bullet point is hereby deleted.
PLEASE KEEP THIS WITH YOUR
FUND’S STATEMENT OF ADDITIONAL INFORMATION
FOR FUTURE REFERENCE
MGN-NIT235-0211P
January 18, 2011
Nuveen Short Duration Bond Fund
Ticker Symbols: Class A—NSDAX, Class C—NSCDX, Class R3—NSDTX, Class I— NSDRX
Nuveen Multi-Strategy Core Bond Fund
Ticker Symbols: Class A—NCBAX, Class B—NBCBX, Class C—NCBCX, Class R3—NMSTX, Class I—NCBRX
Nuveen High Yield Bond Fund
Ticker Symbols: Class A—NHYAX, Class B—NHBYX, Class C—NHYCX, Class R3—NHYTX, Class I—NHYRX
Nuveen Symphony Credit Opportunities Fund
Ticker Symbols: Class A—NCOAX, Class C—NCFCX, Class R3—NCORX, Class I—NCOIX
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement of Additional Information relates to, and should be read in conjunction with, the Prospectus for Nuveen Short Duration Bond Fund (the “Short Duration Bond Fund”), Nuveen Multi-Strategy Core Bond Fund (the “Multi-Strategy Core Bond Fund”), Nuveen High Yield Bond Fund (the “High Yield Bond Fund”) and Nuveen Symphony Credit Opportunities Fund (the “Credit Opportunities Fund”) (individually, a “Fund,” and collectively, the “Funds”), each a series of Nuveen Investment Trust III, dated January 18, 2011. A Prospectus may be obtained without charge from certain securities representatives, banks and other financial institutions that have entered into sales agreements with Nuveen Investments, 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 Fund’s most recent fiscal year appear in the Fund’s Annual Report dated September 30, 2010; each is incorporated herein by reference and is available without charge by calling (800) 257-8787.
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Independent Registered Public Accounting Firm, Custodian and Transfer Agent | S-89 | |
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A-1 |
The Funds are diversified series of Nuveen Investment Trust III (the “Trust”), an open-end management investment company organized as a Massachusetts business trust on August 20, 1998. 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, four series of the Trust are authorized and outstanding. Effective January 29, 2010, the Multi-Strategy Core Bond Fund (formerly, the Nuveen Multi-Strategy Income Fund) adopted its current name. The Funds’ investment adviser is Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors” or the “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.
The investment objective and certain fundamental investment policies of each Fund are described in the Prospectus for that Fund. A Fund, as a fundamental policy, may not, without the approval of the holders of a majority of the Fund’s outstanding voting shares:
(1) Except with respect to the Credit Opportunities Fund, invest more than 5% of its total assets in securities of any one issuer, except this limitation shall not apply to securities of the U.S. government, and to the investment of 25% of such Fund’s assets.
(2) Except with respect to the Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High-Yield Bond Fund, with respect to 75% of its total assets, purchase the securities of any issuer (except securities issued or guaranteed by the United States government or any agency or instrumentality thereof) if as a result (i) more than 5% of the Fund’s total assets would be invested in securities of that issuer or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer.
(3) Borrow money except as permitted by the 1940 Act and exemptive orders granted thereunder.
(4) Issue senior securities as defined in the 1940 Act, except as permitted by the 1940 Act.
(5) Underwrite any issue of securities, except to the extent that the purchase or sale of securities in accordance with its investment objective, policies and limitations, may be deemed to be an underwriting.
(6) Purchase or sell real estate, but this shall not prevent any Fund from investing in securities secured by real estate or interests therein or foreclosing upon and selling such security.
(7) Purchase or sell commodities or commodities contracts or oil, gas or other mineral exploration or development programs, except for transactions involving futures contracts within the limits described in the Prospectus and this Statement of Additional Information.
(8) Make loans except as permitted by the 1940 Act and exemptive orders granted thereunder.
(9) Invest more than 25% of its total assets in securities of issuers in any one industry; provided, however, that such limitations shall not be applicable to securities issued by governments or political subdivisions of governments, and obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities.
(10) Except with respect to the Credit Opportunities Fund, purchase or retain the securities of any issuer other than the securities of the Fund if, to the Fund’s knowledge, those trustees of the Trust, or those officers and directors of Nuveen Fund Advisors, who individually own beneficially more than 1/2 of 1% of the outstanding securities of such issuer, together own beneficially more than 5% of such outstanding securities.
S-2
For the purpose of applying the limitations set forth in paragraph (1) above to municipal obligations, an issuer shall be deemed the sole issuer of a security when its assets and revenues are separate from other governmental entities and its securities are backed only by its assets and revenues. Similarly, in the case of a non-governmental user, such as an industrial corporation or a privately owned or operated hospital, if the security is backed only by the assets and revenues of the non-governmental user, then such non-governmental user would be deemed to be the sole issuer. Where a security is also backed by the enforceable obligation of a superior or unrelated governmental entity or other entity (other than a bond insurer), it shall also be included in the computation of securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other facility, such as a bank guarantee or letter of credit, such a guarantee or letter of credit would be considered a separate security and would be treated as an issue of such government, other entity or bank. Where a security is insured by bond insurance, it shall not be considered a security issued or guaranteed by the insurer; instead the issuer of such security will be determined in accordance with the principles set forth above. The foregoing restrictions do not limit the percentage of a Fund’s assets that may be invested in securities insured by any single insurer.
Except with respect to paragraph (3) above, the foregoing restrictions and limitations, as well as a Fund’s policies as to ratings of portfolio investments, 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.
The foregoing fundamental investment policies, together with the investment objective of each of the Funds and certain other policies specifically identified in the Prospectus, cannot be changed without approval by holders of a “majority of the Fund’s outstanding voting shares.” As defined in the 1940 Act, this means the vote of (i) 67% or more of the Fund’s shares present at a meeting, if the holders of more than 50% of the Fund’s shares are present or represented by proxy, or (ii) more than 50% of the Fund’s shares, whichever is less.
The Short Duration Bond Fund and the Multi-Strategy Core Bond Fund have adopted a non-fundamental investment policy pursuant to Rule 35d-1 under the 1940 Act (the “Name Policy”) whereby the Short Duration Bond Fund and the Multi-Strategy Core Bond, under normal market conditions, will invest at least 80% of their net assets in bonds and other fixed-income securities. The High Yield Bond Fund has adopted the Name Policy whereby the High Yield Bond Fund, under normal market conditions, will invest at least 80% of its net assets in high yield debt securities. As a result of the Name Policy, each Fund must provide shareholders with a notice meeting the requirements of Rule 35d-1(c) at least 60 days prior to any change of their Fund’s Name Policy. For purpose of the Name Policy, the Funds include both direct investments and indirect investments (e.g., investments in an underlying fund, derivatives and synthetic instruments with economic characteristics similar to the underlying asset).
In addition, each Fund, as a non-fundamental policy, may not invest more than 15% of its net assets in “illiquid” securities, including repurchase agreements maturing in more than seven days.
INVESTMENT POLICIES AND TECHNIQUES
Additional information about individual types of securities (including key considerations and risks) in which some or all of the Funds may invest is set forth below. In addition to the types of securities described in the Prospectus, and consistent with each Fund’s investment policies, objective and strategies, each Fund may invest in the following types of securities in amounts of less than 5% of its net assets in each case and not in the aggregate. However, if any such security type is listed in a Fund’s Prospectus as part of a principal investment strategy, this 5% limitation shall not apply.
Asset-Backed Securities
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may invest in asset-backed securities. Asset-backed securities are securities issued by trusts and special
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purpose entities that are backed by pools of assets, such as automobile and credit-card receivables and home equity loans, 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 paper 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. Examples include certificates for automobile receivables (CARs) and so-called plastic bonds, backed by credit card receivables.
The value of an asset-backed security is affected by, among other things, changes in the market’s perception of the asset backing the security, the creditworthiness of the servicing agent for the loan pool, the originator of the loans and the financial institution providing any credit enhancement. Payments of principal and interest passed through to holders of asset-backed securities are frequently supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guarantee by another entity or by having a priority to certain of the borrower’s other assets. The degree of credit enhancement varies, and generally applies to only a portion of the asset-backed security’s par value. Value is also affected if any credit enhancement has been exhausted. See also “Mortgage-Backed Securities” below.
The risks of investing in asset-backed securities depend upon payment of the underlying loans by the individual borrowers (i.e., the backing asset). For example, the underlying loans are subject to prepayments, which shorten the weighted average life of asset-backed securities and may lower their return, in the same manner as described under “Mortgage-Backed Securities” for prepayments of a pool of mortgage loans underlying mortgage-backed securities. However, asset-backed securities typically do not have the benefit of the same direct security interest in the underlying collateral as do mortgage-backed securities.
In addition, as purchasers of an asset-backed security, the Funds generally will have no recourse against the entity that originated the loans in the event of default by a borrower. If the credit enhancement of an asset-backed security held by a Fund has been exhausted, and if any required payments of principal and interest are not made with respect to the underlying loans, the Fund may experience losses or delays in receiving payment.
Bank Obligations
Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may purchase bank obligations. Bank obligations include, for example, certificates of deposit, bankers’ acceptances, commercial paper, Yankee dollar certificates of deposit, Eurodollar certificates of deposit, time deposits and promissory notes.
A certificate of deposit, or so-called CD, is a debt instrument issued by a bank that usually pays interest and which has maturities ranging from a few weeks to several years. A bankers acceptance is a time draft drawn on and accepted by a bank, a customary means of effecting payment for merchandise sold in import-export transactions and a general source of financing. A Yankee dollar certificate of deposit is a negotiable CD issued in the United States by branches and agencies of non-U.S. banks. A Eurodollar certificate of deposit is a CD issued by a non-U.S. (mainly European) bank with interest and principal paid in U.S. dollars. Such CDs typically have maturities of less than two years and have an interest rate which is usually pegged to the London Interbank Offered Rate or LIBOR. A time deposit can be either a savings account or CD that is an obligation of a financial institution for a fixed term. Typically there are penalties for early withdrawal of a time deposit. A promissory note is a written commitment of the maker to pay the payee a specified sum of money either on demand or at a fixed or determinable future date, with or without interest.
A bank obligation may be issued by: (i) a U.S. branch of a U.S. bank; (ii) a non-U.S. branch of a U.S. bank; (iii) a U.S. branch of a non-U.S. bank; or (iv) a non-U.S. branch of a non-U.S. bank.
As a general matter, obligations of “U.S. banks” are not subject to the Funds’ fundamental investment policies regarding concentration limits. For this purpose, the SEC staff also takes the position that U.S. branches of non-U.S. banks and non-U.S. branches of U.S. banks may, if certain conditions are met, be treated as “U.S. banks.” More specifically, “U.S. banks” include: (a) U.S. branches of U.S. banks; (b) U.S. branches of non-U.S. banks, to the extent that they are subject to
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comparable regulation as U.S. banks; and (c) non-U.S. branches of U.S. banks with respect to which the U.S. bank would be unconditionally liable in the event that the non-U.S. branch failed to pay on its instruments for any reason.
Certain Funds may invest in exchange-traded Eurodollar contracts. For information about these types of securities, see “Futures and Options” below.
Certain bank obligations, such as some CDs, are insured by the FDIC. Many other bank obligations, however, are neither guaranteed nor insured by the U.S. Government. These bank obligations are “backed” only by the creditworthiness of the issuing bank or parent financial institution.
Obligations of non-U.S. banks, including Yankee dollar and Eurodollar obligations, involve somewhat different investment risks than those affecting obligations of U.S. banks, including, among others, the possibilities that: (a) their liquidity could be impaired because of political or economic developments; (b) the obligations may be less marketable than comparable obligations of U.S. banks; (c) a non-U.S. jurisdiction might impose withholding and other taxes on amounts realized on those obligations; (d) non-U.S. deposits may be seized or nationalized; (e) non-U.S. governmental restrictions such as exchange controls may be adopted, which might adversely affect the payment of principal or interest on those obligations; and (f) the selection of the obligations may be based on less publicly available information concerning non-U.S. banks or that the accounting, auditing and financial reporting standards, practices and requirements applicable to non-U.S. banks may differ from those applicable to U.S. banks. Non-U.S. banks are not subject to examination by any U.S. Government agency or instrumentality.
Convertible Securities
Convertible securities are hybrid securities that combine the investment characteristics of bonds and common stocks. Convertible securities typically consist of debt securities or preferred securities that may be converted within a specified period of time (typically for the entire life of the security) into a certain amount of common stock or other equity security of the same or a different issuer at a predetermined price. They also include debt securities with warrants or common stock attached and derivatives combining the features of debt securities and equity securities. Convertible securities entitle the holder to receive interest paid or accrued on debt, or dividends paid or accrued on preferred securities, until the security matures or is redeemed, converted or exchanged.
The market value of a convertible security generally is a function of its “investment value” and its “conversion value.” A security’s “investment value” represents the value of the security without its conversion feature (i.e., a comparable nonconvertible fixed-income security). The investment value is determined by, among other things, reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer’s capital structure. A security’s “conversion value” is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security. If the conversion value of a convertible security is significantly below its investment value, the convertible security will trade like nonconvertible debt or a preferred security in the sense that its market value will not be influenced greatly by fluctuations in the market price of the underlying security into which it can be converted. Instead, the convertible security’s price will tend to move in the opposite direction from interest rates. Conversely, if the conversion value of a convertible security is significantly above its investment value, the market value of the convertible security will be more heavily influenced by fluctuations in the market price of the underlying stock. In that case, the convertible security’s price may be as volatile as that of the common stock. Because both interest rate and market movements can influence its value, a convertible security is not generally as sensitive to interest rates as a similar fixed-income security, nor is it generally as sensitive to changes in share price as its underlying stock.
The Funds may invest in convertible securities that are below investment-grade (e.g., rated BB or below by S&P). See “High Yield/Lower-rated Debt Securities” and “Warrants and Rights” below.
A Fund’s investments in convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid—that is, a Fund
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may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the Fund. A Fund’s investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities (of the same or a different issuer) at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. For issues where the conversion of the security is not at the option of the holder, the Fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially.
In addition, some convertibles are often rated below investment-grade or are not rated, and therefore may be considered speculative investments. The credit rating of a company’s convertible securities is generally lower than that of its conventional debt securities. Convertibles are normally considered “junior” securities—that is, the company usually must pay interest on its conventional corporate debt before it can make payments on its convertible securities. Some convertibles are particularly sensitive to interest rate changes when their predetermined conversion price is much higher than the issuing company’s common stock.
Corporate Debt Securities
Corporate debt securities are fixed-income securities usually issued by businesses to finance their operations, although corporate debt instruments may also include bank loans to companies. Notes, bonds, debentures and commercial paper are the most common types of corporate debt securities, with the primary difference being their maturities and secured or unsecured status. Commercial paper has the shortest term and is usually unsecured.
The broad category of corporate debt securities includes debt issued by U.S. or non-U.S. companies of all kinds, including those with small-, mid- and large-capitalizations. Corporate debt may be rated investment-grade or below investment-grade and may carry variable or floating rates of interest.
See also “Non-U.S. Securities,” “Variable and Floating-Rate Instruments” and “Money Market Instruments” below.
Because of the wide range of types and maturities of corporate debt securities, as well as the range of creditworthiness of its issuers, corporate debt securities have widely varying potentials for return and risk profiles. For example, commercial paper issued by a large established domestic corporation that is rated investment-grade may have a modest return on principal, but carries relatively limited risk. On the other hand, a long-term corporate note issued by a small non-U.S. corporation from an emerging market country that has not been rated by an NRSRO may have the potential for relatively large returns on principal, but carries a relatively high degree of risk.
Corporate debt securities carry both credit risk and interest rate risk. Credit risk is the risk that a Fund could lose money if the issuer of a corporate debt security is unable to pay interest or repay principal when it’s due. Some corporate debt securities that are rated below investment-grade are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. The credit risk of a particular issuer’s debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while making payments on senior securities. In addition, in the event of bankruptcy, holders of higher-ranking senior securities may receive amounts otherwise payable to the holders of more junior securities. Interest rate risk is the risk that the value of certain corporate debt securities will tend to fall when interest rates rise. In general, corporate debt securities with longer terms tend to fall more in value when interest rates rise than corporate debt securities with shorter terms.
Derivatives
A derivative is a financial contract whose value is based on (or “derived” from) a traditional security (such as a stock or a bond), an asset (such as a commodity like gold), or a market index (such as the S&P 500). Some forms of derivatives, such as exchange-traded futures and options on securities, commodities, or indices, have been trading on regulated exchanges for more than two decades. These types of derivatives are standardized contracts that can easily be bought and sold,
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and whose market values are determined and published daily. Non-standardized derivatives, on the other hand, tend to be more specialized or complex, and may be harder to value. Derivatives afford leverage and, when used properly, can enhance returns and be useful in hedging portfolios. Some common types of derivatives include: futures; options; options on futures; forward non-U.S. currency exchange contracts; linked securities and structured products; collateralized mortgage obligations; stripped securities; warrants and swap contracts. For more information about each type of derivative, see those sections in this Statement of Additional Information discussing such securities.
The Funds may use derivatives for a variety of reasons, including to: enhance a Fund’s return, to attempt to protect against possible changes in the market value of securities held in or to be purchased for a Fund’s portfolio resulting from securities markets or currency exchange rate fluctuations (i.e., to hedge), to protect the Fund’s unrealized gains reflected in the value of its portfolios securities, to facilitate the sale of such securities for investment purposes, to and/or manage the effective maturity or duration of the Fund’s portfolio.
A Fund may use any or all of these investment techniques and different types of derivative securities may be purchased at any time and in any combination. There is no particular strategy that dictates the use of one technique rather than another, as use of derivatives is a function of numerous variables including market conditions.
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, management risk and liquidity risk. 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. These risks are heightened when the management team uses derivatives to enhance a Fund’s 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. The success of management’s derivatives strategies will depend on its 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. Liquidity risk exists when a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. The management team is not required to utilize derivatives to reduce risks.
Counterparty Creditworthiness
Each Fund’s portfolio manager tracks the creditworthiness of counterparties in swaps, forwards, and options. Typically, the Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, will enter into these transactions only with counterparties with long-term debt ratings in the category of A or higher by Standard & Poor’s, Fitch or Moody’s at the time of contract. However, for these Funds, short-term derivatives may be entered into with counterparties that do not have long-term debt ratings, but with short-term debt ratings of A-1 by Standard & Poor’s, F-1 by Fitch and/or Prime-1 by Moody’s. In addition to checking agency ratings to assess creditworthiness, each Fund’s portfolio manager also considers news reports and market activity, such as the levels at which a counterparty’s long-term debt is trading. Furthermore, for the Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, each Fund’s portfolio manager monitors the amount of credit extended to any one counterparty by a particular Fund and will not enter into additional transactions involving a given counterparty if more than 5% of the Fund’s net assets are devoted to transactions involving that counterparty. Besides creditworthiness, each Fund’s portfolio manager reviews, on a regular basis, the various exposures that each Fund has to over-the-counter counterparties. Additionally, each Fund’s portfolio manager may negotiate collateral arrangements with a counterparty in order to further reduce a Fund’s exposure to such counterparty.
See also “Futures and Options,” “Linked Securities and Structured Products,” “Stripped Securities,” “Warrants and Rights” and “Portfolio Securities—Swap Contracts” below.
Dollar Roll Transactions
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, may engage in dollar roll transactions. Under a mortgage “dollar roll,” a Fund sells mortgage-backed
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securities for delivery in a given month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the “roll” period, a Fund forgoes principal and interest paid on the mortgage-backed securities. A Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. A Fund may only enter into covered rolls. A “covered roll” is a specific type of dollar roll for which there is an offsetting cash position which matures on or before the forward settlement date of the dollar roll transaction. See also “Mortgage-Backed Securities” below.
Mortgage dollar rolls involve the risk that the market value of the securities the Fund is obligated to repurchase under an agreement may decline below the repurchase price. Also, these transactions involve some risk to the Fund if the other party should default on its obligation and the Fund is delayed or prevented from completing the transaction. In the event that the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the dollar roll may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.
Non-U.S. Securities
The Credit Opportunities Fund may invest directly in U.S. dollar-denominated debt issued by non-U.S. companies that is traded over-the-counter or listed on an exchange. The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, may invest in non-U.S. securities that are debt, equity or derivative securities determined by a Fund’s portfolio management team to be non-U.S. based on an issuer’s domicile, its principal place of business, the source of its revenue or other factors.
Forward non-U.S. currency exchange contracts—Forward non-U.S. currency exchange contracts establish an exchange rate at a future date. A Fund may enter into a forward contract, for example, when it enters into a contract for the purchase or sale of a security denominated in a non-U.S. currency in order to “lock in” the U.S. dollar price of the security (a “transaction hedge”). In addition, when a non-U.S. currency suffers a substantial decline against the U.S. dollar, a Fund may enter into a forward sale contract to sell an amount of that non-U.S. currency approximating the value of some or all of the Fund’s securities denominated in such non-U.S. currency. When it is believed that the U.S. dollar may suffer a substantial decline against the non-U.S. currency, it may enter into a forward purchase contract to buy that non-U.S. currency for a fixed dollar amount (a “position hedge”).
A Fund may, however, enter into a forward contract to sell a different non-U.S. currency for a fixed U.S. dollar amount when it is believed that the U.S. dollar value of the currency to be sold pursuant to the forward contract will fall whenever there is a decline in the U.S. dollar value of the currency in which the securities are denominated (a “cross-hedge”).
Non-U.S. currency hedging transactions are attempts to protect a Fund against changes in non-U.S. currency exchange rates between the trade and settlement dates of specific securities transactions or changes in non-U.S. currency exchange rates that would adversely affect a portfolio position or an anticipated portfolio position. Although these transactions tend to minimize the risk of loss due to a decline in the value of the hedged currency, they also tend to limit any potential gain that might be realized should the value of the hedged currency increase.
Non-U.S. securities may pose risks greater than those typically associated with an equity, debt or derivative security due to: (1) restrictions on non-U.S. investment and repatriation of capital; (2) fluctuations in currency exchange rates, which can significantly affect a Fund’s share price; (3) costs of converting non-U.S. currency into U.S. dollars and U.S. dollars into non-U.S. currencies; (4) greater price volatility and less liquidity; (5) settlement practices, including delays, which may differ from those customary in U.S. markets; (6) exposure to political and economic risks, including the risk of nationalization, expropriation of assets and war; (7) possible impositions of non-U.S. taxes and exchange control and currency restrictions; (8) lack of uniform accounting, auditing and financial reporting standards; (9) less governmental supervision of securities markets, brokers and issuers of securities; (10) less financial information available to investors; and (11) difficulty in enforcing legal rights outside the United States.
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Certain of the risks associated with investments in non-U.S. securities are heightened with respect to investments in emerging markets countries. Political and economic structures in many emerging market countries, especially those in Eastern Europe, the Pacific Basin, and the Far East, are undergoing significant evolutionary changes and rapid development, and may lack the social, political and economic stability of more developed countries. Investing in emerging markets securities also involves risks beyond the risks inherent in non-U.S. investments. For example, some emerging market countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Further, certain currencies may not be traded internationally and some countries with emerging securities markets have sustained long periods of very high inflation or rapid fluctuation in inflation rates which can have negative effects on a country’s economy and securities markets.
As noted, non-U.S. securities also involve currency risks. The U.S. dollar value of a non-U.S. security tends to decrease when the value of the U.S. dollar rises against the non-U.S. currency in which the security is denominated, and tends to increase when the value of the U.S. dollar falls against such currency. A Fund may purchase or sell forward non-U.S. currency exchange contracts in order to attempt to minimize the risk to the Fund from adverse changes in the relationship between the U.S. dollar and non-U.S. currencies. A Fund may also purchase and sell non-U.S. currency futures contracts and related options. See “Futures and Options” below.
Loans
The Funds may invest in fixed and floating rate loans (“Loans”). Loans may include senior floating rate loans (“Senior Loans”) and secured and unsecured loans, second lien or more junior loans and bridge loans (“Junior Loans”). Loans are typically arranged through private negotiations between borrowers in the United States or in foreign or emerging markets which may be corporate issuers or issuers of sovereign debt obligations (“Obligors”) and one or more financial institutions and other lenders (“Lenders”). The Funds may invest in Loans by purchasing assignments of all or a portion of Loans (“Assignments”) or Loan participations (“Participations”) from third parties.
The Funds have direct rights against the Obligor on the Loan when it purchases an Assignment. Because Assignments are arranged through private negotiations between potential assignees and potential assignors, however, the rights and obligations acquired by the Funds as the purchaser of an Assignment may differ from, and be more limited than, those held by the assigning Lender. With respect to Participations, typically, the Funds will have a contractual relationship only with the Lender and not with the Obligor. The agreement governing Participations may limit the rights of the Funds to vote on certain changes which may be made to the Loan agreement, such as waiving a breach of a covenant. However, the holder of a Participation will generally have the right to vote on certain fundamental issues such as changes in principal amount, payment dates and interest rate. Participations may entail certain risks relating to the creditworthiness of the parties from which the participations are obtained.
A Loan is typically originated, negotiated and structured by a U.S. or foreign commercial bank, insurance company, finance company or other financial institution (the “Agent”) for a group of Loan investors. The Agent typically administers and enforces the Loan on behalf of the other Loan investors in the syndicate. The Agent’s duties may include responsibility for the collection of principal and interest payments from the Obligor and the apportionment of these payments to the credit of all Loan investors. The Agent is also typically responsible for monitoring compliance with the covenants contained in the Loan agreement based upon reports prepared by the Obligor. In addition, an institution, typically but not always the Agent, holds any collateral on behalf of the Loan investors. In the event of a default by the Obligor, it is possible, though unlikely, that the Funds could receive a portion of the borrower’s collateral. If the Funds receive collateral other than cash, any proceeds received from liquidation of such collateral will be available for investment as part of the Funds’ portfolio.
In the process of buying, selling and holding Senior Loans, the Funds may receive and/or pay certain fees. These fees are in addition to interest payments received and may include facility fees, commitment fees, commissions and prepayment penalty fees. When the Funds buy or sell a Loan it may pay a fee. In certain circumstances, the Funds may receive a prepayment penalty fee upon prepayment of a Loan.
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Additional Information Concerning Senior Loans
Senior Loans typically hold the most senior position in the capital structure of the Obligor, are typically secured with specific collateral and have a claim on the assets and/or stock of the Obligor that is senior to that held by subordinated debtholders and shareholders of the Obligor. Collateral for Senior Loans may include (i) working capital assets, such as accounts receivable and inventory; (ii) tangible fixed assets, such as real property, buildings and equipment; (iii) intangible assets, such as trademarks and patent rights; and/or (iv) security interests in shares of stock of subsidiaries or affiliates.
Additional Information Concerning Junior Loans
Junior Loans include secured and unsecured loans including subordinated loans, second lien and more junior loans, and bridge loans. Second lien and more junior loans (“Junior Lien Loans”) are generally second or further in line in terms of repayment priority. In addition, Junior Lien Loans may have a claim on the same collateral pool as the first lien or other more senior liens or may be secured by a separate set of assets. Junior Lien Loans generally give investors priority over general unsecured creditors in the event of an asset sale.
Junior Loans that are bridge loans or bridge facilities (“Bridge Loans”) are short-term loan arrangements (e.g., 12 to 18 months) typically made by an Obligor in anticipation of intermediate-term or long-term permanent financing. Most Bridge Loans are structured as floating-rate debt with step-up provisions under which the interest rate on the Bridge Loan rises the longer the Loan remains outstanding. In addition, Bridge Loans commonly contain a conversion feature that allows the Bridge Loan investor to convert its Loan interest to senior exchange notes if the Loan has not been prepaid in full on or prior to its maturity date. Bridge Loans may be subordinate to other debt and may be secured or undersecured.
Additional Information Concerning Unfunded Commitments
Unfunded commitments are contractual obligation pursuant to which the Funds agree to invest in a Loan at a future date. Typically, the Funds receive a commitment fee for entering into the Unfunded Commitment.
Additional Information Concerning Synthetic Letters of Credit
Loans include synthetic letters of credit. In a synthetic letter of credit transaction, the Lender typically creates a special purpose entity or a credit-linked deposit account for the purpose of funding a letter of credit to the borrower. When the Funds invest in a synthetic letter of credit, the Funds are typically paid a rate based on the Lender’s borrowing costs and the terms synthetic letter of credit. Synthetic letters of credit are typically structured as Assignments with the Funds acquiring direct rights against the Obligor.
Limitations on Investments in Loan Assignments and Participations
If a government entity is a borrower on a Loan, the Funds will consider the government to be the issuer of an Assignment or Participation for purposes of the Funds’ fundamental investment policy that it will not invest 25% or more of its total assets in securities of issuers conducting their principal business activities in the same industry (i.e., foreign government).
Risk Factors of Loan Assignments and Participations
Loans are subject to the risks associated with debt obligations in general including interest rate risk, credit risk and market risk. When a Loan is acquired from a Lender, the risk includes the credit risk associates with the Obligor of the underlying Loan. The Funds may incur additional credit risk when the Funds acquire a participation in a Loan from another lender because the Funds must assume the risk of insolvency or bankruptcy of the other lender from which the Loan was acquired. To the extent
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that Loans involve Obligors in foreign or emerging markets, such Loans are subject to the risks associated with foreign investments or investments in emerging markets in general. The following outlines some of the additional risks associated with Loan Assignments and Participations.
High Yield Securities Risk. The Loans that the Funds invest in may not be rated by an NRSRO, will not be registered with the Securities and Exchange Commission (the “SEC”) or any state securities commission and will not be listed on any national securities exchange. To the extent that such high yield Loans are rated, they typically will be rated below investment grade and are subject to an increased risk of default in the payment of principal and interest as well as the other risks described under “High Yield/Lower-Rated Debt Securities.” Loans are vulnerable to market sentiment such that economic conditions or other events may reduce the demand for Loans and cause their value to decline rapidly and unpredictably.
Liquidity Risk. Although the Funds limit their investments in illiquid securities to no more than 15% of a Fund’s net assets at the time of purchase, Loans that are deemed to be liquid at the time of purchase may become illiquid or less liquid. No active trading market may exist for certain Loans and certain Loans may be subject to restrictions on resale or have a limited secondary market. Certain Loans may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. The inability to dispose of certain Loans in a timely fashion or at a favorable price could result in losses to a Fund.
Collateral, Subordination and Litigation Risk. With respect to Loans that are secured, the Funds are subject to the risk that collateral securing the Loan will decline in value or have no value or that a Fund’s lien is or will become junior in payment to other liens. A decline in value, whether as a result of bankruptcy proceedings or otherwise, could cause the Loan to be undercollateralized or unsecured. There may be no formal requirement for the Obligor to pledge additional collateral. In addition, collateral may consist of assets that may not be readily liquidated, and there is no assurance that the liquidation of such assets would satisfy an Obligor’s obligation on a Loan.
If an Obligor becomes involved in bankruptcy proceedings, a court may invalidate the Loan or a Fund’s security interest in loan collateral or subordinate a Fund’s rights under a Senior Loan or Junior Loan to the interest of the Obligor’s other creditors, including unsecured creditors, or cause interest or principal previously paid to be refunded to the Obligor. If a court required interest or principal to be refunded, it could negatively affect Fund performance. Such action by a court could be based, for example, on a “fraudulent conveyance” claim to the effect that the Obligor did not receive fair consideration for granting the security interest in the Loan collateral to the Fund. For Senior Loans made in connection with a highly leveraged transaction, consideration for granting a security interest may be deemed inadequate if the proceeds of the Loan were not received or retained by the Obligor, but were instead paid to other persons (such as shareholders of the Obligor) in an amount which left the Obligor insolvent or without sufficient working capital. There are also other events, such as the failure to perfect a security interest due to faulty documentation or faulty official filings, which could lead to the invalidation of a Fund’s security interest in Loan collateral. If a Fund’s security interest in Loan collateral is invalidated or the Senior Loan is subordinated to other debt of an Obligor in bankruptcy or other proceedings, a Fund would have substantially lower recovery, and perhaps no recovery on the full amount of the principal and interest due on the Loan, or a Fund could have to refund interest.
Lenders and investors in Loans can be sued by other creditors and shareholders of the Obligors. Losses can be greater than the original Loan amount and occur years after the principal and interest on the Loan have been repaid.
Agent Risk. Selling Lenders, Agents and other entities who may be positioned between a Fund and the Obligor will likely conduct their principal business activities in the banking, finance and financial services industries. Investments in Loans may be more impacted by a single economic, political or regulatory occurrence affecting such industries than other types of investments. Entities engaged in such industries may be more susceptible to, among other things, fluctuations in interest rates, changes in the Federal Open Market Committee’s monetary policy, government regulations concerning such industries and concerning capital raising activities generally and fluctuations in the financial markets generally. An Agent, Lender or other entity positioned between a Fund and the
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Obligor may become insolvent or enter FDIC receivership or bankruptcy. A Fund might incur certain costs and delays in realizing payment on a Loan or suffer a loss of principal and/or interest if assets or interests held by the Agent, Lender or other party positioned between a Fund and the Obligor are determined to be subject to the claims of the Agent’s, Lender’s or such other party’s creditors.
Regulatory Changes. To the extent that legislation or state or federal regulators that regulate certain financial institutions impose additional requirements or restrictions with respect to the ability of such institutions to make Loans, particularly in connection with highly leveraged transactions, the availability of Loans for investment may be adversely affected. Furthermore, such legislation or regulation could depress the market value of Loans held by a Fund.
Inventory Risk. Affiliates of the adviser or sub-adviser may participate in the primary and secondary market for Loans. Because of limitations imposed by applicable law, the presence of the adviser’s or sub-adviser’s affiliates in the Loan market may restrict a Fund’s ability to acquire some Loans, affect the timing of such acquisition or affect the price at which the Loan is acquired.
Information Risk. There is typically less publicly available information concerning Loans than other types of fixed income investments. As a result, a Fund generally will be dependent on reports and other information provided by the Obligor, either directly or through an Agent, to evaluate the Obligor’s creditworthiness or to determine the Obligor’s compliance with the covenants and other terms of the Loan Agreement. Such reliance may make investments in Loans more susceptible to fraud than other types of investments. In addition, because the adviser or sub-adviser may wish to invest in the publicly traded securities of an Obligor, it may not have access to material non-public information regarding the Obligor to which other Loan investors have access.
Junior Loan Risk. Junior Loans are subject to the same general risks inherent to any Loan investment. Due to their lower place in the Obligor’s capital structure and possible unsecured status, Junior Loans involve a higher degree of overall risk than Senior Loans of the same Obligor. Junior Loans that are Bridge Loans generally carry the expectation that the Obligor will be able to obtain permanent financing in the near future. Any delay in obtaining permanent financing subjects the Bridge Loan investor to increased risk. An Obligor’s use of Bridge Loans also involves the risk that the Obligor may be unable to locate permanent financing to replace the Bridge Loan, which may impair the Obligor’s perceived creditworthiness.
Futures and Options
Futures and options contracts on fixed income securities are derivative instruments that the Funds may utilize for a variety of reasons including: for hedging purposes, risk reduction, securities exposure, to enhance a Fund’s return, to enhance a Fund’s liquidity, to reduce transaction costs or other reasons. See generally “Derivatives” above.
Futures. Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a specific security (including a single stock) or index at a specified future time and at a specified price. Futures contracts, which are standardized as to maturity date and underlying financial instrument, are traded on national futures exchanges. Futures exchanges and trading are regulated under the Commodity Exchange Act by the U.S. Commodity Futures Trading Commission (the “CFTC”). Although many fixed-income futures contracts call for actual delivery or acceptance of the underlying securities at a specified date (stock index futures contracts do not permit delivery of securities), the contracts are normally closed out before the settlement date without the making or taking of delivery. Closing out an open futures position is done by taking an opposite position (“buying” a contract which has previously been “sold,” “selling” a contract previously “purchased”) in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or government securities with a broker or custodian in order to initiate and maintain open positions in futures contracts. A margin deposit is intended to assure completion of the contract (delivery or acceptance of the underlying security) if it is not terminated prior to the specified delivery date. Minimum initial margin requirements are established by the futures exchange and may be changed. Brokers may establish deposit requirements which are higher than the exchange minimums. Futures contracts are
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customarily purchased and sold on margin which may range upward from less than 5% of the value of the contract being traded. After a futures contract position is opened, the value of the contract is marked to market daily. If the futures contract price changes to the extent that the margin on deposit does not satisfy margin requirements, payment of additional “variation” margin will be required. Conversely, a change in the contract value may reduce the required margin, resulting in a repayment of excess margin to the contract holder. Variation margin payments are made to and from the futures broker for as long as the contract remains open. The Funds expect to earn interest income on their margin deposits.
Traders in futures contracts may be broadly classified as either “hedgers” or “speculators.” Hedgers use the futures markets primarily to offset unfavorable changes (anticipated or potential) in the value of securities currently owned or expected to be acquired by them. Speculators are less inclined to own the securities underlying the futures contracts which they trade, and generally use futures contracts with the expectation of realizing profits from fluctuations in the value of the underlying securities. Regulations of the CFTC applicable to the Funds require that all of their futures transactions constitute bona fide hedging transactions except to the extent that the aggregate and initial margins and premiums required to establish any non-hedging positions do not exceed five percent of the value of the respective Fund’s portfolio.
The Funds may also invest in exchange-traded Eurodollar contracts, which are interest rate futures on the forward level of LIBOR. These contracts are generally considered liquid securities and trade on the Chicago Mercantile Exchange. Such Eurodollar contracts are generally used to “lock-in” or hedge the future level of short-term rates.
Options. Each Fund may purchase and write (i.e., sell) put and call options. Such options may relate to particular securities or indices, and may or may not be listed on a domestic or non-U.S. securities exchange and may or may not be issued by the Options Clearing Corporation. A call option for a particular security gives the purchaser of the option the right to buy, and the writer (seller) the obligation to sell, the underlying security at the stated exercise price at any time prior to the expiration of the option, regardless of the market price of the security. The premium paid to the writer is in consideration for undertaking the obligation under the option contract. A put option for a particular security gives the purchaser the right to sell the security at the stated exercise price at any time prior to the expiration date of the option, regardless of the market price of the security.
Options on Futures. The Funds may purchase options on the futures contracts described above. A futures option gives the holder, in return for the premium paid, the right to buy from (call) or sell to (put) the writer of the option a futures contract at a specified price at any time during the period of the option. Upon exercise, the writer of the option is obligated to pay the difference between the cash value of the futures contract and the exercise price. Like the buyer or seller of a futures contract, the holder, or writer, of an option has the right to terminate its position prior to the scheduled expiration of the option by selling, or purchasing, an option of the same series, at which time the person entering into the closing transaction will realize a gain or loss.
Futures and Options Risk. Investments in futures options involve some of the same considerations that are involved in connection with investments in futures contracts (for example, the existence of a liquid secondary market). In addition, the purchase of an option also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the option purchased. Depending on the pricing of the option compared to either the futures contract upon which it is based, or upon the price of the securities being hedged, an option may or may not be less risky than ownership of the futures contract or such securities. In general, the market prices of options can be expected to be more volatile than the market prices on the underlying futures contract. Compared to the purchase or sale of futures contracts, however, the purchase of call or put options on futures contracts may frequently involve less potential risk to a Fund because the maximum amount at risk is the premium paid for the options (plus transaction costs).
Futures and options investing are highly specialized activities that entail greater than ordinary investment risks. For example, futures and options may be more volatile than the underlying instruments, and therefore, on a percentage basis, an investment in a future or an option may be subject to greater fluctuation than an investment in the underlying instruments themselves.
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With regard to futures, the risk of loss in trading futures contracts in some strategies can be substantial, due both to the relatively low margin deposits required and the potential for an extremely high degree of leverage involved in futures contracts. As a result, a relatively small price movement in a futures contract may result in an immediate and substantial loss (or gain) to the investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit if the contract were closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount posted as initial margin for the contract.
With regard to options, an option writer, unable to effect a closing purchase transaction, will not be able to sell the underlying instrument, as described below, until the option expires or the optioned instrument is delivered upon exercise. The writer in such circumstances will be subject to the risk of market decline or appreciation in the instrument during such period. If an option purchased by a Fund expires unexercised, the Fund will realize a loss equal to the premium paid. If a Fund enters into a closing sale transaction on an option purchased by it, the Fund will realize a gain if the premium received by the Fund on the closing transaction is more than the premium paid to purchase the option, or a loss if it is less. If an option written by a Fund expires on the stipulated expiration date or if a Fund enters into a closing purchase transaction, it will realize a gain (or loss if the cost of a closing purchase transaction exceeds the net premium received when the option is sold). If a call option written by a Fund is exercised, the proceeds of the sale of the underlying instrument will be increased by the net premium received when the option was written and the Fund will realize a gain or loss on the sale of the underlying instrument. If a put option written by a Fund is exercised, the Fund’s basis in the underlying instrument will be reduced by the net premium received when the option was written.
With regard to both futures and options contracts, positions may be closed out only on an exchange which provides a secondary market for such contracts. However, there can be no assurance that a liquid secondary market will exist for any particular contract at any specific time. Thus, it may not be possible to close a position. In the case of a futures contract, for example, in the event of adverse price movements, a Fund would continue to be required to make daily cash payments in order to maintain its required margin. In such a situation, if the Fund has insufficient cash, it may have to sell portfolio securities in order to meet daily margin requirements at a time when it may be disadvantageous to do so. The inability to close the futures position also could have an adverse impact on the ability to hedge effectively. Each Fund generally will minimize the risk that it will be unable to close out a contract by only entering into those contracts which are traded on national exchanges and for which there appears to be a liquid secondary market.
In addition, there is also the risk of loss by a Fund of margin deposits in the event of bankruptcy of a broker with whom the Fund has an open position in a futures contract or related option. Most futures exchanges limit the amount of fluctuation permitted in some 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 day’s settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of future positions and subjecting some futures traders to substantial losses.
The successful use by the Funds of futures and options will be subject to the ability of the Funds’ portfolio managers to correctly predict movements in interest rates. This requires different skills and techniques than those required to predict changes in the prices of individual securities. The Funds therefore bear the risk that future market trends will be incorrectly predicted. In addition, a Fund’s ability to effectively hedge all or a portion of the securities in its portfolio, in anticipation of or during a market decline, through transactions in futures and options, depends on the degree to which price movements in the applicable markets correlate with the price movements of the securities held by a Fund. Inasmuch as a Fund’s securities will not duplicate the applicable market, the correlation will not
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be perfect. Consequently, each Fund will bear the risk that the prices of its securities being hedged will not move in the same amount as the prices of its put options on the stock indices.
Asset Coverage for Futures and Options Positions. Each Fund will comply with the regulatory requirements of the SEC and the CFTC with respect to coverage of options and futures positions by registered investment companies and, if the guidelines so require, will set aside or earmark cash, U.S. government securities, high grade liquid debt securities and/or other liquid assets permitted by the SEC and CFTC in the amount prescribed. Securities set aside or earmarked cannot be sold while the futures or options position is outstanding, unless replaced with other permissible assets, and will be market-to-market daily. A Fund may not enter into futures or options positions if such positions will require the Fund to set aside or earmark more than 100% of its assets.
Guaranteed Investment Contracts and Funding Agreements
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, may invest in guaranteed investment contracts (“GICs”). GICs are investment contracts or funding agreements are debt instruments issued by highly-rated insurance companies. Pursuant to such contracts, a Fund may make cash contributions to a deposit fund of the insurance company’s general or separate accounts.
A Fund will only purchase GICs from issuers which, at the time of purchase, meet certain credit and quality standards. Generally, GICs are not assignable or transferable without the permission of the issuing insurance companies, and an active secondary market in GICs does not currently exist. In addition, the issuer may not be able to return the principal amount of a GIC to a Fund on seven days’ notice or less, at which point the GIC may be considered to be an illiquid investment. Unlike certain types of money market instruments, there is no government guarantee on the payment of principal or interest; only the insurance company backs the GIC.
High Yield/Lower-Rated Debt Securities
A high yield/lower-rated debt security (also known as a “junk” bond) is generally rated by an NRSRO to be non investment-grade (e.g., BB or lower by S&P). These types of bonds are issued by companies without long track records of sales and earnings, or by companies or municipalities that have questionable credit strength. High yield/lower-rated debt and comparable unrated securities: (a) will likely have some quality and protective characteristics that, in the judgment of the NRSRO, are outweighed by large uncertainties or major risk exposures to adverse conditions; and (b) are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligation. See also “Corporate Debt Securities” above and “Municipal Securities” below.
The Funds may invest in high yield/lower-rated securities that are also convertible securities. See “Convertible Securities” above.
The yields on high yield/lower-rated debt and comparable unrated debt securities generally are higher than the yields available on investment-grade debt securities. However, investments in high yield/lower-rated debt and comparable unrated debt generally involve greater volatility of price and risk of loss of income and principal, including the possibility of default by or insolvency of the issuers of such securities. Since the risk of default is higher for high yield/lower-rated debt securities, the Fund will try to minimize the risks inherent in investing in these securities by engaging in credit analysis, diversification, and attention to current developments and trends affecting interest rates and economic conditions. The Funds will attempt to identify those issuers of high-yielding securities with a financial condition that is adequate to meet future obligations, has improved, or is expected to improve in the future. Accordingly, with respect to these types of securities, a Fund may be more dependent on credit analysis than is the case for higher quality bonds.
The market values of certain high yield/lower-rated debt and comparable unrated securities tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated securities. In addition, issuers of high yield/lower-rated debt and comparable unrated securities often are highly leveraged and may not have more traditional methods of financing available to them so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired.
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The risk of loss due to default by such issuers is significantly greater because high yield/lower-rated debt and comparable unrated securities generally are unsecured and frequently are subordinated to senior indebtedness. A Fund may incur additional expenses to the extent that it is required to seek recovery upon a default in the payment of principal or interest on its portfolio holdings. The existence of limited markets for high yield/lower-rated debt and comparable unrated securities may diminish a Fund’s ability to: (a) obtain accurate market quotations for purposes of valuing such securities and calculating its net asset value; and (b) sell the securities at fair value either to meet redemption requests or to respond to changes in the economy or in financial markets.
An economic recession could severely disrupt the market for such securities and adversely affect the value of such securities. Any such economic downturn also could severely and adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon.
Because certain high yield/lower-rated debt securities also may be non-U.S. securities, some of which may be considered debt securities from emerging markets countries, there are certain additional risks associated with such investments. See “Non-U.S. Securities” above.
Linked Securities and Structured Products
Linked securities, such as index-linked, credit-linked and currency-linked securities, are types of derivative securities. See generally “Derivatives” above.
Index-linked, equity-linked and credit-linked securities can be either equity or debt securities that call for interest payments and/or payment at maturity in different terms than the typical note where the borrower agrees to make fixed interest payments and to pay a fixed sum at maturity. Principal and/or interest payments depend on the performance of an underlying stock, index, or a weighted index of commodity futures such as crude oil, gasoline and natural gas. Currency-linked debt securities are short- term or intermediate-term instruments that have a value at maturity, and/or an interest rate, determined by reference to one or more non-U.S. currencies. Payment of principal or periodic interest may be calculated as a multiple of the movement of one currency against another currency, or against an index.
One common type of linked security is a “structured” product. Structured products generally are individually negotiated agreements and may be traded over-the-counter. They are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities (“structured securities”) backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments.
Like all derivatives, a Fund’s investments in “linked” securities can lead to large losses because of unexpected movements in the underlying financial asset, index, currency or other investment. The ability of the Fund to utilize linked-securities successfully will depend on its ability to correctly predict pertinent market movements, which cannot be assured. Because currency-linked securities usually relate to non-U.S. currencies, some of which may be currency from emerging markets countries, there are certain additional risks associated with such investments. See “Non-U.S. Securities” above.
With respect to structured products, because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there is currently no active trading market for these securities. See also “Private Placement Securities and Other Restricted Securities” below.
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Money Market Instruments
Money market instruments are high-quality, short-term debt obligations, which include: (1) bank obligations; (2) funding agreements; (3) repurchase agreements; (4) U.S. Government obligations; and (5) certain corporate debt securities, such as commercial paper and master notes (which are generally understood to be unsecured obligations of a firm (often private and/or unrated), privately negotiated by borrower and lender, that contemplate a series of recurring loans and repayments, governed in each case by the terms of the one master note). Such instruments also may be structured to be, what would not otherwise be, a money market instrument by modifying the maturity of a security or interest rate adjustment feature to come within permissible limits.
Money market mutual funds (i.e., funds that comply with Rule 2a-7 of the 1940 Act) are permitted to purchase most money market instruments, subject to certain credit quality, maturity and other restrictions.
See “Bank Obligations,” “Corporate Debt Securities” and “Guaranteed Investment Contracts and Funding Agreements” above and “Repurchase Agreements” and “U.S. Government Obligations” below.
Money market instruments (other than certain U.S. Government obligations) are not backed or insured by the U.S. Government, its agencies or instrumentalities. Accordingly, only the creditworthiness of an issuer, or guarantees of that issuer, support such instruments.
Mortgage-Backed Securities
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, may invest in mortgage-backed securities. 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. See “Pass-Through Securities” below.
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. FNMA is a private, shareholder-owned company that purchases both government-backed and conventional mortgages from lenders and securitizes them. Its objective is to increase the affordability of home mortgage funds for low- and middle-income home buyers. FNMA is a congressionally chartered company, although neither its stock nor the securities it issues are insured or guaranteed by the federal government. For example, the pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest only by FNMA. FHLMC is a publicly chartered agency that buys qualifying residential mortgages from lenders, re-packages them and provides certain guarantees. The corporation’s stock is owned by savings institutions across the United States and is held in trust by the Federal Home Loan Bank System. Pass-through securities issued by the FHLMC are guaranteed as to timely payment of interest and ultimately collection of principal only by the FHLMC.
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. 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
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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 Fund will only invest in SMBS whose mortgage assets are U.S. Government obligations. 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. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to fully recoup its initial investment in these securities. 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.
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 investment’s 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. With respect to GNMA certificates, although GNMA guarantees timely payment even if homeowners delay or default, tracking the “pass-through” payments may, at times, be difficult.
Municipal Securities
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, may invest in municipal securities.
Municipal Bonds. Municipal bonds are debt obligations issued by the states, territories and possessions of the United States and the District of Columbia, and also by their political subdivisions, duly constituted offering authorities and instrumentalities. States, territories, possessions and municipalities may issue municipal bonds for a variety of reasons, including, for example, to raise funds for various public purposes such as airports, housing, hospitals, mass transportation, schools, water and sewer works. They may also issue municipal bonds to refund outstanding obligations and to meet general operating expenses. Public authorities also issue municipal bonds to obtain funding for privately operated facilities, such as housing and pollution control facilities, industrial facilities or for water supply, gas, electricity or waste disposal facilities.
Municipal bonds generally are classified as “general obligation” or “revenue” bonds. There are, of course, variations in the security of municipal bonds, both within a particular classification and
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between classifications, depending on numerous factors. General obligation bonds are secured by the issuer’s pledge of its good faith, credit and taxing power for the payment of principal and interest. The payment of the principal of and interest on such bonds may be dependent upon an appropriation by the issuer’s legislative body. The characteristics and enforcement of general obligation bonds vary according to the law applicable to the particular issuer. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source. Municipal bonds may include “moral obligation” bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer.
Private activity bonds (such as an industrial development or industrial revenue bond) held by a Fund are in most cases revenue securities and are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved. Private activity bonds have been or are issued to obtain funds to provide, among other things, privately operated housing facilities, pollution control facilities, convention or trade show facilities, mass transit, airport, port or parking facilities, and certain local facilities for water supply, gas, electricity, or sewage or solid waste disposal. Private activity bonds are also issued for privately held or publicly owned corporations in the financing of commercial or industrial facilities. Most governments are authorized to issue private activity bonds for such purposes in order to encourage corporations to locate within their communities. The principal and interest on these obligations may be payable from the general revenues of the users of such facilities.
Municipal Notes. Municipal notes are issued by states, municipalities and other tax-exempt issuers in order to finance short-term cash needs or, occasionally, to finance construction. Most municipal notes are general obligations of the issuing entity payable from taxes or designated revenues expected to be received within the related fiscal period. Municipal obligation notes generally have maturities of one year or less. Municipal notes are subdivided into three categories of short-term obligations: municipal notes, municipal commercial paper and municipal demand obligations.
Municipal commercial paper typically consists of very short-term unsecured negotiable promissory notes that are sold to meet seasonal working capital or interim construction financing needs of a municipality or agency. While these obligations are intended to be paid from general revenues or refinanced with long-term debt, they frequently are backed by letters of credit, lending agreements, note repurchase agreements or other credit facility agreements offered by banks or institutions.
Municipal demand obligations are subdivided into two general types: variable rate demand notes and master demand obligations. Variable rate demand notes are tax-exempt municipal obligations or participation interests that provide for a periodic adjustment in the interest rate paid on the notes. They permit the holder to demand payment of the notes, or to demand purchase of the notes at a purchase price equal to the unpaid principal balance, plus accrued interest either directly by the issuer or by drawing on a bank letter of credit or guaranty issued with respect to such note. The issuer of the municipal obligation may have a corresponding right to prepay at its discretion the outstanding principal of the note plus accrued interest upon notice comparable to that required for the holder to demand payment. The variable rate demand notes in which the Fund may invest are payable, or are subject to purchase, on demand usually on notice of seven calendar days or less. The terms of the notes provide that interest rates are adjustable at intervals ranging from daily to six months.
Master demand obligations are tax-exempt municipal obligations that provide for a periodic adjustment in the interest rate paid and permit daily changes in the amount borrowed. The interest on such obligations is, in the opinion of counsel for the borrower, excluded from gross income for federal income tax purposes. Although there is no secondary market for master demand obligations, such obligations are considered by the Fund to be liquid because they are payable upon demand. The Fund has no specific percentage limitations on investments in master demand obligations.
There are variations in the quality of municipal securities, both within a particular classification and between classifications, and the yields on municipal securities depend upon a variety of factors,
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including general money market conditions, the financial condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The ratings of NRSROs represent their opinions as to the quality of municipal securities. It should be emphasized, however, that these ratings are general and are not absolute standards of quality, and municipal securities with the same maturity, interest rate, and rating may have different yields while municipal securities of the same maturity and interest rate with different ratings may have the same yield. Subsequent to its purchase by a Fund, an issue of municipal securities may cease to be rated, or its rating may be reduced below the minimum rating required for purchase by that Fund. A Fund’s portfolio managers will consider such an event in determining whether the Fund should continue to hold the obligation.
The payment of principal and interest on most securities purchased by a Fund will depend upon the ability of the issuers to meet their obligations. Each state, each of their political subdivisions, municipalities, and public authorities, as well as the District of Columbia, Puerto Rico, Guam, and the Virgin Islands, is a separate “issuer.” An issuer’s obligations under its municipal securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Code. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its municipal securities may be materially adversely affected by litigation or other conditions.
There are particular considerations and risks relevant to investing in a portfolio of a single state’s municipal securities, such as the greater risk of the concentration of a Fund versus the greater relative safety that comes with a less concentrated investment portfolio.
Other Investment Companies
In seeking to attain their investment objectives, each Fund may invest in securities issued by other investment companies within the limits prescribed by the 1940 Act, its rules and regulations and any exemptive orders obtained by the Funds from the Securities and Exchange Commission.
Each Fund may invest up to 10% of its assets in securities of other open- or closed-end investment companies that invest primarily in securities of the types in which the Funds may invest directly. Each Fund may also invest in the securities of registered investment companies that are exchange-traded funds (“ETFs”) in excess of the limits imposed under the 1940 Act pursuant to exemptive orders obtained by certain ETFs and their sponsors from the Securities and Exchange Commission. An ETF is a fund that holds a portfolio of common stocks or bonds designed to track the performance of a securities index, including industry, sector, country and region indexes. ETFs trade on a securities exchange and their shares may, at times, trade at a premium or discount to their net asset value. An ETF may not replicate exactly the performance of the index it seeks to track for a number of reasons, including transaction costs incurred by the ETF. ETFs incur fees and expenses, such as operating expenses, licensing fees, trustee fees and marketing expenses, which are borne proportionately by ETF shareholders, such as the Funds. The Funds will also incur brokerage costs when purchasing and selling shares of ETFs.
Each Fund may also invest a portion of its assets in pooled investment vehicles (other than investment companies) that invest primarily in securities of the types in which the Funds may invest directly.
Each Fund generally expects that it may invest in other investment companies and/or other pooled investment vehicles either during periods when it has large amounts of uninvested cash, or during periods when there is a shortage of attractive, high-yielding securities available in the market. As a stockholder in an investment company, a Fund will bear its ratable share of that investment company’s expenses, and would remain subject to payment of the fund’s advisory and administrative fees with respect to assets so invested. Shareholders would therefore be subject to duplicative expenses to the extent a fund invests in other investment companies. In addition, the securities of other investment companies may be leveraged and will therefore be subject to leverage risks.
Pass-Through Securities
A pass-through security is a share or certificate of interest in a pool of debt obligations that have been repackaged by an intermediary, such as a bank or broker-dealer. The purchaser of a pass-
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through security receives an undivided interest in the underlying pool of securities. The issuers of the underlying securities make interest and principal payments to the intermediary which are passed through to purchasers, such as the Funds. The most common type of pass-through securities are mortgage-backed securities. GNMA Certificates are mortgage-backed securities that evidence an undivided interest in a pool of mortgage loans. GNMA Certificates differ from bonds in that principal is paid back monthly by the borrowers over the term of the loan rather than returned in a lump sum at maturity. A Fund may purchase modified pass-through GNMA Certificates, which entitle the holder to receive a share of all interest and principal payments paid and owned on the mortgage pool, net of fees paid to the issuer and GNMA, regardless of whether or not the mortgagor actually makes the payment. GNMA Certificates are backed as to the timely payment of principal and interest by the full faith and credit of the U.S. Government.
FHLMC issues two types of mortgage pass-through securities: mortgage participation certificates and guaranteed mortgage certificates. Participation certificates resemble GNMA Certificates in that the participation certificates represent a pro rata share of all interest and principal payments made and owed on the underlying pool. FHLMC guarantees timely payments of interest on the participation certificates and the full return of principal. Guaranteed mortgage certificates also represent a pro rata interest in a pool of mortgages. However, these instruments pay interest semi-annually and return principal once a year in guaranteed minimum payments. This type of security is guaranteed by FHLMC as to timely payment of principal and interest but is not backed by the full faith and credit of the U.S. Government.
FNMA issues guaranteed mortgage pass-through certificates. FNMA Certificates resemble GNMA Certificates in that each FNMA Certificate represents a pro rata share of all interest and principal payments made and owned on the underlying pool. This type of security is guaranteed by the FNMA as to timely payment of principal and interest but is not backed by the full faith and credit of the U.S. Government.
There are also private entities that issue mortgage-backed securities that resemble those issued by GNMA, FHLMC and FNMA. Such private entities generally issue certificates that represent a pro rata interest in a pool of mortgages. Such certificates are not backed by the full faith and credit of the U.S. government. However, they typically maintain credit enhancement through the structure of the offering or from third party insurers.
Except for guaranteed mortgage certificates, each of the mortgage-backed securities described above is characterized by monthly payments to the holder, reflecting the monthly payments made by the borrowers who received the underlying mortgage loans. The payments to the securities holders, such as the Funds, like the payments on the underlying loans, represent both principal and interest. Although the underlying mortgage loans are for specified periods of time, such as 20 or 30 years, the borrowers can, and typically do, pay them off sooner. Thus, the security holders frequently receive prepayments of principal in addition to the principal that is part of the regular monthly payments. Estimated prepayment rates will be a factor considered in calculating the average weighted maturity of a Fund which owns these securities. A borrower is more likely to prepay a mortgage that bears a relatively high rate of interest. This means that in times of declining interest rates, higher yielding mortgage-backed securities held by a Fund might be converted to cash and the Fund will be forced to accept lower interest rates when that cash is used to purchase additional securities in the mortgage-backed securities sector or in other investment sectors. Additionally, prepayments during such periods will limit a Fund’s ability to participate in as large a market gain as may be experienced with a comparable security not subject to prepayment.
Preferred Stock
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may invest in preferred stock. Preferred stock are units of ownership of a public corporation that pay dividends at a specified rate and have preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. Most preferred stock is cumulative; if dividends are passed (i.e., not paid for any reason), they accumulate and must be paid before common stock dividends. A passed dividend on noncumulative preferred stock is generally gone forever. Participating preferred stock entitles its holders to share in profits above and
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beyond the declared dividend, along with common shareholders, as distinguished from nonparticipating preferred stock, which is limited to the stipulated dividend. Convertible preferred stock is exchangeable for a given number of common shares and thus tends to be more volatile than nonconvertible preferred stock, which generally behaves more like a fixed-income bond.
Auction preferred stock (“APS”) is a type of adjustable-rate preferred stock with a dividend determined every seven weeks in a dutch auction process by corporate bidders. Shares are typically bought and sold at face values ranging from $100,000 to $500,000 per share. Auction preferred stock is sometimes known by the proprietary name given by the relevant broker, e.g., Merrill Lynch’s AMPS (auction market preferred stock), Smith Barney’s DARTS or First Boston’s STARS. Benefits of APS include:
• | Reduced interest rate risk—Because these securities generally reset within a short period of time, the exposure to interest rate risk is somewhat mitigated. |
• | Preservation of principal—The frequency of the dividend reset provisions makes APS an attractive cash management instrument. The auction reset mechanism generally assures that the shares will trade at par on the auction date. For those that reset frequently, the share price is not expected to fluctuate from par, however, the reset rate will reflect factors such as market conditions, demand and supply for a particular credit confidence in the issuer. |
• | Credit quality—Most corporate APS carry an investment grade credit rating from both Moody’s and S&P, municipal APS typically carry the highest credit rating from both Moody’s and S&P (Aaa/AAA). This is primarily because the issuers of municipal APS are required under the 1940 Act to maintain at least 300% asset coverage for senior securities. |
In addition to reinvestment risk if interest rates fall, some specific risks with regard to APS include:
• | Failed auction—In the event of a failed auction, the rate is reset at the maximum applicable rate, which is usually described in the prospectus and is typically influenced by the issuer’s credit rating. In a failed auction, current shareholders are generally unable to sell some, or all, of the shares when the auction is completed. Typically, the liquidity for APS that have experienced a failed auction becomes very limited. If a failed auction were to occur, the shareholder may hold his or her shares until the next auction. Should there not be subsequent auctions that ‘unfail’ the process, the shareholder may: 1) hold the APS in anticipation of a refinancing by the issuer that would cause the APS to be called, or 2) hold securities either indefinitely or in anticipation of the development of a secondary market. |
• | Early call risk—Although unlikely, the preferred shares are redeemable at any time, at the issuers option, at par plus accrued dividends. |
Private Placement Securities and Other Restricted Securities
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may invest in private placement securities. Although many securities are offered publicly, some are offered privately only to certain qualified investors. Private placements may often offer attractive opportunities for investment not otherwise available on the open market. However, the securities so purchased are often “restricted,” i.e., they cannot be sold to the public without registration under the 1933 Act or the availability of an exemption from registration (such as Rules 144 or 144A), or they are “not readily marketable” because they are subject to other legal or contractual delays in or restrictions on resale.
Generally speaking, private placements may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration.
Private placements may be considered illiquid securities. The term “illiquid securities” for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the securities. Illiquid securities are considered to include, among other things, written over-the-counter options, securities or other liquid assets being used as cover for such options, repurchase agreements with maturities in excess of seven days, certain loan participation interests, fixed time deposits which are not subject to prepayment or provide for withdrawal penalties upon prepayment (other than overnight deposits),
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and other securities whose disposition is restricted under the federal securities laws (other than securities issued pursuant to Rule 144A under the 1933 Act and certain commercial paper that has been determined to be liquid under procedures approved by the Board). Illiquid securities may include privately placed securities, which are sold directly to a small number of investors, usually institutions.
Private placements are generally subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, a Fund could find it more difficult to sell such securities when it may be advisable to do so or it may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it may also be more difficult to determine the fair value of such securities for purposes of computing the Fund’s net asset value due to the absence of a trading market.
Unlike public offerings, restricted securities are not registered under the federal securities laws. Although certain of these securities may be readily sold, others may be illiquid, and their sale may involve substantial delays and additional costs.
REITs
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund may invest in a real estate investment trust, or REIT. A REIT is a managed portfolio of real estate investments which may include office buildings, apartment complexes, hotels and shopping malls. A mortgage REIT specializes in lending money to developers of properties, and passes any interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property owned or financed by the REIT; mortgage REITs also may be affected by the quality of credit extended. Mortgage REITs are dependent upon management skills and may not be diversified. REITs also may be subject to heavy cash flow dependency, defaults by borrowers, self-liquidation and the possibility of failing to qualify for preferential treatment under the Code.
The real estate industry is particularly sensitive to economic downturns. The value of securities of issuers in the real estate industry is sensitive to changes in real estate values and rental income, property taxes, interest rates, tax and regulatory requirements, overbuilding, extended vacancies of properties and the issuer’s management skills. In addition, the value of a REIT can depend on the structure of and cash flow generated by the REIT. Mortgage REITs are subject to the risk that mortgagors may not meet their payment obligations. Each investment also has its unique interest rate and payment priority characteristics. In addition, REITs are subject to unique tax requirements which, if not met, could adversely affect dividend payments. Also, in the event of a default of an underlying borrower or lessee, a REIT could experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments.
Repurchase Agreements
A repurchase agreement is a money market instrument that is a contract under which a Fund acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund’s cost plus interest). Repurchase agreements may be viewed, in effect, as loans made by a Fund which are collateralized by the securities subject to repurchase. Typically, the Funds will enter into repurchase agreements only with commercial banks and registered broker/dealers and only with respect to the highest quality securities, such as U.S. Government obligations. Such transactions are monitored to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including any accrued interest. See “Money Market Instruments” above.
Repurchase Agreements are generally subject to counterparty risk, which is the risk that the counterparty to the agreement could default on the agreement. If a seller defaults, a Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement, including interest.
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In addition, if the seller becomes involved in bankruptcy or insolvency proceedings, the Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if, for example, the Fund is treated as an unsecured creditor and required to return the underlying collateral to the seller or its assigns.
Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Funds may “combine” uninvested cash balances into a joint account, which may be invested in one or more repurchase agreements.
Reverse Repurchase Agreements
A reverse repurchase agreement is a contract under which a Fund sells a security for cash for a relatively short period (usually not more than one month) subject to the obligation of the Fund to repurchase such security at a fixed time and price (representing the seller’s cost plus interest). Reverse repurchase agreements may be viewed as borrowings made by a Fund.
Reverse repurchase agreements involve the risk that the market value of the securities the Funds are obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Funds’ use of proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Funds’ obligation to repurchase the securities. In addition, reverse repurchase agreements are techniques involving leverage, and accordingly, under the requirements of the 1940 Act, the Funds are required to segregate permissible assets to cover their position.
Securities Lending
For various reasons, including to enhance a Fund’s return, a Fund may lend its portfolio securities to broker/dealers and other institutional investors. Loans are typically made pursuant to agreements that require the loans to be continuously secured by collateral equal at all times in value to at least the market value of the securities loaned. Such loans may not be made if, as a result, the aggregate amount of all outstanding securities loans for a Fund exceeds one-third of the value of the Fund’s net assets. A Fund will continue to receive interest on the loaned securities while simultaneously earning interest on the investment of the collateral. However, a Fund will normally pay lending fees to such broker/dealers and related expenses from the interest earned on invested collateral.
Securities lending transactions are generally subject to counterparty risk, which is the risk that the counterparty to the transaction could default. In other words, the risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. However, loans are made only to borrowers deemed to be of good standing and when, in the portfolio managers’ judgment, the income to be earned from the loan justifies the attendant risks.
Short Sales
Selling a security short is the sale of a security or commodity futures contract not owned by the seller. The technique is used in order to take advantage of an anticipated decline in the price or to protect a profit in a long-term position. To complete such a transaction, a Fund must borrow the security to make delivery to the buyer. A Fund is then obligated to replace the security borrowed by purchasing the security at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the lender amounts equal to any dividends or interest which accrue during the period of the loan. To borrow the security, a Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet the margin requirements, until the short position is closed out.
The successful use by the Funds of short sales will be subject to the ability of the Funds’ portfolio managers to correctly predict movements in the directions of the relevant market. The Funds therefore bear the risk that their portfolio managers will incorrectly predict future price directions. In addition, if a Fund sells a security short, and that security’s price goes up, the Fund will have to make up the margin on its open position (i.e., purchase more securities on the market to cover the position).
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It may be unable to do so and thus its position may not be closed out. There can be no assurance that the Fund will not incur significant losses in such a case.
When a Fund’s portfolio manager believes that the price of a particular security held by a Fund may decline, it may make “short sales against the box” to hedge the unrealized gain on such security. Selling short against the box involves selling a security which a Fund owns for delivery at a specified date in the future. Selling securities short “against the box” entails many of the same risks and considerations described above, except that a Fund is not required to borrow any securities to establish its short position.
Stripped Securities
Stripped securities are derivatives in which an instrument’s coupon (or interest) is separated from its corpus (or principal) and then are re-sold separately, usually as zero-coupon bonds. See “Derivatives” above. Because stripped securities are typically products of brokerage houses and the U.S. Government, there are many different types and variations. For example, separately traded interest and principal securities, or STRIPS, are component parts of a U.S. Treasury security where the principal and interest components are traded independently through the Federal Book-Entry System. Stripped mortgage-backed securities, or SMBS, are also issued by the U.S. Government or an agency. TIGERS are Treasury securities stripped by brokers. See also “Zero-Coupon, Pay-In-Kind and Step-Coupon Securities” below.
If the underlying obligations experience greater than anticipated prepayments of principal, the Fund may fail to fully recover its initial investment. The market value of the class consisting entirely of principal payments can be extremely volatile in response to changes in interest rates. The yields on a class of SMBS that receives all or most of the interest are generally higher than prevailing market yields on other mortgage-backed obligations because their cash flow patterns are also volatile and there is a greater risk that the initial investment will not be fully recovered. SMBS issued by the U.S. Government (or a U.S. Government agency or instrumentality) may be considered liquid under guidelines established by the Trust’s Board if they can be disposed of promptly in the ordinary course of business at a value reasonably close to that used in the calculation of the Fund’s per share net asset value.
Swap Agreements
Swap agreements are derivative instruments. They can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. Depending on their structure, swap agreements may increase or decrease a Fund’s exposure to long- or short-term interest rates, non-U.S. currency values, mortgage securities, corporate borrowing rates, or other factors such as security prices or inflation rates. Swap agreements can take many different forms and are known by a variety of names, including interest rate, index, credit, equity, credit default and currency exchange rate swap agreements. In a typical cap or floor agreement, one party agrees to make payments only under specified circumstances, usually in return for payment of a fee by the other party. For example, the buyer of an interest rate cap obtains the right to receive payments to the extent that a specified interest rate exceeds an agreed-upon level, while the seller of an interest rate floor is obligated to make payments to the extent that a specified interest rate falls below an agreed-upon level. An interest rate collar combines elements of buying a cap and selling a floor. Swap agreements will tend to shift a Fund’s investment exposure from one type of investment to another. For example, if the Fund agreed to pay fixed rates in exchange for floating rates while holding fixed-rate bonds, the swap would tend to decrease the Fund’s exposure to long-term interest rates. Caps and floors have an effect similar to buying or writing options.
Depending on how they are used, swap agreements may increase or decrease the overall volatility of a Fund’s investments and its share price and yield. Additionally, whether a Fund’s use of swap contracts will be successful in furthering its investment objective will depend on its portfolio managers’ ability to correctly predict whether certain types of investments are likely to produce greater returns than other investments. Because they are two party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The most significant factor in
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the performance of swap agreements is the change in the specific interest rate, currency, or other factor that determines the amounts of payments due to and from a Fund. If a swap agreement calls for payments by a Fund, the Fund must be prepared to make such payments when due. In addition, if the counterparty’s creditworthiness declines, the value of a swap agreement would likely decline, potentially resulting in losses. However, a Fund will closely monitor the credit of a swap contract counterparty in order to minimize this risk. A Fund may be able to eliminate its exposure under a swap agreement either by assignment or other disposition, or by entering into an offsetting swap agreement with the same party or a similarly creditworthy party.
A Fund’s use of credit default swap agreements exposes the Fund to additional risks, including but not limited to, the credit and liquidity risk of a counterparty. If the credit quality of any such counterparty deteriorates, such counterparty may default on its obligations to make payments under the swap agreement. A Fund may also be exposed to liquidity risk because the market for credit default swaps are relatively illiquid and a Fund will generally not be permitted to terminate or assign its credit default swaps without the consent of the related counterparty and accordingly may not be able to terminate or assign such credit default swaps in a timely fashion and for a fair price, potentially restricting its ability to take advantage of market opportunities.
A swap agreement can be a form of leverage, which can magnify a Fund’s gains or losses. In order to reduce the risk associated with leveraging, a Fund will cover its current obligations under swap agreements according to guidelines established by the SEC. If a Fund enters into a swap agreement on a net basis, it will segregate assets with a daily value at least equal to the excess, if any, of a Fund’s accrued obligations under the swap agreement over the accrued amount the Fund is entitled to receive under the agreement. If a Fund enters into a swap agreement on other than a net basis, it will segregate assets with a value equal to the full amount of a Fund’s accrued obligations under the agreement.
U.S. Government Obligations
U.S. Government obligations include securities that are issued or guaranteed by the United States Treasury, by various agencies of the U.S. Government, or by various instrumentalities which have been established or sponsored by the U.S. Government. U.S. Treasury securities are backed by the “full faith and credit” of the United States. Securities issued or guaranteed by federal agencies and U.S. Government-sponsored instrumentalities may or may not be backed by the full faith and credit of the United States. Some of the U.S. Government agencies that issue or guarantee securities include the Export-Import Bank of the United States, Farmers Home Administration, Federal Housing Administration, Maritime Administration, Small Business Administration and The Tennessee Valley Authority. An instrumentality of the U.S. Government is a government agency organized under Federal charter with government supervision. Instrumentalities issuing or guaranteeing securities include, among others, Federal Home Loan Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit Banks and FNMA.
Because of their relative liquidity and high credit quality, U.S. Government obligations are often purchased by the Money Market Funds, and can in some instances, such as for Treasury Reserves, comprise almost all of their portfolios.
In the case of those U.S. Government obligations not backed by the full faith and credit of the United States, the investor must look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment, and may not be able to assert a claim against the United States itself in the event that the agency or instrumentality does not meet its commitment.
Variable and Floating-Rate Instruments
These types of securities have variable or floating-rates of interest and, under certain limited circumstances, may have varying principal amounts. Unlike a fixed interest rate, a variable or floating interest rate is one that rises and falls based on the movement of an underlying index of interest rates. For example, many credit cards charge variable interest rates, based on a specific spread over the prime rate. Most home equity loans charge variable rates tied to the prime rate.
Variable and floating-rate instruments pay interest at rates that are adjusted periodically according to a specified formula; for example, some adjust daily and some adjust every six months.
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The variable or floating-rate tends to decrease the security’s price sensitivity to changes in interest rates. These types of 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 investments, a Fund’s portfolio managers must correctly assess probable movements in interest rates. This involves different skills than those used to select most portfolio securities. If its portfolio managers incorrectly forecasts such movements, a Fund could be adversely affected by the use of variable or floating-rate obligations.
Warrants and Rights
A warrant is a type of security, usually issued together with a bond or preferred stock, that entitles the holder to buy a proportionate amount of common stock at a specified price, usually higher than the market price at the time of issuance, for a period of years or to perpetuity. In contrast, rights, which also represent the right to buy common stock, normally have a subscription price lower than the current market value of the common stock and a life of two to four weeks. A warrant is usually issued as a sweetener in order to enhance the marketability of the accompanying fixed-income securities. Warrants are freely transferable and are traded on major exchanges. The prices of warrants do not necessarily correlate with the prices of the underlying securities and are, therefore, generally considered speculative investments.
The purchase of warrants involves the risk that the purchaser could lose the purchase value of the warrant if the right to subscribe to additional shares is not exercised prior to the warrant’s expiration, if any. Also, the purchase of warrants involves the risk that the effective price paid for the warrant added to the subscription price of the related security may exceed the value of the subscribed security’s market price, such as when there is no movement in the level of the underlying security.
When-Issued Purchases, Delayed Delivery and Forward Commitments
A Fund may agree to purchase securities on a when-issued or delayed delivery basis or enter into a forward commitment to purchase securities. These types of securities are those for which the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued (normally within forty-five days after the date of the transaction). The payment obligation and, if applicable, the interest rate that will be received on the securities, are fixed at the time that the buyer enters into the commitment.
A Fund will make commitments to purchase securities on a when-issued or delayed delivery basis or to purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, a Fund may dispose of or renegotiate a commitment after it is entered into, and may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. In these cases the Fund may realize a capital gain or loss.
The value of the securities underlying a when-issued purchase or a forward commitment to purchase securities, and any subsequent fluctuations in their value, is taken into account when determining the net asset value of a Fund starting on the date that the Fund agrees to purchase the securities. The Fund does not earn dividends on the securities it has committed to purchase until they are paid for and delivered on the settlement date. When the Fund makes a forward commitment to sell securities it owns, the proceeds to be received upon settlement are included in the Fund’s assets. Fluctuations in the value of the underlying securities are not reflected in the Fund’s net asset value as long as the commitment remains in effect.
Investment in securities on a when-issued or delayed delivery basis may increase the Fund’s exposure to market fluctuation and may increase the possibility that the Fund’s shareholders will suffer adverse federal income tax consequences if the Fund must engage in portfolio transactions in order to honor a when-issued or delayed delivery commitment. In a delayed delivery transaction, the Fund relies on the other party to complete the transaction. If the transaction is not completed, the Fund may miss a price or yield considered to be advantageous.
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In delayed delivery transactions, delivery of the securities occurs beyond normal settlement periods, but a Fund would not pay for such securities or start earning interest on them until they are delivered. However, when a Fund purchases securities on such a delayed delivery basis, it immediately assumes the risk of ownership, including the risk of price fluctuation. Failure by a counterparty to deliver a security purchased on a delayed delivery basis may result in a loss or missed opportunity to make an alternative investment. Depending upon market conditions, a Fund’s delayed delivery purchase commitments could cause its net asset value to be more volatile, because such securities may increase the amount by which the Fund’s total assets, including the value of when-issued and delayed delivery securities held by the Fund, exceed its net assets.
Zero-Coupon, Pay-In-Kind and Step-Coupon Securities
A zero-coupon security is one that makes no periodic interest payments but instead is sold at a deep discount from its face value. There are many different kinds of zero-coupon securities. The most commonly known is the zero-coupon bond, which either may be issued at a deep discount by a corporation or government entity or may be created by a brokerage firm when it strips the coupons off a bond and sells the bond of the note and the coupon separately. This technique is used frequently with U.S. Treasury bonds, and the zero-coupon issue is marketed under such names as CATS (Certificate of Accrual on Treasury Securities), TIGER (Treasury Investor Growth Receipt) or STRIPS (Separate Trading of Registered Interest and Principal of Securities). Zero-coupon bonds are also issued by municipalities. Buying a municipal zero-coupon bond frees its purchaser of the worry about paying federal income tax on imputed interest, since the interest is exempt for federal income tax purposes. Zero-coupon certificates of deposit and zero-coupon mortgages also exist; they work on the same principle as zero-coupon bonds—the CD holder or mortgage holder receives face value at maturity, and no payments until then. See “Stripped Securities” above.
Pay-in-kind bonds normally give the issuer an option to pay cash at a coupon payment date or give the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of the coupon payment that would have been made.
Step-coupon bonds trade at a discount from their face value and pay coupon interest. The coupon rate is low for an initial period and then increases to a higher coupon rate thereafter. The discount from the face amount or par value depends on the time remaining until cash payments begin, prevailing interest rates, liquidity of the security and the perceived credit quality of the issue.
In general, owners of zero-coupon, step-coupon and pay-in-kind bonds have substantially all the rights and privileges of owners of the underlying coupon obligations or principal obligations. Owners of these bonds have the right upon default on the underlying coupon obligations or principal obligations to proceed directly and individually against the issuer, and are not required to act in concert with other holders of such bonds.
Generally, the market prices of zero-coupon, step-coupon and pay-in-kind securities are more volatile than the prices of securities that pay interest periodically and in cash and are likely to respond to changes in interest rates to a greater degree than other types of debt securities.
Because zero-coupon securities bear no interest, they are the most volatile of all fixed-income securities. Since zero-coupon bondholders do not receive interest payments, zero-coupon securities fall more dramatically than bonds paying out interest on a current basis when interest rates rise. However, when interest rates fall, zero-coupon securities rise more rapidly in value than full-coupon bonds, because the bonds have locked in a particular rate of reinvestment that becomes more attractive the further rates fall. The greater the number of years that a zero-coupon security has until maturity, the less an investor has to pay for it, and the more leverage is at work for the investor. For example, a bond maturing in 5 years may double in value, but one maturing in 25 years may increase in value 10 times, depending on the interest rate of the bond.
Temporary Defensive Purposes
Each Fund may hold cash or money market instruments. It may invest in these securities without limit when its management team: (i) believes that the market conditions are not favorable for profitable investing; (ii) is unable to locate favorable investment opportunities; or (iii) determines that a
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temporary defensive position is advisable or necessary in order to meet anticipated redemption requests, or for other reasons. When a Fund engages in such strategies, it may not achieve its investment objective.
Hedging and Other Defensive Actions
Each Fund may periodically engage in hedging transactions. Hedging is a term used for various methods of seeking to preserve portfolio capital value by offsetting price changes in one investment through making another investment whose price should tend to move in the opposite direction. It may be desirable and possible in various market environments to partially hedge a Fund’s portfolio against fluctuations in market value due to interest rate fluctuations by investment in financial futures and index futures as well as related put and call options on such instruments, or by entering into interest rate swap transactions or options on swaps. Both parties entering into an index or financial futures contract are required to post an initial deposit of 1% to 5% of the total contract price. Typically, option holders enter into offsetting closing transactions to enable settlement in cash rather than take delivery of the position in the future of the underlying security. In the event of a sale of a futures contract, each Fund will segregate assets equal to the amount of any related obligations.
These transactions present certain risks. In particular, the imperfect correlation between price movements in the hedging instrument and price movements in the securities being hedged creates the possibility that losses on the hedge by a Fund may be greater than gains in the value of the securities in the Fund’s portfolio being hedged, or that the gain on the hedge may be less than the losses on the Fund’s portfolio securities. In addition, the markets for futures, swaps and options may not be liquid in all circumstances. As a result, in volatile markets a Fund may not be able to close out the transaction without incurring losses substantially greater than the initial deposit. Finally, the potential daily deposit requirements in futures or swap contracts create an ongoing greater potential financial risk than do options transactions, where the exposure is limited to the cost of the initial premium. Losses due to certain hedging transactions may reduce yield. Net gains, if any, from hedging and other portfolio transactions will be distributed as taxable ordinary income or capital gains distributions to shareholders.
No Fund will make any hedging investment (whether an initial premium or deposit or a subsequent deposit) other than as necessary to close a prior investment if, immediately after such investment, the sum of the amount of its premiums and deposits, with respect to all currently effective hedging investments, would exceed 5% of such series’ net assets. Each Fund will invest in these instruments only in markets believed by its management team to be active and sufficiently liquid. For further information regarding these investment strategies and risks presented thereby.
Each Fund reserves the right for liquidity or defensive purposes (such as thinness in the market for municipal securities or an expected substantial decline in value of long-term obligations) to invest temporarily up to 100% of its assets in obligations issued or guaranteed by the U.S. Government and its agencies or instrumentalities.
Short-Term Investments
The Prospectus discusses briefly the ability of the Funds to invest a portion of their assets in federally short-term securities or shares of money market funds (“short-term investments”) Under normal market conditions, short-term investments will not exceed 10% of a Fund’s net assets. The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, will invest only in taxable short-term investments that are either U.S. Government securities or are rated within the highest grade by Moody’s, S&P, or Fitch and mature within one year from the date of purchase or carry a variable or floating rate of interest. See Appendix A for more information about ratings by Moody’s, S&P and Fitch.
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, may invest in the following federally tax-exempt short-term investments:
Bond Anticipation Notes (BANs) are usually general obligations of state and local governmental issuers, which are sold to obtain interim financing for projects that will eventually be funded through the sale of long-term debt obligations or bonds. The ability of an issuer to
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meet its obligations on its BANs is primarily dependent on the issuer’s access to the long-term municipal bond market and the likelihood that the proceeds of such bond sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to finance the current operations of such governments. Repayment is generally to be derived from specific future tax revenues. Tax anticipation notes are usually general obligations of the issuer. A weakness in an issuer’s capacity to raise taxes due to, among other things, a decline in its tax base or a rise in delinquencies, could adversely affect the issuer’s ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general, they also constitute general obligations of the issuer. A decline in the receipt of projected revenues, such as anticipated revenues from another level of government, could adversely affect an issuer’s ability to meet its obligations on outstanding RANs. In addition, the possibility that the revenues would, when received, be used to meet other obligations could affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for specific projects. Frequently, these notes are redeemed with funds obtained from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as those described above to commercial banks as evidence of borrowings. The purposes for which the notes are issued are varied, but they are frequently issued to meet short-term working capital or capital-project needs. These notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term unsecured, negotiable promissory notes, issued by states, municipalities and their agencies. Payment of principal and interest on issues of municipal paper may be made from various sources, to the extent the funds are available therefrom. Maturities of municipal paper generally will be shorter than the maturities of TANs, BANs or RANs. There is a limited secondary market for issues of municipal paper.
Certain municipal obligations may carry variable or floating rates of interest whereby the rate of interest is not fixed, but varies with changes in specified market rates or indices, such as a bank prime rate or a tax-exempt money market index.
While these various types of notes as a group represent the major portion of the tax-exempt note market, other types of notes are occasionally available in the marketplace and each Fund may invest in such other types of notes to the extent permitted under their investment objective, policies and limitations. Such notes may be issued for different purposes and may be secured differently from those mentioned above.
The Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund, may also invest in the following taxable short-term investments:
Certificates of Deposit (CDs). A certificate of deposit is a negotiable interest bearing instrument with a specific maturity. CDs are issued by banks in exchange for the deposit of funds and normally can be traded in the secondary market, prior to maturity. The Funds will only invest in U.S. dollar-denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper. Commercial paper is the term used to designate unsecured short-term promissory notes issued by corporations. Maturities on these issues vary from a few days to nine months. Commercial paper may be purchased from U.S. corporations.
Other Corporate Obligations. The Funds may purchase notes, bonds and debentures issued by corporations if at the time of purchase there is less than one year remaining until maturity or if they carry a variable or floating rate of interest.
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Repurchase Agreements. A repurchase agreement is a contractual agreement whereby the seller of securities (U.S. government or municipal obligations) agrees to repurchase the same security at a specified price on a future date agreed upon by the parties. The agreed upon repurchase price determines the yield during a Fund’s holding period. Repurchase agreements are considered to be loans collateralized by the underlying security that is the subject of the repurchase contract. The Funds will only enter into repurchase agreements with dealers, domestic banks or recognized financial institutions that in the opinion of the Funds’ management team present minimal credit risk. The risk to the Funds is limited to the ability of the issuer to pay the agreed-upon repurchase price on the delivery date; however, although the value of the underlying collateral at the time the transaction is entered into always equals or exceeds the agreed-upon repurchase price, if the value of the collateral subsequently declines there is a risk of loss of both principal and interest. In the event of default, the collateral may be sold but a Fund might incur a loss if the value of the collateral declines, and might incur disposition costs or experience delays in connection with liquidating the collateral. In addition, if bankruptcy proceedings are commenced with respect to the seller of the security, realization upon the collateral by a Fund may be delayed or limited. The Funds’ management team will monitor the value of collateral at the time the transaction is entered into and at all times subsequent during the term of the repurchase agreement in an effort to determine that the value always equals or exceeds the agreed upon price. In the event the value of the collateral declined below the repurchase price, the Funds’ management team will demand additional collateral from the issuer to increase the value of the collateral to at least that of the repurchase price. Each of the Funds will not invest more than 10% of its assets in repurchase agreements maturing in more than seven days.
The Credit Opportunities Fund may only invest in short-term taxable fixed income securities with a maturity of one year or less and whose issuers shall have a long-term rating of at least A or higher by S&P, Moody’s or Fitch. Short-term taxable fixed income securities are defined to include, without limitation, the following:
(1) The Fund may invest in U.S. government securities, including bills, notes and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. government agencies or instrumentalities. U.S. government agency securities include securities issued by (a) the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, and the Government National Mortgage Association, whose securities are supported by the full faith and credit of the United States; (b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the Tennessee Valley Authority, whose securities are supported by the right of the agency to borrow from the U.S. Treasury; (c) the Federal National Mortgage Association, whose securities are supported by the discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality; and (d) the Student Loan Marketing Association, whose securities are supported only by its credit. While the U.S. government provides financial support to such U.S. government-sponsored agencies or instrumentalities, no assurance can be given that it always will do so since it is not so obligated by law. The U.S. government, its agencies, and instrumentalities do not guarantee the market value of their securities, and consequently, the value of such securities may fluctuate. In addition, the Fund may invest in sovereign debt obligations of non-U.S. countries. A sovereign debtor’s willingness or ability to repay principal and interest in a timely manner may be affected by a number of factors, including its cash flow situation, the extent of its non-U.S. reserves, the availability of sufficient non-U.S. exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward principal international lenders and the political constraints to which it may be subject.
(2) The Fund may invest in certificates of deposit issued against funds deposited in a bank or savings and loan association. Such certificates are for a definite period of time, earn a specified rate of return, and are normally negotiable. If such certificates of deposit are non-negotiable, they will be considered illiquid securities and be subject to the Fund’s 15% restriction on investments in illiquid securities. Pursuant to the certificate of deposit, the issuer agrees to pay the amount deposited plus interest to the bearer of the certificate on the date specified thereon. Under current FDIC regulations, the maximum insurance payable as to any one certificate of deposit is $250,000; therefore, certificates of deposit purchased by the Fund may not be fully insured. The Fund may only invest in certificates of deposit issued by U.S. banks with at least $1 billion in assets.
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(3) The Fund may invest in bankers’ acceptances, which are short-term credit instruments used to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then “accepted” by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an asset or it may be sold in the secondary market at the going rate of interest for a specific maturity.
(4) The Fund may invest in repurchase agreements which involve purchases of debt securities. In such an action, at the time the Fund purchases the security, it simultaneously agrees to resell and redeliver the security to seller, who also simultaneously agrees to buy back the security at a fixed price and time. This assures a predetermined yield for the Fund during its holding period since the resale price is always greater than the purchase price and reflects an agreed-upon market rate. Such actions afford an opportunity for the Fund to invest temporarily available cash. The Fund may enter into repurchase agreements only with respect to obligations of the U.S. government, its agencies or instrumentalities; certificates of deposit; or bankers’ acceptances in which the Fund may invest. Repurchase agreements may be considered loans to the seller, collateralized by the underlying securities. The risk to the Fund is limited to the ability of the seller to pay the agreed-upon sum on the repurchase date; in the event of default, the repurchase agreement provides that the Fund is entitled to sell the underlying collateral. If the value of the collateral declines after the agreement is entered into, however, and if the seller defaults under a repurchase agreement when the value of the underlying collateral is less than the repurchase price, the Fund could incur a loss of both principal and interest. The portfolio managers monitor the value of the collateral at the time the action is entered into and at all times during the term of the repurchase agreement. The portfolio managers do so in an effort to determine that the value of the collateral always equals or exceeds the agreed-upon repurchase price to be paid to the Fund. If the seller were to be subject to a federal bankruptcy proceeding, the ability of the Fund to liquidate the collateral could be delayed or impaired because of certain provisions of the bankruptcy laws.
(5) The Fund may invest in bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest. There may be penalties for the early withdrawal of such time deposits, in which case the yields of these investments will be reduced.
(6) The Fund may invest in commercial paper, which are short-term unsecured promissory notes, including variable rate master demand notes issued by corporations to finance their current operations. Master demand notes are direct lending arrangements between the Fund and a corporation. There is no secondary market for the notes. However, they are redeemable by the Fund at any time. The portfolio managers will consider the financial condition of the corporation (e.g., earning power, cash flow, and other liquidity ratios) and will continuously monitor the corporation’s ability to meet all of its financial obligations, because the Fund’s liquidity might be impaired if the corporation were unable to pay principal and interest on demand. The Fund may only invest in commercial paper rated A-2 or better by S&P, Prime-2 or higher by Moody’s or F2 or higher by Fitch, or unrated commercial paper which is, in the opinion of the portfolio managers, of comparable quality.
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The management of the Trust, including general supervision of the duties performed for the Funds by the Adviser under the 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 113 Nuveen-sponsored open-end funds (the “Nuveen Mutual Funds”) and 131 Nuveen-sponsored closed-end funds (collectively with the Nuveen Mutual Funds, the “Nuveen Funds”).
Name, Business Address | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other | |||||
Independent Trustees: | ||||||||||
Robert P. Bremner* 333 West Wacker Drive Chicago, IL 60606 | Chairman of the Board and Trustee | Term—Indefinite** Length of Service— Since 2003 | Private Investor and Management Consultant; Treasurer and Director Humanities Council of Washington D.C. | 244 | N/A | |||||
Jack B. Evans 333 West Wacker Drive Chicago, IL 60606 (10/22/48) | Trustee | Term—Indefinite** Length of Service— | President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Director and Chairman, United Fire Group, a publicly held company; President Pro Tem of the Board of Regents for the State of Iowa University System; Director, Gazette Companies; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. | 244 | See Principal Occupation description |
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Name, Business Address | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other | |||||
William C. Hunter (3/6/48) | Trustee | Term—Indefinite** Length of Service— Since 2004 | Dean (since 2006), Tippie College of Business, University of Iowa; Director (since 2005), Beta Gamma Sigma International Honor Society; Director (since 2004) of Xerox Corporation; 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). | 244 | See Principal Occupation description | |||||
David J. Kundert* 333 West Wacker Drive Chicago, IL 60606 (10/28/42) | Trustee | Term—Indefinite** Length of Service— | 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. | 244 | See Principal Occupation description |
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Name, Business Address | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other | |||||
William J. Schneider* Chicago, IL 60606 (9/24/44) | Trustee | Term—Indefinite** Length of Service— Since 2003 | Chairman of Miller-Valentine Partners Ltd., a real estate investment company; formerly, Senior Partner and Chief Operating Officer (retired, 2004) of Miller-Valentine Group; Member, Mid-America Health System Board; Member, University of Dayton Business School Advisory Council; formerly, Member, Dayton Philharmonic Orchestra Association; formerly, Director, Dayton Development Coalition; formerly, Member, Business Advisory Council, Cleveland Federal Reserve Bank. | 244 | See Principal Occupation description | |||||
Judith M. Stockdale 333 West Wacker Drive Chicago, IL 60606 (12/29/47) | Trustee | Term—Indefinite** Length of Service— | Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (from 1990 to 1994). | 244 | See Principal Occupation description | |||||
Carole E. Stone* 333 West Wacker Drive Chicago, IL 60606 (6/28/47) | Trustee | Term—Indefinite** Length of Service— | Director, C2 Options Exchange, Incorporated (since 2009); Director, Chicago Board Options Exchange (since 2006); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing Association Oversight Board (2005-2007). | 244 | See Principal Occupation description |
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Name, Business Address | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other | |||||
Virginia L. Stringer 333 West Wacker Drive Chicago, IL 60606 (8/16/44) | Trustee | Term—Indefinite** Length of Service— Since 2011 | Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institute’s 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; Independent Director, First American Fund Complex from 1987-2010 and Chair from 1997-2010. | 244 | See Principal Occupation Description | |||||
Terence J. Toth* Chicago, IL 60606 | Trustee | Term—Indefinite** Length of Service— Since 2008 | 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: Goodman Theatre Board (since 2004); Chicago Fellowship Board (since 2005), University of Illinois Leadership Council Board (since 2007) and Catalyst Schools of Chicago Board (since 2008); 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). | 244 | See Principal Occupation Description |
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Name, Business Address | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other | |||||
Interested Trustee: | ||||||||||
John P. Amboian*** 333 West Wacker Drive Chicago, IL 60606 (6/14/61) | Trustee | Term—Indefinite** Length of Service— Since 2008 | Chief Executive Officer and Chairman (since 2007) and Director (since 1999) of Nuveen Investments, Inc.; Chief Executive Officer (since 2007) of Nuveen Asset Management, Nuveen Investments Advisors, Inc.; Director (since 2011) of Nuveen Fund Advisors, Inc.; formerly Chief Executive Officer (2007-2010) of Nuveen Asset Management. | 244 | See Principal Occupation description |
* | Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate of the Adviser. |
** | Each trustee serves an indefinite term until his or her successor is elected. |
*** | 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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Name, Business Address | Position(s) | Term of | Principal Occupation(s) | Number of | ||||
Officers of the Trust: | ||||||||
Gifford R. Zimmerman 333 West Wacker Drive Chicago, IL 60606 (9/9/56) | Chief Administrative Officer | Term—Until August 2011 Length of Service—Since Inception | Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Investments, LLC; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC and 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 Tradewinds Global Investors, LLC and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2010) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst. | 244 | ||||
Margo L. Cook 333 West Wacker Drive Chicago, IL 60606 (4/11/64) | Vice President | Term—Until August 2011 Length of Service—Since 2009 | Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors (since 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. | 244 | ||||
Lorna C. Ferguson 333 West Wacker Drive Chicago, IL 60606 (10/24/45) | Vice President | Term—Until August 2011 Length of Service—Since Inception | Managing Director (since 2004), formerly, Vice President of Nuveen Investments, LLC; Managing Director (since 2005) of Nuveen Fund Advisors. | 244 | ||||
Stephen D. Foy 333 West Wacker Drive Chicago, IL 60606 (5/31/54) | Vice President and Controller | Term—Until August 2011 Length of Service—Since Inception | Senior Vice President (since 2010), formerly, Vice President (1993-2010) and Funds Controller (since 1998) of Nuveen Investments, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors; Certified Public Accountant. | 244 |
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Name, Business Address | Position(s) | Term of | Principal Occupation(s) | Number of | ||||
Scott S. Grace 333 West Wacker Drive Chicago, IL 60606 (8/20/70) | Vice President and Treasurer | Term—Until August 2011 Length of Service—Since 2009 | Managing Director, Corporate Finance & Development, Treasurer (since September 2009) of Nuveen Investments, LLC; Managing Director and Treasurer (since 2009) of Nuveen Investment Solutions, Inc., Nuveen Investments Advisers, Inc., Nuveen Investments Holdings, Inc., and (since 2011) of Nuveen Fund Advisors and 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, Inc.; 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 Stanley’s Global Financial Services Group (2000-2003); Chartered Accountant Designation. | 244 | ||||
Walter M. Kelly 333 West Wacker Drive Chicago, IL 60606 (2/24/70) | Vice President and Chief Compliance Officer | Term—Until August 2011 Length of Service—Since 2003 | Senior Vice President (since 2008), formerly, Vice President, of Nuveen Investments, LLC; Senior Vice President (since 2008) and Assistant Secretary (since 2003), formerly, Vice President (2006-2008) of Nuveen Fund Advisors; previously, Assistant Vice President and Assistant Secretary of the Nuveen Funds (2003-2006). | 244 | ||||
Tina M. Lazar 333 West Wacker Drive Chicago, IL 60606 (8/27/61) | Vice President | Term—Until August 2011 Length of Service—Since 2002 | Senior Vice President (since 2009), formerly, Vice President of Nuveen Investments, LLC (1999-2009); Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors. | 244 | ||||
Larry W. Martin 333 West Wacker Drive Chicago, IL 60606 (7/27/51) | Vice President and Assistant Secretary | Term—Until August 2011 Length of Service—Since Inception | Senior Vice President (since 2010), formerly, Vice President (1993-2010), Assistant Secretary and Assistant General Counsel of Nuveen Investments, LLC; Senior Vice President (since 2011) of Nuveen Asset Management, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010), and Assistant Secretary of Nuveen Investments, Inc.; Senior Vice President (since 2010), formerly, Vice President (2005-2010), and Assistant Secretary (since 1997) of Nuveen Fund Advisors; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002), NWQ Investment Management Company, LLC, Symphony Asset Management, LLC. (since 2003), Tradewinds Global Investors, LLC, Santa Barbara Asset Management LLC (since 2006), Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Assistant Secretary of Nuveen Commodities Asset Management, LLC (since 2010). | 244 |
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Name, Business Address | Position(s) | Term of | Principal Occupation(s) | Number of | ||||
Kevin J. McCarthy 333 West Wacker Drive Chicago, IL 60606 (3/26/66) | Vice President | Term—Until August 2011 Length of Service—Since 2007 | Managing Director (since 2008), formerly, Vice President (2007-2008) of Nuveen Investments, LLC; Managing Director (since 2008), Assistant Secretary (since 2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Vice President and Assistant Secretary of Nuveen Investment Advisers Inc., NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC, Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. and of Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007). | 244 | ||||
Kathleen L. Prudhomme 800 Nicollet Mall Minneapolis, Minnesota 55402 (3/30/53) | Vice President and Assistant Secretary | Term—Until August 2011 Length of Service—Since 2011 | Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; formerly, Secretary of FASF (2004-2010); prior thereto, Assistant Secretary of FASF (1998-2004); Deputy General Counsel, FAF Advisors, Inc. (1998-2010). | 244 | ||||
Jeffrey M. Wilson 333 West Wacker Drive Chicago, IL 60606 (3/13/56) | Vice President | Term—Until August 2011 Length of Service—Since 2011 | Senior Vice President (since 2011) of Nuveen Investments, LLC; formerly, Senior Vice President of FAF Advisors, Inc. (2000-2010). | 113 |
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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 candidate’s particular background, skills and experience, among other things, but also whether such background, skills and experience enhance the Board’s 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 Board’s knowledge and expertise with respect to the many aspects of fund operations that are complex-wide in nature. The unitary structure also enhances the Board’s influence and oversight over the investment advisor 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 Board’s 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 as the independent Chairman of the Board. 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 Fund’s operations. The Board has established five standing committees: the Executive Committee, the Dividend Committee, the Audit Committee, the Compliance, Risk Management and Regulatory Oversight Committee and the Nominating and Governance 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.
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 September 30, 2010, the Executive Committee did not meet.
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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 Adviser’s 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 Board’s general supervision of such actions, the Audit Committee addresses any valuation issues, oversees the Nuveen Funds’ pricing procedures and actions taken by Adviser’s 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 Adviser’s 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 year ended September 30, 2010, the Audit Committee met four 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 Board’s 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 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 candidate’s qualifications, each candidate must meet certain basic
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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 or 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 year ended September 30, 2010, the Nominating and Governance Committee met six 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 year ended September 30, 2010, the Dividend Committee met eight 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 committee’s 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 Adviser’s 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, 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,
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Judith M. Stockdale, Chair, and Virginia L. Stringer. During the fiscal year ended September 30, 2010, the Compliance, Risk Management and Regulatory Oversight Committee met four times.
Board Diversification and Trustee Qualifications
In determining that a particular trustee was qualified to serve on the Board, the Board has considered each trustee’s 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, do not constitute holding out 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 firm’s 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 Bachelor’s 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, Children’s 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 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. 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
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Chairman of the Board of United Fire Group, sits on the Board of the Gazette Companies, is President Pro Tem of the Board of Regents for the State of Iowa University System, is a Life Trustee of Coe College and is a member of the Advisory Council of the Department of Finance in the Tippie College of Business, University of Iowa. He has a Bachelor of Arts degree from Coe College and an MBA from the University of Iowa.
William C. Hunter
Mr. Hunter was appointed Dean of the Henry B. Tippie College of Business at the University of Iowa effective 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 Bank’s Chief Economist and was an Associate Economist on the Federal Reserve System’s 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 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. He is President-Elect 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 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 Lowcountry 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 Governor’s 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.
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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 Chair of the Public Authorities Control 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 Funds from 1997 to 2010, having joined the Board in 1987. Ms. Stringer serves on the Governing Board of the Investment Company Institute’s Independent Directors Council and 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 also serves as board chair of the Oak Leaf Trust, is the immediate past board chair of the Saint Paul Riverfront Corporation and is immediate past President of the Minneapolis Club’s 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 Board on Judicial Standards and recently served on a Minnesota Supreme Court Judicial Advisory Committee to reform the state’s judicial disciplinary process. She is a member of the International Women’s 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 Women’s Campaign Fund and the Minnesota Women’s 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 Boards of the Goodman Theatre, Chicago Fellowship, and University of Illinois Leadership Council, and is Chairman of the Board of Catalyst Schools of Chicago. 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.
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Board Compensation
The following table shows, for each independent trustee, (1) the aggregate compensation paid by the Trust for its fiscal year ended September 30, 2010, (2) the amount of total compensation paid by the Trust that has been deferred, and (3) the total compensation paid to each trustee by the Nuveen Funds during the fiscal year ended September 30, 2010.
Name of Trustee | Aggregate Compensation From Trust1 | Amount of Total Compensation that Has Been Deferred2 | Total Compensation From Nuveen Funds Paid to Trustees3 | |||||||||
Robert P. Bremner | $ | 1,270 | $ | — | $ | 264,438 | ||||||
Jack B. Evans | 1,098 | — | 228,908 | |||||||||
William C. Hunter | 872 | — | 190,547 | |||||||||
David J. Kundert | 1,030 | — | 233,256 | |||||||||
William J. Schneider | 1,057 | — | 230,408 | |||||||||
Judith M. Stockdale | 978 | — | 210,800 | |||||||||
Carole E. Stone | 872 | — | 189,000 | |||||||||
Virginia L. Stringer4 | — | — | — | |||||||||
Terence J. Toth | 1,076 | — | 227,666 |
1 | The compensation paid, including deferred amounts, to the independent trustees for the fiscal year ended September 30, 2010 for services to the Trust. |
2 | Pursuant to a deferred compensation agreement with the Trust, 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 Trust. |
3 | Based on the compensation paid (including any amounts deferred) to the trustees for the one-year period ending September 30, 2010 for services to the Nuveen Funds. |
4 | Ms. Stringer was appointed to the Board effective January 1, 2011. |
Prior to January 1, 2011, independent trustees receive a $100,000 annual retainer plus (a) a fee of $3,250 per day for attendance in person or by telephone at a regularly scheduled meeting of the Board of Trustees; (b) a fee of $2,500 per meeting for attendance in person where such in-person attendance is required and $1,500 per meeting for attendance by telephone or in person where in-person attendance is not required at a special, non-regularly scheduled board meeting; (c) a fee of $2,000 per meeting for attendance in person or by telephone at an Audit Committee meeting; (d) a fee of $2,000 per meeting for attendance in person or by telephone at a regularly scheduled Compliance, Risk Management and Regulatory Oversight Committee meeting where in-person attendance is required and $1,000 per meeting for attendance by telephone or in person where in-person attendance is not required; (e) a fee of $1,000 per meeting for attendance in person or by telephone for a meeting of the Dividend Committee; and (f) a fee of $500 per meeting for attendance in person at all other committee meetings ($1,000 for shareholder meetings) on a day on which no regularly scheduled board meeting is held in which 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. In addition to the payments described above, the Chairman of the Board of Trustees receives $50,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee receive $7,500 and the chairperson of the Nominating and Governance Committee receives $5,000 as additional retainers. Independent trustees also receive a fee of $2,500 per day for site visits to entities that provide services to the Nuveen Funds on days on which no regularly scheduled 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 at any ad hoc committee meeting where in-person attendance is required and $500 per meeting for attendance by telephone
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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 fund management may, in its discretion, establish a minimum amount to be allocated to each fund.
Effective January 1, 2011, independent trustees receive 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 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; 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 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. In addition to the payments described above, the Chairman of the Board receives $75,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee receive $10,000 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 trustee’s 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 trustee’s 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 fund’s 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.
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Share Ownership
The following table sets forth the dollar range of equity securities beneficially owned by each trustee as of December 31, 2010:
Name of Trustee | 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 | ||||||||||||||||
Short Duration Bond Fund | Multi-Strategy Core Bond Fund | High Yield Bond Fund | Credit Opportunities Fund | |||||||||||||||
John P. Amboian | Over $100,000 | Over $100,000 | $50,001 - $100,000 | $0 | Over $100,000 | |||||||||||||
Robert P. Bremner | $50,001 - $100,000 | $0 | $0 | $0 | Over $100,000 | |||||||||||||
Jack B. Evans | $1 - $10,000 | $0 | $0 | $0 | Over $100,000 | |||||||||||||
William C. Hunter | $0 | $0 | $0 | $0 | Over $100,000 | |||||||||||||
David J. Kundert | $0 | $0 | $0 | $0 | Over $100,000 | |||||||||||||
William J. Schneider | Over $100,000 | $0 | $0 | $0 | Over $100,000 | |||||||||||||
Judith M. Stockdale | $50,001 - $100,000 | $0 | $0 | $0 | Over $100,000 | |||||||||||||
Carole E. Stone | $0 | $0 | $0 | $0 | Over $100,000 | |||||||||||||
Virginia L. Stringer1 | $0 | $0 | $0 | $0 | Over $100,000 | |||||||||||||
Terence J. Toth | $0 | $0 | $0 | $10,001 - $50,000 | Over $100,000 |
1 | Ms. Stringer was appointed to the Board effective January 1, 2011. |
As of January 7, 2011, the officers and trustees of each Fund, in the aggregate, owned less than 1% of the shares of each Fund.
The following table sets forth the percentage ownership of each person, who, as of January 7, 2011, owned of record, or is known by the Trust to have owned of record or beneficially, 5% or more of any class of a Fund’s shares.
Name of Fund and Class | Name and Address of Owner | Percentage of Record Ownership | ||||
Short Duration Bond Fund |
UBS Financial Services Inc. FBO Capital Foresight Limited Partnership N. Beverly Glen Circle, Suite 300 Los Angeles, CA 90077 | 39.38% | ||||
Merrill Lynch, Pierce, Fenner & Smith For the benefit of its customers 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246 | 18.08% | |||||
American Enterprise Investment Serv PO Box 9446 Minneapolis, MN 55440-9446 | 6.08% | |||||
First Clearing,, LLC Special Custody Account for the exclusive benefit of Customer 2801 Market St. St. Louis, MO 63103 | 5.53% |
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Name of Fund and Class | Name and Address of Owner | Percentage of Record Ownership | ||||
Morgan Stanley & Co. FBO Coleman Fung 22 Orchard Meadow Rd. E Willison, NY 11596-2504 | 5.28% | |||||
Class C Shares | Merrill Lynch, Pierce, Fenner & Smith For the benefit of its customers 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246 | 22.73% | ||||
First Clearing LLC Special Custody Acct for the exclusive benefit of customer 2801 Market Street St. Louis, MO 63103-2523 | 17.64% | |||||
Citigroup Global Markets Inc., House Account Attn: Peter Booth, 7th Floor 333 West 34th St. New York, NY 10001 | 10.14% | |||||
Morgan Stanley Smith Barney Attn: Mutual Funds Operations Harborside Financial Center Plaza Two, 2nd Floor Jersey City, NJ 07311 | 5.09% | |||||
Class R3 Shares | Merrill Lynch, Pierce, Fenner & Smith For the benefit of its customers Attn: Fund Admin 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246-6484 | 90.05% | ||||
Nuveen Investments, Inc. Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 9.94% | |||||
Class I Shares | Merrill Lynch, Pierce, Fenner & Smith For the benefit of its customers Attn: Fund Admin 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246-6484 | 47.42% | ||||
Nuveen Conservative Allocation Fund Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 13.56% |
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Name of Fund and Class | Name and Address of Owner | Percentage of Record Ownership | ||||
First Clearing, LLC Special Custody Account for the exclusive benefit of Customer 2801 Market St. St. Louis, MO 63103 | 8.81% | |||||
Citigroup Global Markets Inc., House Account Attn: Peter Booth, 7th Floor 333 West 34th St. New York, NY 10001 | 6.49% | |||||
LPL Financial FBO Customer Accounts Attn: Mutual Funds Operations PO Box 509046 San Diego, CA 92150-9046 | 5.15% | |||||
Band & Co. c/o U.S. Bank P.O. Box 1787 Milwaukee, WI 53201-1787 | 5.02% | |||||
Multi-Strategy Core Bond Fund | ||||||
Class A Shares | Merrill Lynch, Pierce, Fenner & Smith For the benefit of its customers 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246 | 20.96% | ||||
First Clearing, LLC Special Custody Account for the exclusive benefit of customer 2801 Market St. St. Louis, MO 63103 | 15.06% | |||||
American Enterprise Investment Serv PO Box 9446 Minneapolis, MN 55440-9446 | 8.28% | |||||
Class B Shares | First Clearing, LLC Special Custody Account for the exclusive benefit of customer 2801 Market St. St. Louis, MO 63103 | 42.02% | ||||
Merrill Lynch, Pierce, Fenner & Smith For the benefit of its customers 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246 | 17.38% |
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Name of Fund and Class | Name and Address of Owner | Percentage of Record Ownership | ||||
Morgan Stanley Smith Barney Attn: Mutual Funds Operations Harborside Financial Center Plaza Two, Second Floor Jersey City, NJ 07311 | | 5.76% | | |||
Class C Shares | Merrill Lynch, Pierce, Fenner & Smith For the benefit of its customers 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246 | 28.98% | ||||
First Clearing, LLC Special Custody Account for the exclusive benefit of customer 2801 Market St. St. Louis, MO 63103 | | 12.47% | | |||
Citigroup Global Markets Inc., House Account Attn: Peter Booth, 7th Floor 333 West 34th St. New York, NY 10001 | 5.91% | |||||
Morgan Stanley Smith Barney ATTN: Mutual Funds Operations Harborside Financial Center Plaza Two 2nd Floor Jersey City, NJ 07311 | 5.23% | |||||
Class R3 Shares | Nuveen Investments, Inc. 333 West Wacker Drive Chicago, IL 60606 | 40.44% | ||||
MLPF&S for the benefit of its customers ATTN FUND ADMN 4800 Deer Lake Dr FL 3 Jacksonville, FL 32246-6484 | 33.59% | |||||
Psychiatry Associates PC RPM 401(K) Plan DTD 01/01/2005 FBO Gonzalo G. Gurmendi 1736 Oxmoor Road, Suite 103 Birmingham, AL 35209 | | 25.97% | | |||
Citigroup Global Markets Inc. 333 West 34th St., 3rd Floor New York, NY 10001 | 28.11% | |||||
Class I Shares | Nuveen Conservative Allocation Fund Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 17.01% |
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Name of Fund and Class | Name and Address of Owner | Percentage of Record Ownership | ||||
MLPF&S For the benefit of its customers ATTN FUND ADMN 4800 Deer Lake Dr FL 3 Jacksonville, FL 32246-6484 | 15.21% | |||||
First Clearing, LLC Special Custody Account for the exclusive benefit of Customer 2801 Market St. St. Louis, MO 63103 | 8.07% | |||||
Nuveen Moderate Allocation Fund Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 7.56% | |||||
High Yield Bond Fund | ||||||
Class A Shares | MLPF&S For the benefit of its customers 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246 | 24.01% | ||||
First Clearing, LLC Special Custody Account for the exclusive benefit of customer 2801 Market St. St. Louis, MO 63103 | 10.75% | |||||
Class B Shares | First Clearing, LLC Special Custody Account for the exclusive benefit of customer 2801 Market St. St. Louis, MO 63103 | 41.50% | ||||
MLPF&S For the benefit of its customers 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246 | 13.62% | |||||
NFS LLC FEBO NFS/FMTC Rollover IRA FBO Thomas E. McKennedy 219 Edgewood Highland Village, TX 75077-6903 | 5.36% | |||||
LPL Financial FBO Customer Accounts Attn: Mutual Funds Operations PO Box 509046 San Diego, CA 92150-9046 | 8.25% |
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Name of Fund and Class | Name and Address of Owner | Percentage of Record Ownership | ||||
Class C Shares | MLPF&S For the benefit of its customers 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246 | 27.09% | ||||
Citigroup Global Markets Inc. House Account Attn: Peter Booth, 7th floor 333 West 34th St. New York, NY 10001-2402 | 12.65% | |||||
First Clearing, LLC Special Custody Account for the exclusive benefit of customer 2801 Market St. St. Louis, MO 63103 | 12.53% | |||||
Morgan Stanley Smith Barney Attn: Mutual Funds Operations Harborside Financial Center Plaza Two, Second Floor Jersey City, NJ 07311 | 5.41% | |||||
Class R3 Shares | Nuveen Investments, Inc. Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 94.25% | ||||
MLPF&S for the benefit of its customers ATTN FUND ADMN 4800 Deer Lake Dr FL 3 Jacksonville, FL 32246-6484 | 5.75% | |||||
Class I Shares | Merrill Lynch, Pierce, Fenner & Smith For the benefit of its customers Attn: Fund Admin 4800 Deer Lake Dr. E. Floor 3 Jacksonville, FL 32246-6484 | 8.66% | ||||
Charles Schwab & Co. Inc. For the benefit of its customers 4500 Cherry Creek Dr. S. Denver, CO 80018 | 6.76% | |||||
First Clearing, LLC Special Custody Account for the exclusive benefit of Customer 2801 Market St. St. Louis, MO 63103 | 5.83% | |||||
Nuveen Moderate Allocation Fund Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 5.62% |
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Name of Fund and Class | Name and Address of Owner | Percentage of Record Ownership | ||||
Credit Opportunities Fund | Charles Schwab & Co Inc 101 Montgomery Street San Francisco, CA 94104 | | 76.81% | | ||
Nuveen Investments, Inc. Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 17.42% | |||||
Class C Shares | Nuveen Investments, Inc. Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 47.44% | ||||
RBC Capital Markets Corp FBO Michael R. Chambrello Denise M. Chambrello -CT Muni Bond account- 504 Mt Vernon Road Plantsville, CT 06479 | 9.20% | |||||
LPL Financial For A/C 9785 Towne Centre Dr. San Diego, CA 92121 | 7.06% | |||||
Class R3 Shares | Nuveen Investments, Inc. Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 100.00% | ||||
Class I Shares | Charles Schwab & Co Inc For the Benefit of their Customers 101 Montgomery Street San Francisco, CA 94104 | 53.57% | ||||
Nuveen Investments, Inc. Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 26.39% | |||||
Nuveen Moderate Allocation Fund. Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 9.46% | |||||
Nuveen Conservative Allocation Fund. Attn: Darlene Cramer 333 West Wacker Drive Chicago, IL 60606 | 6.68% |
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INVESTMENT ADVISER AND SUB-ADVISERS
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 wholly-owned subsidiary, Nuveen Asset Management, LLC, located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as sub-adviser to manage the investment portfolios of the Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund. The Adviser has selected its affiliate, Symphony Asset Management LLC (“Symphony”), located at 555 California Street, Suite 2975, San Francisco, California 94104, to serve as sub-adviser to manage the investment portfolio of the Credit Opportunities Fund. For additional information regarding the management services performed by the Adviser, Nuveen Asset Management, LLC and Symphony, see “Who Manages the Funds” in the Prospectus.
The Adviser is an affiliate of the Distributor, which is also 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 wholly-owned 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 (the “MDP Acquisition”). The investor group led by Madison Dearborn Partners, LLC includes affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”). Merrill Lynch has since been acquired by Bank of America Corporation. The Adviser has adopted policies and procedures that address arrangements with Bank of America Corporation (including Merrill Lynch) that may give rise to certain conflicts of interest.
Each Fund is dependent upon services and resources provided by the Adviser and therefore the Adviser’s parent, Nuveen Investments. Nuveen Investments increased its level of debt in connection with the MDP Acquisition. Nuveen Investments believes that monies generated from operations and cash on hand will be adequate to fund debt service requirements, capital expenditures and working capital requirements for the foreseeable future; however, Nuveen Investments’ ability to continue to fund these items, to service its debt and to maintain compliance with covenants in its debt agreements may be affected by general economic, financial, competitive, legislative, legal and regulatory factors and by its ability to refinance or repay outstanding indebtedness with scheduled maturities beginning in 2014. In the event that Nuveen Investments breaches certain of the covenants included in its debt agreements, the breach of such covenants may result in the accelerated payment of its outstanding debt, increase the cost of such debt or generally have an adverse effect on the financial condition of Nuveen Investments.
For the management services and facilities furnished by the Adviser, each of the Funds has agreed to pay an annual management fee at rates 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 Fund’s management fee is divided into two components—a complex-level fee based on the aggregate amount of all qualifying 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.
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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 qualifying 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 component of the management fee for the Funds is calculated based upon the aggregate daily managed assets of all Nuveen Funds, with such daily managed assets defined separately for each Fund in its management agreement, but excluding assets attributable to investments in other Nuveen Funds and assets in excess of $2 billion added to the Nuveen Funds in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011. Managed 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 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 the TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser to limit the amount of such assets for determining managed assets in certain circumstances. As of September 30, 2010, the complex-level fee rate was 0.1822%. |
The following tables set 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 periods.
Amount of Management Fees (Net of Fee Waivers and Expense Reimbursements by the Adviser) | Amount of Fees Waived and Expenses Reimbursed by the Adviser | |||||||||||||||||||||||
10/01/07- 9/30/08 | 10/01/08- 9/30/09 | 10/01/09- 9/30/10 | 10/01/07- 9/30/08 | 10/01/08- 9/30/09 | 10/01/09- 9/30/10 | |||||||||||||||||||
Short Duration Bond Fund | $ | — | $ | — | $ | 444,804 | $ | 213,388 | $ | 283,140 | $ | 191,048 | ||||||||||||
Multi-Strategy Core Bond Fund | — | — | 123,174 | 238,979 | 292,668 | 212,461 | ||||||||||||||||||
High Yield Bond Fund | 192,701 | 297,808 | 699,960 | 388,878 | 495,024 | 163,961 |
Amount of Management Fees (Net of Fee Waivers and Expense Reimbursements by the Adviser) | Amount of Fees Waived and Expenses Reimbursed by the Adviser | |||||||
4/28/10- 9/30/10 | 4/28/10- 9/30/10 | |||||||
Credit Opportunities Fund | $ | 4,259 | $ | 28,250 |
In addition to the Adviser’s management fee, each Fund also pays a portion of the Trust’s 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.
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The Funds, the other Nuveen Funds, the Adviser, Nuveen Asset Management, LLC, Symphony and other related entities have adopted codes of ethics which essentially prohibit all Nuveen Fund management personnel, including the Funds’ portfolio managers, from engaging in personal investments which compete or interfere with, or attempt to take advantage of, a Fund’s anticipated or actual portfolio transactions, and are designed to assure that the interests of shareholders are placed before the interests of Nuveen personnel in connection with personal investment transactions.
Sub-Advisers
Effective January 1, 2011, the Adviser has selected its wholly-owned subsidiary, Nuveen Asset Management, LLC, to serve as sub-adviser to manage the investment portfolio of the Short Duration Bond Fund, Multi-Strategy Core Bond Fund and High Yield Bond Fund. The Adviser pays Nuveen Asset Management, LLC a portfolio management fee equal to 50% of the advisory fee paid to the Adviser for its services to the Short Duration Bond Fund and the Multi-Strategy Core Bond Fund (net of any waivers, reimbursement payments, supermarket fees and alliance fees waived, reimbursed or paid by the Adviser in respect of the Funds). The Adviser pays Nuveen Asset Management, LLC a portfolio management fee equal to 66.67% of the advisory fee paid to the Adviser for its services to the High Yield Bond fund (net of any waivers, reimbursement payments, supermarket fees and alliance fees waived, reimbursed or paid by the Adviser in respect of the Fund).
The Adviser has selected Symphony to serve as sub-adviser to manage the investment portfolio of the Fund. Symphony is organized as a member-managed limited liability company, and its sole managing member is Nuveen Investments. The Adviser pays Symphony a portfolio management fee equal to 50% of the advisory fee paid to the Adviser for its services to the Fund (net of any waivers, reimbursement payments, supermarket fees and alliance fees waived, reimbursed or paid by the Adviser in respect of the Fund). The Adviser paid Symphony $9,573 for its services to the Credit Opportunities Fund for the period April 28, 2010 (commencement of Fund operations) through September 30, 2010.
Portfolio Managers
The following individuals have primary responsibility for the day-to-day implementation of investment strategies of the Funds:
Name | Fund | |
Chris J. Neuharth, CFA | Short Duration Bond Fund | |
Brenda A. Langenfeld, CFA | Short Duration Bond Fund | |
Peter L. Agrimson, CFA | Short Duration Bond Fund | |
Timothy A. Palmer, CFA | Multi-Strategy Core Bond Fund | |
Jeffrey J. Ebert, CFA | Multi-Strategy Core Bond Fund | |
Marie A. Newcome, CFA | Multi-Strategy Core Bond Fund | |
John T. Fruit, CFA | High Yield Bond Fund | |
Jeffrey T. Schmitz, CFA | High Yield Bond Fund | |
Gunther Stein | Credit Opportunities Fund | |
Jenny Rhee | Credit Opportunities Fund |
Compensation
Nuveen Asset Management, LLC. Portfolio manager compensation consists primarily of base pay, an annual cash incentive and long-term incentive payments.
Base pay is determined based upon an analysis of the portfolio manager’s general performance, experience, and market levels of base pay for such position.
The Funds’ portfolio managers are paid an annual cash incentive based upon investment performance, generally over the past one- and three-year periods unless the portfolio manager’s tenure is shorter. The maximum potential annual cash incentive is equal to a multiple of base pay, determined based upon the particular portfolio manager’s performance and experience, and market levels of base pay for such position. The portion of the maximum potential annual cash incentive that is paid out is based upon performance relative to the portfolio’s benchmark and performance relative to an appropriate Lipper industry peer group. Generally, the threshold for payment of an annual cash
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incentive is (i) benchmark performance and (ii) median performance versus the peer group, and the maximum annual cash incentive is attained at (i) a spread over the benchmark which the firm believes will, over time, deliver top quartile performance and (ii) top quartile performance versus the Lipper industry peer group. Investment performance is measured on a pre-tax basis, gross of fees, for a Fund’s results and for its Lipper industry peer group.
Payments pursuant to a long-term incentive plan are paid to portfolio managers on an annual basis based upon general performance and expected contributions to the success of the firm. There are generally no differences between the methods used to determine compensation with respect to the Funds and the other accounts shown in the table above.
Symphony. Symphony investment professionals receive compensation based on three elements: fixed-base salary, participation in a bonus pool and certain long-term incentives.
The fixed-base salary is set at a level determined by Symphony and is reviewed periodically to ensure that it is competitive with base salaries paid by similar financial services companies for persons playing similar roles.
The portfolio manager is also eligible to receive an annual bonus from a pool based on Symphony’s aggregate asset-based and performance fees after all operating expenses. The level of this bonus to each individual portfolio manager is determined by senior management’s assessment of the team’s performance, and the individual’s contribution to and performance on that team. Factors considered in that assessment include the total return and risk-adjusted total return performance of the accounts for which the individual serves as portfolio manager relative to any benchmarks established for those accounts; the individual’s effectiveness in communicating investment performance to investors and/or their advisors; and the individual’s contribution to the firm’s overall investment process and to the execution of investment strategies. The portfolio manager also receives long-term incentives tied to the performance and growth of Symphony and Nuveen Investments.
Other Accounts Managed
In addition to the Funds, as of December 31, 2010, members of the investment team are 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 | |||||||||||
Chris J. Neuharth | Registered Investment Companies | 4 | $279 million | 0 | $0 | |||||||||||
Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||||||||
Other Accounts | 9 | 1.1 million | 0 | 0 | ||||||||||||
Brenda A. Langenfeld | Registered Investment Companies | 1 | 82.6 million | 0 | 0 | |||||||||||
Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||||||||
Other Accounts | 4 | 106.7 million | 0 | 0 | ||||||||||||
Peter L. Agrimson | Registered Investment Companies | 1 | 82.6 million | 0 | 0 | |||||||||||
Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||||||||
Other Accounts | 0 | 0 | 0 | 0 | ||||||||||||
Timothy A. Palmer | Registered Investment Companies | 4 | 241 million | 0 | 0 | |||||||||||
Other Pooled Investment Vehicles | 1 | 76.6 million | 0 | 0 | ||||||||||||
Other Accounts | 11 | 531 million | 0 | 0 | ||||||||||||
Jeffrey J. Ebert | Registered Investment Companies | 4 | 244 million | 0 | 0 | |||||||||||
Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||||||||
Other Accounts | 13 | 654 million | 1 | 105.5 million | ||||||||||||
Marie A. Newcome | Registered Investment Companies | 2 | 67.5 million | 0 | 0 | |||||||||||
Other Pooled Investment Vehicles | 1 | 916 million | 0 | 0 | ||||||||||||
Other Accounts | 29 | 390 million | 0 | 0 |
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Portfolio Manager | Type of Account Managed | Number of Accounts | Assets* | Number of Accounts with Performance Based Fees | Assets of Accounts with Performance Based Fees | |||||||||
John T. Fruit | Registered Investment Companies | 2 | $135 million | 0 | $0 | |||||||||
Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||||||
Other Accounts | 0 | 0 | 0 | 0 | ||||||||||
Jeffrey T. Schmitz | Registered Investment Companies | 1 | 55 million | 0 | 0 | |||||||||
Other Pooled Investment Vehicles | 0 | 0 | 0 | 0 | ||||||||||
Other Accounts | 0 | 0 | 0 | 0 | ||||||||||
Gunther Stein | Registered Investment Companies | 14 | 3.04 billion | 0 | 0 | |||||||||
Other Pooled Investment Vehicles | 5 | 74 million | 16 | 3.42 billion | ||||||||||
Other Accounts | 6 | 92 million | 3 | 723 million | ||||||||||
Jenny Rhee | Registered Investment Companies | 0 | 0 | 0 | 0 | |||||||||
Other Pooled Investment Vehicles | 2 | 31 million | 2 | 68 million | ||||||||||
Other Accounts | 10 | 2.8 million | 0 | 0 |
Conflicts of Interest
Nuveen Asset Management, LLC. Each portfolio manager’s simultaneous management of the Funds and the other accounts noted above may present actual or apparent conflicts of interest with respect to the allocation and aggregation of securities orders placed on behalf of a Fund and the other account. The sub-adviser, however, believes that such potential conflicts are mitigated by the fact that it has adopted several policies that address potential conflicts of interest, including best execution and trade allocation policies that are designed to ensure (1) that portfolio management is seeking the best price for portfolio securities under the circumstances, (2) fair and equitable allocation of investment opportunities among accounts over time and (3) compliance with applicable regulatory requirements. All accounts are to be treated in a non-preferential manner, such that allocations are not based upon account performance, fee structure or preference of the portfolio manager, although the allocation procedures may provide allocation preferences to funds with special characteristics (such as favoring state funds versus national funds for allocations of in-state bonds). In addition, the sub-adviser has adopted a Code of Conduct that sets forth policies regarding conflicts of interest.
Symphony. The portfolio managers may manage other accounts with investment strategies similar to the Fund, including other investment companies and separately managed accounts. Fees earned by the sub-adviser may vary among these accounts and the portfolio managers may personally invest in some but not all of these accounts. These factors could create conflicts of interest because a portfolio manager may have incentives to favor certain accounts over others, resulting in other accounts outperforming the Fund. A conflict may also exist if a portfolio manager identified a limited investment opportunity that may be appropriate for more than one account, but the Fund is not able to take full advantage of that opportunity due to the need to allocate that opportunity among multiple accounts. In addition, the portfolio managers may execute transactions for another account that may adversely impact the value of securities held by the Fund. Potential conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities. Allocations of aggregated trades, particularly trade orders that were only partially completed due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest.
However, the sub-adviser believes that these risks are mitigated by the fact that accounts with like investment strategies managed by a particular portfolio manager are generally managed in a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts, differences in cash flows and account sizes, and other factors. In addition, the sub-adviser has adopted trade allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts.
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Beneficial Ownership of Securities
As of January 1, 2011, each portfolio manager beneficially owned the following dollar range of equity securities issued by the Fund he or she co-manages:
Name of Portfolio Manager | Fund | Dollar Range of Equity Securities Beneficially Owned in Fund | ||||
Chris J. Neuharth, CFA | Short Duration Bond Fund | $ | 0 | |||
Brenda A. Langenfeld, CFA | Short Duration Bond Fund | 0 | ||||
Peter L. Agrimson, CFA | Short Duration Bond Fund | 0 | ||||
Timothy A. Palmer, CFA | Multi-Strategy Core Bond Fund | 0 | ||||
Jeffrey J. Ebert, CFA | Multi-Strategy Core Bond Fund | 0 | ||||
Marie A. Newcome, CFA | Multi-Strategy Core Bond Fund | 0 | ||||
John T. Fruit, CFA | High Yield Bond Fund | 0 | ||||
Jeffrey T. Schmitz, CFA | High Yield Bond Fund | 0 | ||||
Gunther Stein | Credit Opportunities Fund | 0 | ||||
Jenny Rhee | Credit Opportunities Fund | 0 |
Proxy Voting Policies
Short Duration, Multi-Strategy Core Bond and High Yield Bond Funds
The Funds invest their assets primarily in fixed income securities, derivative instruments and cash management securities. On rare occasions a Fund may acquire, directly or through a special purpose vehicle, equity securities of certain issuers whose securities the Fund already owns when such securities have deteriorated or are expected shortly to deteriorate significantly in credit quality. The purpose of acquiring equity securities generally will be to acquire control of the issuer and to seek to prevent the credit deterioration or facilitate the liquidation or other workout of the distressed issuer’s credit problem. In the course of exercising control of a distressed issuer, Nuveen Asset Management, LLC may pursue a Fund’s interests in a variety of ways, which may entail negotiating and executing consents, agreements and other arrangements, and otherwise influencing the management of the issuer. Nuveen Asset Management, LLC does not consider such activities proxy voting for purposes of Rule 206(4)-6 under the Investment Advisers Act of 1940, but nevertheless provides reports to the Funds’ Board of Trustees on its control activities on a quarterly basis.
In the rare event that an issuer were to issue a proxy or that the Funds were to receive a proxy issued by a cash management security, Nuveen Asset Management, LLC would either engage an independent third party to determine how the proxy should be voted or vote the proxy with the consent, or based on the instructions, of the Funds’ Board of Trustees or its representative. A member of Nuveen Asset Management, LLC’s legal department would oversee the administration of the voting, and ensure that records were maintained in accordance with Rule 206(4)-6, reports were filed with the Securities and Exchange Commission (“SEC”) on Form N-PX, and the results provided to the Fund’s Board of Trustees and made available to shareholders as required by applicable rules.
Credit Opportunities Fund
The Credit Opportunities Fund has adopted a proxy voting policy that seeks to ensure that proxies for securities held by the Fund are voted consistently and solely in the best economic interests of the Fund.
A member of the Fund’s management team is responsible for the oversight of the Fund’s proxy voting process. Symphony has engaged the services of RiskMetrics Group, Inc. (“RMG”) to make recommendations on the voting of proxies relating to securities held by the Fund and managed by Symphony. RMG provides voting recommendations based upon established guidelines and practices. Symphony reviews and frequently follows the RMG recommendations. However, on selected issues, RMG recommendations are not in the best economic interest of the Fund. If Symphony manages the
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assets of a company or its pension plan and any of Symphony’s clients hold any securities of that company, Symphony will vote proxies relating to such company’s securities in accordance with the RMG recommendations to avoid any conflict of interest. Where a material conflict of interest has been identified by Symphony and RMG does not offer a recommendation on the matter, Symphony shall disclose the conflict and Symphony’s Proxy Voting Committee shall determine the manner in which to vote and notify the Fund’s Board of Trustees or its designated committee.
Although Symphony has affiliates that provide investment advisory, broker-dealer, insurance or other financial services, Symphony does not receive non-public information about the business arrangements of such affiliates (except with regard to major distribution partners of its investment products) or the directors, officers and employees of such affiliates. Therefore, Symphony is unable to consider such information when determining whether there are material conflicts of interests.
Information regarding how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge by calling (800) 257-8787 or by accessing the SEC’s website at http://www.sec.gov.
Each Fund’s sub-adviser 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 each sub-adviser 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 manager considers, among other things, the firm’s reliability, the quality of its execution services on a continuing basis and its financial condition. Brokerage will not be allocated based on the sale of a Fund’s shares.
Section 28(e) of the Securities 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 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 each sub-adviser or a Fund. Each sub-adviser 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 each sub-adviser 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 each sub-
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adviser under the Sub-Advisory Agreement are not reduced as a result of receipt by either the Adviser or each sub-adviser of research services.
Each Fund’s sub-adviser 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 each sub-adviser in servicing all of its accounts; not all of such services may be used by each sub-adviser in connection with the Funds. Each sub-adviser 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, each sub-adviser believes such costs to the Funds will not be disproportionate to the benefits received by the Funds on a continuing basis. Each sub-adviser 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 each sub-adviser 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 Funds expect that substantially all portfolio transactions for fixed income securities will be effected on a principal (as opposed to an agency) basis and, accordingly, do not expect to pay any brokerage commissions. Brokerage will not be allocated based on the sale of a Fund’s shares. Purchases from underwriters will include a commission or concession paid by the issuer to the underwriter, and purchases from dealers will include the spread between the bid and asked price. Given the best price and execution obtainable, it may be the practice of the Funds to select dealers that, in addition, furnish research information (primarily credit analyses of issuers and general economic reports) and statistical and other services to each sub-adviser. It is not possible to place a dollar value on information and statistical and other services received from dealers. Since it is only supplementary to each sub-adviser’s own research efforts, the receipt of research information is not expected to reduce significantly each sub-adviser’s expenses. While each sub-adviser will be primarily responsible for the placement of the portfolio transactions of the Funds, the policies and practices of each sub-adviser in this regard must be consistent with the foregoing and will, at all times, be subject to review by the Board of Trustees.
The following table sets forth the aggregate amount of brokerage commissions paid by the Funds for the specified periods:
Aggregate Amount of Brokerage Commissions | ||||||||||||
10/01/07- 9/30/08 | 10/01/08- 9/30/09 | 10/01/09- 9/30/10 | ||||||||||
Short Duration Bond Fund | $ | 2,109 | $ | 7,767 | $ | 10,791 | ||||||
Multi-Strategy Core Bond Fund | 2,760 | 5,106 | 3,615 | |||||||||
High Yield Bond Fund | 2,850 | 300 | — | |||||||||
Credit Opportunities Fund | N/A | N/A | — | * |
* | For the period April 28, 2010 (commencement of operations) through September 30, 2010. |
During the fiscal period ended September 30, 2010, the Funds did not pay commissions to brokers in return for research services.
The Funds have acquired during the fiscal period ended September 30, 2010 the 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. The following table sets forth those brokers or dealers and states the value of the Funds’ aggregate holdings of the securities of each issuer as of close of the fiscal period ended September 30, 2010.
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Fund | Broker/Dealer | Issuer | Aggregate Fund Holdings of Broker/Dealer or Parent (as of September 30, 2010) | |||||
Short Duration Bond Fund | Goldman Sachs Group, Inc. | Goldman Sachs Group, Inc. | $ | 346,485 | ||||
Goldman Sachs Group, Inc. | 643,437 | |||||||
Goldman Sachs, Credit Default Swap | (50,311 | )* | ||||||
Goldman Sachs, Credit Default Swap | 47,836 | * | ||||||
Goldman Sachs, Interest Rate Swap | — | |||||||
Goldman Sachs, Interest Rate Swap | — | |||||||
Goldman Sachs, Interest Rate Swap | — | |||||||
Citigroup Global Markets Inc. | Citigroup, Inc. | 238,741 | ||||||
Citigroup, Inc. | 432,873 | |||||||
Citigroup, Inc. | 359,320 | |||||||
CitiBank Credit Card Issuance Trust, Series 2006-A4 | 669,602 | |||||||
CitiBank Credit Card Issuance Trust, Series 2007 | 271,059 | |||||||
CitiBank Credit Card Issuance Trust, Series 2009-A5 | 2,367,809 | |||||||
Citigroup, Forward Foreign Currency Exchange Contracts | (22,904 | )* | ||||||
Citibank, Interest Rate Swap | 100,226 | * | ||||||
Citibank, Interest Rate Swap | — | |||||||
Citibank, Interest Rate Swap | — | |||||||
Citibank, Credit Default Swap | — | |||||||
Citibank, Interest Rate Swaption | — | |||||||
Credit Suisse Securities LLC | Credit Suisse First Boston, Note | 238,121 | ||||||
CS First Boston Mortgage Securities Corporation, Series 2004-C1 | 983,189 | |||||||
Credit Suisse First Boston Mortgage Securities Corporation, Series 2003-23 | 1,110,709 | |||||||
Credit Suisse, Interest Rate Swap | 12,509 | * | ||||||
Credit Suisse, Interest Rate Swap | (212,438 | )* | ||||||
Credit Suisse, Interest Rate Swap | 259,919 | * | ||||||
Credit Suisse, Credit Default Swap | — | |||||||
Credit Suisse, Credit Default Swap | — | |||||||
Credit Suisse, Credit Default Swap | — |
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Fund | Broker/Dealer | Issuer | Aggregate Fund Holdings of Broker/Dealer or Parent (as of September 30, 2010) | |||||
JP Morgan Chase | JP Morgan Chase & Co. | $ | 925,761 | |||||
Bank One Corporation | — | |||||||
Chase Issuance Trust 2008 Class A9 | 1,167,049 | |||||||
JP Morgan, Interest Rate Swap | 42,851 | * | ||||||
JP Morgan, Interest Rate Swap | (44,431 | )* | ||||||
JP Morgan, Interest Rate Swap | (271,847 | )* | ||||||
JP Morgan, Interest Rate Swap | 149,496 | * | ||||||
JP Morgan, Interest Rate Swap | (101,822 | )* | ||||||
JP Morgan, Interest Rate Swap | — | |||||||
JP Morgan, Forward Foreign Currency Exchange Contracts | (36,140 | )* | ||||||
JP Morgan, Credit Default Swap | 277,959 | * | ||||||
JP Morgan, Credit Default Swap | (15,115 | )* | ||||||
JP Morgan, Credit Default Swap | (219,837 | )* | ||||||
Barclays Capital Inc. | Barclays Bank PLC, Interest Rate Swap | — | ||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
RBC Capital Markets | Royal Bank of Canada, Interest Rate Swap | (197,975 | )* | |||||
Royal Bank of Canada, Interest Rate Swap | 595,988 | * | ||||||
RBC, Forward Foreign Currency Exchange Contracts | 218 | * | ||||||
Deutsche Bank | Deutsche Bank, Interest Rate Swap | 761,397 | * | |||||
Deutsche Bank, Interest Rate Swap | 216,422 | * | ||||||
Deutsche Bank, Forward Foreign Currency Exchange Contracts | 62,597 | * | ||||||
Deutsche Bank, Forward Foreign Currency Exchange Contracts | (664 | )* | ||||||
Deutsche Bank, Credit Default Swap | — | |||||||
UBS Securities LLC | UBS AG, Interest Rate Swap | 11,002 | * | |||||
UBS AG, Interest Rate Swap | (106,133 | )* |
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Fund | Broker/Dealer | Issuer | Aggregate Fund Holdings of Broker/Dealer or Parent (as of September 30, 2010) | |||||
UBS AG, Interest Rate Swap | $ | (275,476 | )* | |||||
UBS AG, Interest Rate Swap | 94,122 | * | ||||||
UBS AG, Credit Default Swap | 11,950 | * | ||||||
Multi-Strategy Core Bond Fund | Goldman Sachs & Co. | Goldman Sachs Group, Inc. | 555,445 | |||||
Goldman Sachs, Interest Rate Swap | — | |||||||
Goldman Sachs, Interest Rate Swap | — | |||||||
Goldman Sachs, Credit Default Swap | (20,781 | )* | ||||||
Goldman Sachs, Credit Default Swap | 21,065 | * | ||||||
Barclays Capital Inc. | Barclays Bank PLC | 164,332 | ||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
Barclays Bank PLC, Interest Rate Swap | — | |||||||
Credit Suisse Securities LLC | Credit Suisse New York | 156,953 | ||||||
CS First Boston Mortgage Securities Corporation, Series 2004-C1 | 528,596 | |||||||
Credit Suisse First Boston Mortgage Securities Corporation, Series 2003-23 | 417,627 | |||||||
Credit Suisse, Interest Rate Swap | 5,080 | * | ||||||
Credit Suisse, Interest Rate Swap | (86,228 | )* | ||||||
Credit Suisse, Interest Rate Swap | 105,426 | * | ||||||
Credit Suisse, Credit Default Swap | — | |||||||
Credit Suisse, Credit Default Swap | — | |||||||
Credit Suisse, Credit Default Swap | — | |||||||
Citigroup Global Markets Inc. | Citigroup, Inc. | 246,136 | ||||||
Citigroup, Inc. | 62,896 | |||||||
Citibank Credit Card Issuance Trust, Series 2006-A4 | 772,618 | |||||||
Citibank Credit Card Issuance Trust, Series 2009-A5 | 566,215 | |||||||
Citibank, Interest Rate Swaption | — | |||||||
Citigroup, Forward Foreign Currency Exchange Contracts | (14,048 | )* |
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Fund | Broker/Dealer | Issuer | Aggregate Fund Holdings of Broker/Dealer or Parent (as of September 30, 2010) | |||||
Citibank, Interest Rate Swap | $ | 43,212 | * | |||||
Citibank, Interest Rate Swap | — | |||||||
Citibank, Credit Default Swap | — | |||||||
JP Morgan Chase | JP Morgan Chase & Company, 5.375% | 86,602 | ||||||
JP Morgan Chase & Company, 6.000% | 240,175 | |||||||
Chase Issuance Trust 2008 Class A9 | 870,168 | |||||||
JP Morgan, Forward Foreign Currency Exchange Contracts | (15,435 | )* | ||||||
JP Morgan, Interest Rate Swap | 20,182 | * | ||||||
JP Morgan, Interest Rate Swap | (20,003 | )* | ||||||
JP Morgan, Interest Rate Swap | (101,551 | )* | ||||||
JP Morgan, Interest Rate Swap | 65,778 | * | ||||||
JP Morgan, Interest Rate Swap | (47,979 | )* | ||||||
JP Morgan, Interest Rate Swap | — | |||||||
JP Morgan, Credit Default Swap | (11,336 | )* | ||||||
JP Morgan, Credit Default Swap | (109,919 | )* | ||||||
JP Morgan, Credit Default Swap | — | |||||||
RBC Capital Markets | Royal Bank of Canada, Interest Rate Swap | (90,828 | )* | |||||
Royal Bank of Canada, Interest Rate Swap | 273,389 | * | ||||||
RBC, Forward Foreign Currency Exchange Contracts | 90 | * | ||||||
Deutsche Bank | Deutsche Bank, Interest Rate Swap | 269,661 | * | |||||
Deutsche Bank, Interest Rate Swap | 88,398 | * | ||||||
Deutsche Bank, Credit Default Swap | — | |||||||
Deutsche Bank, Forward Foreign Currency Exchange Contracts | 25,949 | * | ||||||
Deutsche Bank, Forward Foreign Currency Exchange Contracts | (2,202 | )* | ||||||
UBS Securities LLC | UBS AG, Interest Rate Swap | 5,209 | * | |||||
UBS AG, Interest Rate Swap | (50,098 | )* | ||||||
UBS AG, Interest Rate Swap | (117,587 | )* |
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Fund | Broker/Dealer | Issuer | Aggregate Fund Holdings of Broker/Dealer or Parent (as of September 30, 2010) | |||||
UBS AG, Interest Rate Swap | $ | 44,267 | * | |||||
UBS AG, Credit Default Swap | 5,070 | * | ||||||
Bank of America Securities LLC | Bank of America, Credit Default Swap | 213,160 | * | |||||
High Yield Bond Fund | Deutsche Bank | Deutsche Bank, Credit Default Swap | — | |||||
JP Morgan Chase | JP Morgan, Credit Default Swap | — | ||||||
JP Morgan, Credit Default Swap | — | |||||||
UBS, AG | UBS, Credit Default Swap | 91,617 | * | |||||
Goldman Sachs & Co. | Goldman Sachs, Credit Default Swap | (257,025 | )* | |||||
Goldman Sachs, Credit Default Swap | 369,960 | * | ||||||
Bank of America Securities LLC | Bank of America, Credit Default Swap | | 213,160 | * | ||||
Credit Opportunities Fund | State Street Bank & Trust Co. | State Street Bank, Repurchase Agreement | 3,419,214 |
* | Unrealized Appreciation (Depreciation) |
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.
Each Fund’s net asset value per share is determined separately for each class of the applicable Fund’s shares as of the close of trading (normally 4:00 p.m. New York time) on each day the New York Stock Exchange (the “NYSE”) is open for business. The NYSE is not open for trading on New Year’s Day, Washington’s Birthday, Martin Luther King’s Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. A Fund’s net asset value may not be calculated on days during which the Fund receives no orders to purchase shares and no shares are tendered for redemption. Net asset value per share of a class of a Fund is calculated by taking the value of the pro rata portion of the Fund’s total assets attributable to that class, including interest or dividends accrued but not yet collected, less all liabilities attributable to that class (including the class’s pro rata portion of the Fund’s liabilities) and dividing by the total number of shares of that class outstanding. The result, rounded to the nearest cent, is the net asset value per share of that class.
In determining net asset value, expenses are accrued and applied daily and securities and other assets for which market quotations are available, including ETFs in which a Fund invests, are valued at market value. Common stocks and other equity-type securities are valued at the last sales price on the securities exchange on which such securities are primarily traded. Securities primarily traded on the NASDAQ National Market are valued, except as indicated below, at the NASDAQ Official Closing Price. However, securities traded on a securities exchange or NASDAQ for which there were no transactions on a given day or securities not listed on a securities exchange or NASDAQ are valued at the mean
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between the quoted bid and asked prices. Prices of certain ADRs held by the Funds that trade in only limited volume in the United States are valued based on the mean between the most recent bid and ask price of the underlying non-U.S.- traded stock, adjusted as appropriate for underlying-to-ADR conversion ratio and non-U.S. exchange rate, and from time to time may also be adjusted further to take into account material events that may take place after the close of the local non-U.S. market but before the close of the NYSE. Fixed-income securities are valued by a pricing service that values portfolio securities at the mean between the quoted bid and asked prices or the yield equivalent when quotations are readily available. Securities for which quotations are not readily available are valued at fair value as determined by the pricing service using methods that include consideration of the following: yields or prices of securities or bonds of comparable quality, type of issue, coupon, maturity and rating; indications as to value from securities dealers; and general market conditions. The pricing service may employ electronic data processing techniques and/or a matrix system to determine valuations. Debt securities having remaining maturities of 60 days or less when purchased are valued by the amortized cost method when the Board of Trustees determines that the fair market value of such securities is their amortized cost. Under this method of valuation, a security is initially valued at its acquisition cost, and thereafter amortization of any discount or premium is assumed each day, regardless of the impact of fluctuating interest rates on the market value of the security.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Board of Trustees or its delegate at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, does not reflect the security’s “fair value.” As a general principle, the current “fair value” of an issue of securities would appear to be the amount which the owner might reasonably expect to receive for them upon their current sale. A variety of factors may be considered in determining the fair value of such securities.
Regardless of the method employed to value a particular security, all valuations are subject to review by a Fund’s Board of Trustees or its delegate who may determine the appropriate value of a security whenever the value as calculated is significantly different from the previous day’s calculated value.
If a Fund holds securities that are primarily listed on non-U.S. exchanges, the net asset value of the Fund’s shares may change on days when shareholders will not be able to purchase or redeem the Fund’s shares.
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 Statement of Additional Information. 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. 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.
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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.
Qualification as a Regulated Investment Company
As a regulated investment company, a Fund will not be subject to federal income tax on the portion of its investment company taxable income, as that term is defined in the Code, 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) 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 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 derive 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 “qualified publicly traded partnerships” (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 Fund’s taxable year, (1) 50% or more of the value of the Fund’s assets must be represented by cash, 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 Fund’s assets and 10% of the outstanding voting securities of such issuer and (2) not more than 25% of the value of the Fund’s 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 the Find.
Distributions
Fund distributions are generally taxable. After the end of each year, you will receive a tax statement that separates your Fund’s 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.
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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 income dividends on shares that are attributable to qualifying dividends received by a Fund from certain corporations may be designated 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. For later periods, 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 long-term 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. 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. 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 your 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 your Fund for shares of another Nuveen Mutual Fund, the exchange would generally be considered a sale for federal income tax purposes.
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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 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 individual’s 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.
Investments in Certain Non-U.S. Corporations
If your Fund holds an equity interest in any “passive foreign investment companies” (“PFICs”), which are generally certain foreign corporations that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties or capital gains) or that hold at least 50% of their assets in investments producing such passive income, your Fund could be subject to U.S. federal income tax and additional interest charges on gains and certain distributions with respect to those equity interests, even if all the income or gain is timely distributed to its shareholders. Your Fund will not be able to pass through to its shareholders any credit or deduction for such taxes. Your Fund may be able to make an election that could ameliorate these adverse tax consequences. In this case, your Fund would recognize as ordinary income any increase in the value of such PFIC shares, and as ordinary loss any decrease in such value to the extent it did not exceed prior increases included in income. Under this election, your Fund might be required to recognize in a year income in excess of its distributions from PFICs and its proceeds from dispositions of PFIC stock during that year, and such income would nevertheless be subject to the distribution requirement and would be taken into account for purposes of the 4% excise tax. Dividends paid by PFICs will not be treated as qualified dividend income.
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 designates 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 designated 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. In the case of dividends with respect to taxable years of a Fund beginning prior to 2012, distributions from a Fund that are properly designated by a Fund as an interest-related dividend attributable to certain interest income received by a Fund or as a short-term capital gain dividend attributable to certain net short-term capital gain income received by a Fund may not be subject to U.S. federal income taxes, including withholding taxes when received by certain non-U.S. investors, provided that a Fund makes certain elections and certain other conditions are met. Distributions and dispositions of interests in the Fund after December 31, 2012 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 entity’s U.S. owners.
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At September 30, 2010, the Funds, excluding the Multi-Strategy Core Bond Fund and Symphony Credit Opportunities Fund, had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:
2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||
Short Duration Bond Fund | $ | 54,933 | $ | 141,618 | $ | — | $ | 48,855 | $ | 348,745 | ||||||||||
High Yield Bond Fund | — | 119,975 | 139,565 | 6,367,477 | — |
During the tax year ended September 30, 2010, the High Yield Fund utilized $99,076 of its capital loss carryforwards.
The Funds, excluding the High Yield Bond Fund and Symphony Credit Opportunities Fund, elected to defer net realized losses from investments incurred from November 1, 2009 through September 30, 2010 (“post-October losses”) in accordance with federal income tax regulations. Post-October losses are treated as having arisen on the first day of the following tax year:
Short Duration Bond Fund | $ | 1,356,942 | ||||||
Multi-Strategy Core Bond Fund | 275,324 |
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 Fund’s classes of shares. There are no conversion, preemptive or other subscription rights, except that Class B shares automatically convert into Class A shares as described below.
Shareholders of each class will share expenses proportionately for services that are received equally by all shareholders. A particular class of shares will bear only those expenses that are directly attributable to that class, where the type or amount of services received by a class varies from one class to another. For example, class-specific expenses generally will include distribution and service fees 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 and Service Plans.” 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 September 30, 2010 of
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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.
Short Duration Bond Fund | Multi-Strategy Core Bond Fund | High Yield Bond Fund | Credit Opportunities Fund | |||||||||||||
Net Asset Value per share | $ | 19.82 | $ | 21.25 | $ | 17.44 | $ | 20.42 | ||||||||
Per Share Sales Charge—2.25%, 4.25%, 4.75% and 4.75% respectively, of public offering price (2.32%, 4.42%, 4.99% and 5.00%, respectively, of net asset value per share) | 0.46 | 0.94 | 0.87 | 1.02 | ||||||||||||
Per Share Offering Price to the Public | $ | 20.28 | $ | 22.19 | $ | 18.31 | $ | 21.44 | ||||||||
Each Fund receives the entire net asset value of all Class A shares that are sold.
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 Fund’s 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 Fund’s 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 I and Class C shares of a Nuveen Mutual Fund that you purchase over the next 13 months towards completion of your investment program, but you will receive a reduced sales charge only on new Class A shares you purchase with a sales charge over the 13 months. You cannot count towards completion of your investment program Class A shares that you purchase without a sales charge through investment of distributions from a Nuveen Mutual Fund, or 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, exceed the amount specified in your Letter of Intent and thereby qualify for a lower sales charge than the sales charge specified in your Letter of Intent, you will receive this lower sales charge retroactively, and the difference between it and the higher sales charge paid will be used to purchase additional Class A shares on your behalf. If the total purchases, less redemptions, are less than the amount specified, you must pay 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 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.
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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 dependent children, 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:
• | investors purchasing $1,000,000 or more; |
• | officers, trustees and former trustees of the Nuveen Funds; |
• | bona fide, full-time and retired employees 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- and daughters-in-law, siblings, a sibling’s spouse and a spouse’s siblings); |
• | any person who, for at least the last 90 days, has been an officer, director or bona fide employee of any financial intermediary, or their immediate family members; |
• | bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity; |
• | investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; |
• | clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services; |
• | employer-sponsored retirement plans except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans; and |
• | with respect to purchases by employer-sponsored retirement plans with at least 25 employees and which either (a) make an initial purchase of one or more Nuveen Mutual Funds aggregating $500,000 or more; or (b) execute a Letter of Intent to purchase in the aggregate $500,000 or more of fund shares. The Distributor will pay financial intermediaries a sales commission on these purchases equal to 1% of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of any amount purchased over $5.0 million. Unless the financial intermediary elects to waive the commission, a contingent deferred sales charge of 1% will be assessed on redemptions within 12 months of purchase, unless waived. |
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 Fund’s 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.
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Class B Shares
The Short Duration Bond Fund and Credit Opportunities Fund do not issue Class B shares. The Multi-Strategy Core Bond Fund and High Yield Bond Fund will only issue Class B shares (i) upon the exchange of Class B shares from another Nuveen Mutual Fund and (ii) for purposes of dividend reinvestment. Class B shares are not available for new accounts or for additional investment into existing accounts.
You may be subject to a Contingent Deferred Sales Charge (“CDSC”) if you redeem your Class B shares prior to the end of the sixth year after purchase. See “Reduction or Elimination of Contingent Deferred Sales Charge” below. The Distributor compensates financial intermediaries for sales of Class B shares at the time of sale at the rate of 4.00% of the amount of Class B shares purchased, which represents a sales commission of 3.75% plus an advance on the first year’s annual service fee of 0.25%.
Class B shares acquired through the reinvestment of dividends are not subject to a CDSC. Any CDSC will be imposed on the lower of the redeemed shares’ cost or net asset value at the time of redemption.
Class B shares will automatically convert to Class A shares eight years after purchase. The purpose of the conversion is to limit the distribution fees you pay over the life of your investment. All conversions will be done at net asset value without the imposition of any sales load, fee, or other charge, so that the value of each shareholder’s account immediately before conversion will be the same as the value of the account immediately after conversion. Class B shares acquired through reinvestment of distributions will convert into Class A shares based on the date of the initial purchase to which such shares relate. For this purpose, Class B shares acquired through reinvestment of distributions will be attributed to particular purchases of Class B shares in accordance with such procedures as the Board of Trustees may determine from time to time. Class B shares that are converted to Class A shares will remain subject to an annual service fee that is identical in amount for both Class B shares and Class A shares. Since net asset value per share of the Class B shares and the Class A shares may differ at the time of conversion, a shareholder may receive more or fewer Class A shares than the number of Class B shares converted. Any conversion of Class B shares into Class A shares will be subject to the continuing availability of an opinion of counsel or a private letter ruling from the Internal Revenue Service to the effect that the conversion of shares would not constitute a taxable event under federal income tax law. Conversion of Class B shares into Class A shares might be suspended if such an opinion or ruling were no longer available.
Class C Shares
You may purchase Class C shares 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 year’s distribution fee of 0.75% plus an advance on the first year’s annual service fee of 0.25%. See “Distribution and Service Plans.”
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 purchaser’s shares of any class of any Nuveen Mutual Fund, cause the purchaser’s 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. Class C shares do not convert.
Redemption of Class C shares within 12 months of purchase may be subject to a CDSC of 1% of the lower of the purchase price or redemption proceeds. Because Class C shares do not convert to
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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, where the financial intermediary did not waive the sales commission, a CDSC of 1% (0.60% for the Short Duration Bond Fund) is imposed on any redemption within 12 months of purchase, 0.75% (0.50% for the Short Duration Bond Fund) on redemptions within 12 months of purchase and 0.50% (0.25% for the Short Duration Bond Fund) on redemptions within 18 months of purchase. In the case of Class B shares redeemed within six years of purchase, a CDSC is imposed, beginning at 5% for redemptions within the first year, declining to 4% for redemptions within years two and three, and declining by 1% each year thereafter until disappearing after the sixth year. Class C shares are redeemed at net asset value, without any CDSC, except that a CDSC of 1% is imposed upon any redemption within 12 months of purchase (except in cases where the shareholder’s financial advisor agreed to waive the right to receive an advance of the first year’s distribution and service fee).
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 date of purchase. 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 account’s net asset value depending on the frequency of the plan as designated by the shareholder; (iv) involuntary redemptions caused by operation of law; (v) redemptions in connection with a payment of account or plan fees; (vi) redemptions in connection with the exercise of a reinstatement privilege whereby the proceeds of a redemption of a Fund’s shares subject to a sales charge are reinvested in shares of certain Funds within a specified number of days; (vii) redemptions in connection with the exercise of a Fund’s right to redeem all shares in an account that does not maintain a certain minimum balance or that the 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 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, Class B 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; and (xi) redemptions of Class C shares in cases where (a) you purchase shares after committing to hold the shares for less than one year and (b) your advisor consents up front to receiving the appropriate service and distribution fee on the Class C shares on an ongoing basis instead of having the first year’s fees advanced by the Distributor. 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
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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 employer’s plan or IRA; and (iv) redemptions resulting from the return of an excess contribution. The CDSC will also be waived in connection with the following redemptions of shares held in an IRA account: (i) for redemptions made pursuant to an IRA systematic withdrawal based on the shareholder’s life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 59 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 shareholder’s 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 plan’s 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 plan’s 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 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
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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 Statement of Additional Information should be read in conjunction with the retirement plan’s and/or the financial intermediary’s materials regarding their fees and services.
Class I Shares
Class I shares are available for purchases using dividends and capital gains distributions on Class I shares. Class I shares also are available for the following categories of investors:
• | officers, trustees and former trustees of any Nuveen Fund and their immediate family members and officers, directors and former directors of any parent company of Nuveen and subsidiaries thereof and their immediate family members (“immediate family members” are defined as spouses, parents or domestic partners, children, grandparents, grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a sibling’s spouse and a spouse’s siblings); |
• | bona fide, full-time and retired employees of Nuveen, and subsidiaries thereof, or their immediate family members; |
• | any person who, for at least the last 90 days, has been an officer, director or bona fide employee of any financial intermediary, or their immediate family members; |
(Any shares purchased by investors falling within any of the first three 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.)
• | bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity; |
• | investors purchasing through a periodic fee or asset-based fee program which is sponsored by a registered broker-dealer or other financial institution that has entered into an agreement with Nuveen; |
• | fee paying clients of a registered investment advisor (“RIA”) who initially invests for clients an aggregate of $100,000 in Nuveen Mutual Funds through a fund “supermarket” or other mutual fund trading platform sponsored by a broker-dealer or trust company with which the RIA is not affiliated and which has not entered into an agreement with Nuveen; |
• | employer-sponsored retirement plans, except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans; and |
• | other Nuveen Mutual Funds whose investment policies permit investments in other investment companies. |
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.
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Shareholder Programs
Exchange Privilege
You may exchange shares of a class of a Fund for shares of the same class of any other Nuveen Mutual Fund with reciprocal exchange privileges, at net asset value without a sales charge, by 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. 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. An exchange between classes of shares of the same Fund may be done in writing to the address stated above.
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.
The shares to be purchased through an exchange must be offered in your state of residence. The total value of exchanged shares must at least equal the minimum investment requirement of the Nuveen Mutual Fund being purchased. If your shares are held with a financial intermediary, the financial intermediary must have the operational capability to support exchanges. 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 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. The exchange privilege may be modified or discontinued by a Fund at any time.
The exchange privilege is not intended to permit a Fund to be used as a vehicle for short-term trading. Excessive exchange activity may interfere with 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. The reinstatement privilege for Class B shares is no longer available. 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.
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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 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 Fund’s 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), although the Funds have no present intention to redeem in-kind. 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 four Round Trips per trailing 12-month period and may also restrict the trading privileges of an investor who makes a Round Trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
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 investor’s financial advisor) who has violated these policies from opening new accounts with the Funds and may restrict the investor’s 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 intermediary’s policy to
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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 account’s 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 Fund’s right to redeem all shares in an account that does not maintain a certain minimum balance or that the applicable board has determined may have material adverse consequences to the shareholders of 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 employer’s plan or IRA or changes in a plan’s 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 shareholder’s life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 59 1/2; and (ii) redemptions to satisfy required minimum distributions after age 70 1/2 from an IRA account.
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 broker’s authorized designee accepts the order. Customer orders received by such broker (or their designee) will be priced at the 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 day’s share price; orders accepted after the close of trading will receive the next business day’s share price.
If you choose to invest in a Fund, an account will be opened and maintained for you by Boston Financial Data Services (“BFDS”), the Funds’ shareholder services agent. Shares will be registered in the name of the investor or the investor’s 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 investor’s behalf. Each Fund reserves the right to reject any purchase order and to waive or increase minimum investment requirements.
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The Funds do not issue share certificates. For certificated shares previously issued, a fee of 1% of the current market value will be charged if the certificate is lost, stolen or destroyed. The fee is paid to Seaboard Surety Company for insurance of the lost, stolen or destroyed certificate.
Distribution Arrangements
The Distributor serves as the principal underwriter of the shares of the Funds pursuant to a “best efforts” arrangement as provided by a distribution agreement with the Trust (the “Distribution Agreement”). Pursuant to the Distribution Agreement, the Trust appointed the Distributor to be its agent for the distribution of the Funds’ shares on a continuous offering basis. 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 Fund’s shares less the net asset value of those shares, and reallows a majority or all of such amounts to the Dealers who sold the shares, the Distributor itself may also act as a Dealer. 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 Plans.” The Distributor 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 following tables set forth the aggregate amount of underwriting commissions with respect to the sale of Fund shares, the amount thereof retained by the Distributor and the compensation on redemptions and repurchases received by the Distributor for each of the Funds for the specified periods. All figures are to the nearest thousand.
Amount of Underwriting Commissions | Amount Retained by the Distributor | Amount of Compensation on Redemptions and Repurchases | ||||||||||||||||||||||||||||||||||
10/01/07- 9/30/08 | 10/01/08- 9/30/09 | 10/01/09- 9/30/10 | 10/01/07- 9/30/08 | 10/01/08- 9/30/09 | 10/01/09- 9/30/10 | 10/01/07- 9/30/08 | 10/01/08- 9/30/09 | 10/01/09- 9/30/10 | ||||||||||||||||||||||||||||
Short Duration Bond Fund | $ | 8 | $ | 38 | $ | 203 | $ | 2 | $ | 9 | $ | 28 | $ | 5 | $ | 22 | $ | 44 | ||||||||||||||||||
Multi-Strategy Core Bond Fund | 16 | 90 | 189 | 2 | 12 | 23 | 6 | 12 | 12 | |||||||||||||||||||||||||||
High Yield Bond Fund | 360 | 337 | 224 | 33 | 32 | 24 | 31 | 44 | 23 |
Amount of Underwriting Commissions | Amount Retained by the Distributor | Amount of Compensation on Redemptions and Repurchases | ||||||||||
4/28/10-9/30/10 | 4/28/10-9/30/10 | 4/28/10-9/30/10 | ||||||||||
Credit Opportunities Fund | $ | — | $ | — | $ | — |
Additional Payments to Financial Intermediaries
In addition to the sales charge payments and the distribution, service and transfer agency fees described in the Prospectus and elsewhere in this Statement of Additional Information, 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 advisors, 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.
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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 Intermediary’s 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 Intermediary’s 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’ Prospectuses and described above because they are not paid by the Funds.
The categories of payments described below are not mutually exclusive, and a single Intermediary may receive payments under all categories.
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 Intermediary’s personnel about the Nuveen Mutual Funds in connection with shareholder financial planning needs, placement on the Intermediary’s 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 Nuveen representatives 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 Fund shares that the Intermediary sells or may sell, the value of the assets invested in the Funds by the Intermediary’s 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. (which was the parent company of a firm a portion of whose business has since been acquired by the Adviser) to Great-West Life & Annuity Insurance Company (“Great-West”), the Adviser 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.
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Other Payments
From time to time, the Adviser and/or the Distributor, at their 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 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; and (iv) at the direction of a retirement plan’s sponsor, reimburse or pay direct expenses of an employee benefit plan that would otherwise be payable by the plan.
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 they deem appropriate, subject to their internal guidelines and applicable law. Wholesale representatives of the Distributor may receive additional compensation if they meet certain targets for sales of one or more Nuveen Mutual Funds.
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 firm’s 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.
Certain third parties, affiliates of the Adviser, and employees of the Adviser or its affiliates may receive cash compensation from the Adviser and/or the Distributor in connection with establishing new client relationships with the Nuveen Mutual Funds. Total compensation of employees of the Adviser and/or the Distributor with marketing and/or sales responsibilities is based in part on their generation of new client relationships, including new client relationships with the Nuveen Mutual Funds.
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 January 1, 2011:
ADP Broker-Dealer, Inc.
American Enterprise Investment Services, Inc.
American United Life Insurance Company
Ameriprise Financial Services, Inc.
Ascensus (formerly BISYS Retirement Services, Inc.)
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Banc of America Investment Services, Inc.
Benefit Plans Administrative Services, Inc.
Benefit Trust Company
Charles Schwab & Co., Inc.
Citigroup Global Markets Inc. / Morgan Stanley Smith Barney LLC
Commonwealth Equity Services, LLP, DBA Commonwealth Financial Network
Country Trust Bank
CPI Qualified Plan Consultants, Inc.
Digital Retirement Solutions, Inc.
Dyatech, LLC
ExpertPlan, Inc.
Fidelity Brokerage Services LLC / National Financial Services LLC
Fidelity Investments Institutional Operations Company, Inc.
Genesis Employee Benefits, Inc. DBA America’s VEBA Solution
GWFS Equities, Inc.
Hartford Life Insurance Company
Hartford Securities Distribution Company, Inc.
Hewitt Associates LLC
ICMA Retirement Corporation
ING Institutional Plan Services, LLC / ING Investment Advisors, LLC (formerly CitiStreet LLC / CitiStreet Advisors LLC)
ING Life Insurance and Annuity Company / ING Institutional Plan Services LLC
J.P. Morgan Retirement Plan Services, LLC
Janney Montgomery Scott LLC
Leggette Actuaries, Inc.
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.
MetLife Securities, 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 Dain Rauscher, Inc.
Reliance Trust Company
Retirement Plan Company, LLC (The)
Robert W. Baird & Co., Inc.
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.
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UBS Financial Services, Inc.
Unified Trust Company, N.A.
VALIC Retirement Services Company (formerly AIG Retirement Services Company)
Vanguard Group, Inc.
Wachovia Bank, N.A.
Wachovia Securities, LLC
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 January 18, 2011 are not reflected in the list.
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 following the end of each month with an approximately one-month lag. Additionally, the Funds publish on the website a list of its 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 recipient’s 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 RMG, 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 Vestek’s 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.
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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.
DISTRIBUTION AND SERVICE PLANS
The Funds have adopted a plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act, pursuant to which Class B, Class C and Class R3 shares are subject to an annual distribution fee and Class A, Class B, 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 each of the Class B shares and 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 B, 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 B, Class C and Class R3 shares under each Fund’s Plan compensates the Distributor for expenses incurred in connection with the distribution of Class B, 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 B, 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 B, Class C and Class R3 shares, certain other expenses associated with the distribution of Class B, 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 B, Class C and Class R3 shares under each Fund’s 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 year ended September 30, 2010, 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 service fees collected on Class B shares during the first year following a purchase, all 12b-1 distribution fees on Class B shares, and 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 service fees on Class B shares and 12b-1 fees on Class C shares are paid to financial intermediaries.
12b-1 Fees Incurred by Each Fund for the Fiscal Period Ended September 30, 2010 | ||||
Short Duration Bond Fund | ||||
Class A | $ | 176,613 | ||
Class C | 400,516 | |||
Class R3 | 3,922 | |||
Total | $ | 581,051 | ||
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12b-1 Fees Incurred by Each Fund for the Fiscal Period Ended September 30, 2010 | ||||
Multi-Strategy Core Bond Fund | ||||
Class A | $ | 59,311 | ||
Class B | 24,622 | |||
Class C | 160,159 | |||
Class R3 | 1,033 | |||
Total | $ | 245,125 | ||
High Yield Bond Fund | ||||
Class A | $ | 89,543 | ||
Class B | 16,199 | |||
Class C | 332,738 | |||
Class R3 | 689 | |||
Total | $ | 439,169 | ||
Credit Opportunities Fund* |
| |||
Class A | $ | 2,503 | ||
Class C | 5,334 | |||
Class R3 | 2,643 | |||
Total | $ | 10,480 | ||
* | For the period April 28, 2010 (commencement of operations) through September 30, 2010. |
Under each Fund’s Plan, the Fund will report quarterly to the Board of Trustees for its review all amounts expended per class of shares under the Plan. The Plan may be terminated at any time with respect to any class of shares, without the payment of any penalty, by a vote of a majority of the 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.
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, internal control, tax and related matters.
The custodian of the assets of the Funds is State Street Bank & Trust Company, P.O. Box 5043, Boston, Massachusetts 02206-5043. The custodian performs custodial, fund accounting and portfolio accounting services.
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The Funds’ transfer, shareholder services, and dividend paying agent is Boston Financial Data Services, P.O. Box 8530, Boston, Massachusetts 02266-8530.
The audited financial statements for each Fund’s most recent fiscal year appear in each Fund’s Annual Report, dated September 30, 2010. Each Fund’s Annual Report is incorporated by reference into this Statement of Additional Information and is available without charge by calling (800) 257-8787.
Each Fund is a series of the Trust. The Trust is an open-end management investment company under the 1940 Act. The Trust was organized as a Massachusetts business trust on August 20, 1998. 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 four 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) 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 Trust’s Declaration of Trust further provides for indemnification out of the assets and property of the Trust for all losses and expenses of any shareholder held personally liable 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.
S-90
RATINGS OF INVESTMENTS
Standard & Poor’s Ratings Group—A brief description of the applicable Standard & Poor’s (“S&P”) rating symbols and their meanings (as published by S&P) follows:
Issue Credit Ratings
A S&P issue credit rating is a forward looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.
The opinion reflects S&P’s view of the obligor’s capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Issue credit ratings are based on current information furnished by the obligors or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any credit rating and may, on occasion, rely on unaudited financial information. Credit ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances.
Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days-including commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings.
Long-term issue credit ratings
Issue credit ratings are based, in varying degrees, on the following considerations:
1. Likelihood of payment—capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights.
Issue rating are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
AAA | An obligation rated ‘AAA’ has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. | |
AA | An obligation rated ‘AA’ differs from the highest rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong. | |
A | An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. |
A-1
BBB | An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. |
Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’ and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB | An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. | |
B | An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation. | |
CCC | An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. | |
CC | An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. | |
C | A ‘C’ rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the ‘C’ rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par. | |
D | An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. An obligation’s rating is lowered to ‘D’ upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par. |
Plus (+) or Minus (–): The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
NR | This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy. |
Short-Term Issue Credit Ratings
A-1 | A short-term obligation rated ‘A-1’ is rated in the highest category by S&P. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong. |
A-2
A-2 | A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory. | |
A-3 | A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. | |
B | A short-term obligation rated ‘B’ is regarded as having significant speculative characteristics. Ratings of ‘B-1’, ‘B-2’ and ‘B-3’ may be assigned to indicate finer distinctions within the ‘B’ category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. | |
B-1 | A short-term obligation rated ‘B-1’ is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. | |
B-2 | A short-term obligation rated ‘B-2’ is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. | |
B-3 | A short-term obligation rated ‘B-3’ is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors. | |
C | A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. | |
D | A short-term obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. |
Moody’s Investors Service, Inc.—A brief description of the applicable Moody’s Investors Service, Inc. (“Moody’s”) rating symbols and their meanings (as published by Moody’s) follows:
Long Term Obligation Ratings
Aaa | Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk. | |
Aa | Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. | |
A | Obligations rated A are considered upper-medium grade and are subject to low credit risk. | |
Baa | Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. | |
Ba | Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk. | |
B | Obligations rated B are considered speculative and are subject to high credit risk. | |
Caa | Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk. | |
Ca | Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. | |
C | Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest. |
A-3
Note: Moody’s applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Medium-Term Note Ratings
Moody’s assigns long-term ratings to individual debt securities issued from medium-term note (MTN) programs, in addition to indicating ratings to MTN programs themselves. Notes issued under MTN programs with such indicated ratings are rated at issuance at the rating applicable to all pari passu notes issued under the same program, at the program’s relevant indicated rating, provided such notes do not exhibit any of the characteristics listed below. For notes with any of the following characteristics, the rating of the individual note may differ from the indicated rating of the program:
1) Notes containing features that link interest or principal to the credit performance of any third party or parties (i.e., credit-linked notes).
2) Notes allowing for negative coupons, or negative principal.
3) Notes containing any provision that could obligate the investor to make any additional payments.
4) Notes containing provisions that subordinate the claim.
Market participants must determine whether any particular note is rated, and if so, at what rating level. Moody’s encourages market participants to contact Moody’s Ratings Desks directly if they have questions regarding ratings for specific notes issued under a medium-term note program.
Unrated notes issued under an MTN program may be assigned an NR (not rated) symbol.
U.S. Municipal Short-Term Debt and Demand Obligation Ratings
Short-Term Debt Ratings
In municipal debt issuance, there are three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (MIG) and are divided into three levels—MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation.
MIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing. | |
MIG 2 | This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group. | |
MIG 3 | This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established. | |
SG | This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection. |
Demand Obligation Ratings
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned; a long or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of the degree of risk associated with the ability to receive purchase price upon demand (“demand feature”), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or VMIG rating.
When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/-VMIG 1.
A-4
VMIG rating expirations are a function of each issue’s specific structural or credit features.
VMIG 1 | This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | |
VMIG 2 | This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | |
VMIG 3 | This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand. | |
SG | This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand. |
Short-Term Ratings
Moody’s short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.
Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:
P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
Fitch Ratings—A brief description of the applicable Fitch Ratings (“Fitch”) ratings symbols and meanings (as published by Fitch) follows:
Fitch provides an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Credit ratings are used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. The agency’s credit ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.
The terms “investment grade” and “speculative grade” have established themselves over time as shorthand to describe the categories ‘AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade). The terms “investment grade” and “speculative grade” are market conventions, and do not imply any recommendation or endorsement of a specific security for investment purposes. “Investment
A-5
grade” categories indicate relatively low to moderate credit risk, while ratings in the “speculative” categories either signal a higher level of credit risk or that a default has already occurred.
A designation of “Not Rated” or “NR” is used to denote securities not rated by Fitch where Fitch has rated some, but not all, securities comprising an issuance capital structure.
Credit ratings express risk in relative rank order, which is to say they are ordinal measures of credit risk and are not predictive of a specific frequency of default or loss.
Fitch Ratings’ credit ratings do not directly address any risk other than credit risk. In particular, ratings do not deal with the risk of a market value loss on a rated security due to changes in interest rates, liquidity and other market considerations. However, in terms of payment obligation on the rated liability, market risk may be considered to the extent that it influences the ability of an issuer to pay upon a commitment. Ratings nonetheless do not reflect market risk to the extent that they influence the size or other conditionality of the obligation to pay upon a commitment (for example, in the case of index-linked bonds).
In the default components of ratings assigned to individual obligations or instruments, the agency typically rates to the likelihood of non-payment or default in accordance with the terms of that instrument’s documentation. In limited cases, Fitch Ratings may include additional considerations (ie rate to a higher or lower standard than that implied in the obligation’s documentation). In such cases, the agency will make clear the assumptions underlying the agency’s opinion in the accompanying rating commentary.
International Long-Term Ratings
Issuer Credit Rating Scales
Investment Grade
AAA | Highest credit quality. ‘AAA’ ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. | |
AA | Very high credit quality. ‘AA’ ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. | |
A | High credit quality. ‘A’ ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. | |
BBB | Good credit quality. ‘BBB’ ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. |
A-6
Speculative Grade
BB | Speculative. ‘BB’ ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments. Securities rated in this category are not investment grade. | |
B | Highly speculative. ‘B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment. | |
CCC | Default is a real possibility. | |
CC | Default of some kind appears probable. | |
C | Default is imminent or inevitable, or the issuer is in standstill. Conditions that are indicative of a ‘C’ category rating for an issuer include:
• the issuer has entered into a grace or cure period following non-payment of a material financial obligation;
• the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; and
• Fitch Ratings otherwise believes a condition of ‘RD’ or ‘D’ to be imminent or inevitable, including through the formal announcement of a coercive debt exchange. | |
RD | Restricted default. ‘RD’ ratings indicate an issuer that in Fitch Ratings’ opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased business. This would include:
• the selective payment default on a specific class or currency of debt;
• the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial obligation;
• the extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations, either in series or in parallel; and
• execution of a coercive debt exchange on one or more material financial obligations. | |
D | ‘D’ ratings indicate an issuer that in Fitch Ratings’ opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.
Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a coercive debt exchange.
“Imminent” default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a coercive debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.
In all cases, the assignment of a default rating reflects the agency’s opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuer’s financial obligations or local commercial practice. |
A-7
International Short-Term Ratings
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream, and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as “short term” based on market convention. Typically, this means up to 13 months for corporate, structured and sovereign obligations, and up to 36 months for obligations in US public finance markets.
F1 | Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature. | |
F2 | Good short-term credit quality. A good intrinsic capacity for timely payment of financial commitments. | |
F3 | Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate. | |
B | Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near-term adverse changes in financial and economic conditions. | |
C | High short-term default risk. Default is a real possibility. | |
RD | Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only. | |
D | Default. Indicates a broad-based default event for an entity, or the default of a specific short-term obligation. |
Notes to Long-term and Short-term ratings:
“+” or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ long-term rating category, or to categories below ‘CCC’, or to Short-term ratings other than ‘Fl’.
‘NR’ indicates that Fitch does not publicly rate the issuer or issue in question.
‘WD’ indicates that the rating has been withdrawn and is no longer rated by Fitch.
Rating Watch: Rating Watches indicate that there is a heightened probability of a rating change and the likely direction of such a change. These are designated as “Positive”, indicating a potential upgrade, “Negative”, for a potential downgrade, or “Evolving”, if ratings may be raised, lowered or affirmed. However, ratings that are not on Rating Watch can be raised or lowered without being placed on Rating Watch first if circumstances warrant such an action. A Rating Watch is typically event-driven and, as such, it is generally resolved over a relatively short period.
A-8
MAI-INV3-0111P
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Mutual fund investing involves risk; principal loss is possible.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Message to Shareholders August 13, 2010
Dear Shareholders:
We invite you to take a few minutes to review the results of the fiscal year ended June 30, 2010.
This report includes portfolio commentaries, comparative performance graphs and tables, complete listings of portfolio holdings, and additional fund information. We hope you will find this helpful in monitoring your investment portfolio.
Also, through our website, FirstAmericanFunds.com, we provide quarterly performance fact sheets on all First American Funds, the economic outlook as viewed by our senior investment officers, and other information about fund investments and portfolio strategies.
As announced on July 29, 2010, U.S. Bancorp has entered into an agreement to sell a portion of the asset management business of FAF Advisors, the funds’ advisor, to Nuveen Investments. Included in the sale will be that part of FAF Advisors’ business that advises the funds. Subject to the approval of the funds’ board of directors and shareholders, along with other conditions related to the closing of the sale, Nuveen Asset Management, a subsidiary of Nuveen Investments, will become the advisor to the funds. The sale is currently expected to close by the end of 2010. There will be no change in the funds’ investment objectives or policies as a result of the transaction.
Please contact your financial professional if you have questions about First American Funds or contact First American Investor Services at 800.677.3863.
We appreciate your investment with First American Funds and look forward to serving your financial needs in the future.
Sincerely,
Virginia L. Stringer | Thomas S. Schreier, Jr. | |
Chairperson of the Board First American Investment Funds, Inc. | President First American Investment Funds, Inc. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 1 |
Explanation of Financial Statements
As a shareholder in First American Funds, you receive shareholder reports semiannually. We strive to present this financial information in an easy-to-understand format; however, for many investors, the information contained in this shareholder report may seem very technical. So, we would like to take this opportunity to explain several sections of the shareholder report.
The Schedule of Investments details all of the securities held in the fund and their related dollar values on the last day of the reporting period. Securities are usually presented by type (common stock, bonds, etc.) and by industry classification (banking, communications, etc.). This information is useful for analyzing how your fund’s assets are invested and seeing where your portfolio manager believes the best opportunities exist to meet your objectives. Holdings are subject to change without notice and do not constitute a recommendation of any individual security. The Notes to Financial Statements provide additional details on how the securities are valued.
The Statement of Assets and Liabilities lists the assets and liabilities of the fund and present the fund’s net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the fund’s net assets (assets minus liabilities) by the number of shares outstanding. The investments, as presented in the Schedule of Investments, comprise substantially all of the fund’s assets. Other assets include cash and receivables for items such as income earned by the fund but not yet received. Liabilities include payables for items such as fund expenses incurred but not yet paid.
The Statement of Operations details the dividends and interest income earned from securities as well as the expenses incurred by the fund during the reporting period. Fund expenses may be reduced through fee waivers or reimbursements. This statement reflects total expenses before any waivers or reimbursements, the amount of waivers and reimbursements (if any), and the net expenses. This statement also shows the net realized and unrealized gains and losses from investments owned during the period. The Notes to Financial Statements provide additional details on investment income and expenses of the fund.
The Statement of Changes in Net Assets describes how the fund’s net assets were affected by its operating results, distributions to shareholders, and shareholder transactions during the reporting period. This statement is important to investors because it shows exactly what caused the fund’s net asset size to change during the period.
The Financial Highlights provide a per-share breakdown of the components that affected the fund’s NAV for the current and past reporting periods. It also shows total return, expense ratios, net investment income ratios, and portfolio turnover rates. The net investment income ratios summarize the income earned less expenses, divided by the average net assets. The expense ratios represent the percentage of average net assets that were used to cover operating expenses during the period. Expense ratios can vary across funds for a number of reasons, including differences in advisory fees and the average shareholder account size. The portfolio turnover rate represents the percentage of the fund’s holdings that have changed over the course of the period, and gives an idea of how long the fund holds onto a particular security. A 100% turnover rate implies that an amount equal to the value of the entire portfolio is turned over in a year through the purchase and sale of securities.
The Notes to Financial Statements disclose the organizational background of the fund, its significant accounting policies, federal tax information, fees and compensation paid to affiliates, and significant risks and contingencies.
We hope this guide to your shareholder report will help you get the most out of this important resource. You can visit First American Funds’ website for other useful information on each of our funds, including fund prices, performance, fund manager bios, dividends, and downloadable fact sheets. For more information, call First American Investor Services at 800.677.3863 or visit FirstAmericanFunds.com.
2 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Investment Objective: providing high current income consistent with limited risk to capital
How did the fund perform for the fiscal year ended June 30, 2010?
The First American Core Bond Fund (the “fund”), Class Y shares, returned 17.42% for the fiscal year ended June 30, 2010 (Class A shares returned 17.11% without taking the sales charge into account). By comparison, the fund’s benchmark, the Barclays Capital Aggregate Bond Index*, returned 9.50% for the same period.
What were the general economic and market conditions during the fiscal year?
Policy initiatives to stabilize the financial sector and revive the economy took hold as 2009 progressed, leading to a return of investor confidence and a modest recovery in the domestic economy. Improved capital market access gave many large banks the ability to raise equity and debt in order to repay government Troubled Asset Relief Program (TARP) support funds at a profit to taxpayers. As the expansion appeared to be self-sustaining, most of these programs have been largely eliminated. Inventories were rebuilt from the credit crunch-induced low levels, corporate earnings surprised to the upside, payrolls grew at a modest pace, and consumer spending recovered. Even housing showed signs of life, though concerns of a renewed bout of weakness mounted due to poor sales numbers after expiration of the first-time homebuyer credit.
Financial markets remained volatile as 2009 progressed, but risk taking re-emerged as the uncertainty surrounding the U.S. economy subsided. Broad improvement in fundamentals and liquidity enabled non-government bonds to recover steadily throughout 2009. Investors who accumulated large cash positions during the financial crisis moved off the sidelines, further supporting the bond market as many risk premiums approached pre-Lehman bankruptcy levels in early 2010. This spread rally proved to be somewhat short lived, however, as new market headwinds surfaced due to the European sovereign debt crisis, financial reform, the gulf oil spill, and a soft patch in domestic growth. Accordingly, many bond market sectors lagged the strong performance posted by Treasuries, which rallied hard given macro concerns and a flight to quality. Still, fixed-income assets such as corporate bonds, commercial mortgage securities, asset-backed securities, and non-agency mortgage securities posted incredibly strong results during the fiscal year, outperforming Treasuries by hundreds, if not thousands, of basis points.
How did market conditions and investment strategies affect the fund’s performance?
The fund was positioned to benefit from the recovery in economic and financial conditions during the period. Strong fundamental underwriting and credit analysis in the corporate debt and securitized sectors helped the fund weather the credit crisis in good shape without sizable permanent credit impairments. This provided the basis for a strong recovery in fund holdings, which was further bolstered by opportunistic purchases in the corporate bond sector, as new issues were brought to market at very cheap valuations throughout 2009. From an overall performance perspective, our sector weights to corporate bonds, commercial mortgages, and other securitized debt accounted for the bulk of our strong performance vs. our benchmark and peers. Selection within the corporate sector, especially financial firms and the non-agency mortgage sector, also contributed to strong performance. As part of our view for an extended economic recovery and normalization of markets, we had been expecting rates to trend higher as 2010 progressed, particularly given massive amounts of Treasury issuance. Therefore, our rates strategy was positioned defensively short to our benchmark; this strategy was a modest drag on overall investment performance in mid-2010 amid the flight-to-quality caused largely by the European debt crisis.
What strategic moves were made by the fund and why?
Continued improvement of fundamental economic conditions and substantial gains in corporate balance sheets and cash flow dynamics have supported our ongoing overweight to the corporate bond sector. Nonetheless, as valuations began to normalize, particularly in early 2010, we took the opportunity to reduce positions in corporate bonds and commercial mortgage securities, lowering exposure and locking in some prior gains. Further, we significantly paired fund exposure to non-agency mortgage-backed securities (MBS) in late 2009 and early 2010, as investor demand caused these securities to recover more rapidly than warranted by underlying mortgage credit quality metrics and housing fundamentals.
* | Unlike mutual funds, index returns and category averages do not reflect any expenses, transaction costs, or cash flow effects. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 3 |
Core Bond Fund
Over the course of the fiscal year, the fund became increasingly underweight to the agency MBS sector as the Federal Reserve purchases pushed valuations to historically unattractive levels. Given an adjustment in valuations after the Fed program expired on March 31, 2010, we took the opportunity to add exposure at attractive levels, reducing a large share of our underweight to the sector. Finally, overall portfolio interest rate sensitivity remained defensive at the end of the period, given the low level of Treasury yields resulting from risk aversion and fears of an economic double-dip.
Going forward, we anticipate economic growth to be self-sustaining and adequate to support stability, if not renewed tightening, of risk premiums across non-government sectors. We also expect generally favorable developments in the global factors, specifically the sovereign debt crisis and concerns about growth in emerging economies.
Sector Allocation as of June 30, 20101 (% of net assets) | ||||||
Corporate Bonds | 44.0 | % | ||||
U.S. Government Agency Mortgage-Backed Securities | 22.6 | |||||
Asset-Backed Securities | 17.7 | |||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 5.6 | |||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 4.4 | |||||
U.S. Government & Agency Securities | 4.2 | |||||
Preferred Stock | 0.0 | |||||
Short-Term Investments | 2.3 | |||||
Other Assets and Liabilities, Net2 | (0.8 | ) | ||||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of June 30, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
4 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Annual Performance1,2 as of June 30, 2010 | ||||||||||||||
Since Inception | ||||||||||||||
1 year | 5 years | 10 years | 9/24/2001 | |||||||||||
Average annual return with sales charge (POP) | ||||||||||||||
Class A | 12.09 | % | 3.94 | % | 5.18 | % | — | |||||||
Class B | 11.31 | % | 3.73 | % | 4.87 | % | — | |||||||
Class C | 15.32 | % | 4.06 | % | 4.83 | % | — | |||||||
Average annual return without sales charge (NAV) | ||||||||||||||
Class A | 17.11 | % | 4.85 | % | 5.64 | % | — | |||||||
Class B | 16.31 | % | 4.07 | % | 4.87 | % | — | |||||||
Class C | 16.32 | % | 4.06 | % | 4.83 | % | — | |||||||
Class R | 16.74 | % | 4.63 | % | — | 4.63% | ||||||||
Class Y | 17.42 | % | 5.09 | % | 5.90 | % | — | |||||||
Barclays Capital Aggregate Bond Index3 | 9.50 | % | 5.54 | % | 6.47 | % | 5.65% |
The performance data quoted on this page represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance data quoted. Performance data current to the most recent month-end may be obtained by calling 800.677.3863.
1 | Total returns at net asset value (“NAV”) reflect performance over the time period indicated without including the fund’s maximum sales charge and assume reinvestment of all distributions at NAV. |
Total returns at public offering price (“POP”) reflect performance over the time period indicated including maximum sales charges of 4.25% for Class A shares and the maximum contingent deferred sales charge (“CDSC”) for Class C shares for the relevant period. Maximum CDSC is 5.00% for Class B shares, decreasing annually to 0.0% in the seventh year following purchase, and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. |
Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. |
The fund may also invest in foreign securities. International investment involves risks not typically associated with domestic investing including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, limited liquidity, and volatile prices. |
As of the most recent prospectus, the fund’s total annual operating expense ratio (before waivers and including any required fund fees and expenses) for Class A, Class B, Class C, Class R, and Class Y shares was 1.02%, 1.77%, 1.77%, 1.27%, and 0.77%, respectively. The advisor has contractually agreed to waive fees and reimburse other fund expenses through at least October 31, 2010 so that total annual fund operating expenses (after all waivers and excluding any acquired fund fees and expenses) for Class A, Class B, Class C, Class R, and Class Y shares do not exceed 0.95%, 1.70%, 1.70%, 1.20%, and 0.70%, respectively. These fee waivers and expense reimbursements may be terminated at any time after October 31, 2010, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund’s board of directors. |
Value of $10,000 Investment1,2,4 as of June 30, 2010 |
Core Bond Fund, Class A (NAV) | $ | 17,309 | | | | |||||||||||
Core Bond Fund, Class A (POP) | $ | 16,569 | ||||||||||||||
Barclays Capital Aggregate Bond Index3 | $ | 18,714 | ||||||||||||||
This chart illustrates the total value of an assumed $10,000 investment in the fund’s Class A shares (from 6/30/2000 to 6/30/2010) as compared to the Barclays Capital Aggregate Bond Index3. |
| |||||||||||||||
2 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Investment performance reflects fee waivers that are or were in effect. In the absence of such fee waivers, total returns would be reduced. Index performance is for illustrative purposes only and does not reflect any expenses, transaction costs, or cash flow effects. Direct investment in the index is not available. |
3 | An unmanaged index comprised of the Barclays Capital Government/Credit Bond Index, the Barclays Capital Mortgage Backed Securities Index, and the Barclays Capital Asset Backed Securities Index. The Barclays Capital Government/Credit Bond Index is |
comprised of Treasury securities, other securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including U.S. agency mortgage securities, and investment-grade corporate debt securities. The Barclays Capital Mortgage Backed Securities Index is comprised of the mortgage-backed pass through securities of Ginnie Mae, Fannie Mae, and Freddie Mac. The Barclays Capital Asset Backed Securities Index is comprised of debt securities rated investment grade or higher that are backed by credit card, auto, and home equity loans. |
4 | Performance for Class B, Class C, Class R, and Class Y shares is not presented. Performance for these classes will vary due to the different expense structures. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 5 |
High Income Bond Fund
Investment Objective: providing high level of current income
How did the fund perform for the fiscal year ended June 30, 2010?
The First American High Income Bond Fund (the “fund”), Class Y shares, returned 25.75% for the fiscal year ended June 30, 2010 (Class A shares returned 25.47% without taking the sales charge into account). By comparison, the fund’s benchmark, the Barclays Capital High Yield 2% Issuer Capped Index*, returned 26.66% for the same period.
What were the general economic and market conditions during the fiscal year?
Policy initiatives to stabilize the financial sector and revive the economy took hold as 2009 progressed, leading to a return of investor confidence and a modest recovery in the domestic economy. Improved capital market access gave many large banks the ability to raise equity and debt in order to repay government Troubled Asset Relief Program (TARP) support funds at a profit to taxpayers. As the expansion appeared to be self-sustaining, most of these programs have been largely eliminated. Inventories were rebuilt from the credit crunch-induced low levels, corporate earnings surprised to the upside, payrolls grew at a modest pace, and consumer spending recovered. Even housing showed signs of life, though concerns of a renewed bout of weakness mounted due to poor sales numbers after expiration of the first-time homebuyer credit.
Financial markets remained volatile as 2009 progressed, but risk taking re-emerged as the uncertainty surrounding the U.S. economy subsided. Broad improvement in fundamentals and liquidity enabled non-government bonds to recover steadily throughout 2009. Investors who accumulated large cash positions during the financial crisis moved off the sidelines, further supporting the bond market as many risk premiums approached pre-Lehman bankruptcy levels in early 2010 This spread rally proved to be somewhat short lived, however, as new market headwinds surfaced due to the European sovereign debt crisis, financial reform, the gulf oil spill, and a soft patch in domestic growth. Accordingly, many bond market sectors lagged the strong performance posted by Treasuries, which rallied hard given macro concerns and a flight to quality. Still, fixed-income assets such as corporate bonds, commercial mortgage securities, asset-backed securities, and non-agency mortgage securities posted incredibly strong results during the fiscal year, outperforming Treasuries by hundreds, if not thousands, of basis points.
How did market conditions and investment strategies affect the fund’s performance?
The fund’s performance was aided by maintaining exposure to and selectively adding to deeply discounted bonds that had suffered large price declines during the 2008 market upheaval. Naturally, these issues tended to reflect the bounce-back in cyclical sectors such as autos, basic materials, and media, as well as the debt of emerging market issuers. Much of the improvement in the prices of these securities was simply a return of liquidity to the marketplace, as the refinancing window once again became available to high-yield issuers when the financial system stabilized in early 2009. Fund overweights to financial firms, chemicals, and airlines benefited during this period. Renewed concerns over European sovereign debt and the fledgling economic recovery here in the U.S. again resulted in a paring of risk assets during second quarter 2010. The fund gave up ground during this period from a relative performance standpoint as overweights to financial preferred stock and to financial hybrid securities sold off sharply in response to the renewed worries of systemic financial risk. As the flight-to-quality ensued, the fund’s underweight position to the interest rate-sensitive “BB” rated sector was also a detractor to performance.
What strategic moves were made by the fund and why?
We increased portfolio risk by moving to a benchmark weight in the lowest-rated “CCC” rated sector as the high-yield rally took hold. We added to positions in more economically sensitive areas such as basic materials, building products, and auto parts. We also added to a number of financial and insurance issues, many of which were new entrants to the high-yield arena following the credit crisis of 2008-2009. We began to add back certain preferred stock issues and closed-end funds that were trading at discounts to par or to net asset value. We remain bullish on the long-term fundamentals in the area of emerging market debt and recently began to participate in some of the increased issuance we have seen in this area. Growth rates around the world compare favorably to that being realized in the developed world, while financial disclosure and transparency are also improving. The fund added select credits in the energy and oil services sector, most of which include names that are only tangentially connected with the highly publicized oil spill in the Gulf of Mexico.
* | Unlike mutual funds, index returns and category averages do not reflect any expenses, transaction costs, or cash flow effects |
6 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Sector Allocation as of June 30, 20101 (% of net assets) | ||||||
High Yield Corporate Bonds | 86.4 | % | ||||
Preferred Stocks | 3.4 | |||||
Investment Grade Corporate Bonds | 2.4 | |||||
Exchange-Traded Funds | 1.6 | |||||
Convertible Securities | 1.5 | |||||
Closed-End Funds | 1.1 | |||||
Common Stocks | 0.6 | |||||
Asset-Backed Securities | 0.1 | |||||
Short-Term Investments | 2.6 | |||||
Other Assets and Liabilities, Net2 | 0.3 | |||||
| 100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of June 30, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 7 |
High Income Bond Fund
Annual Performance1,2 as of June 30, 2010 | ||||||||||||
Since Inception | ||||||||||||
1 year | 5 years | 8/30/2001 | 9/24/20014 | |||||||||
Average annual return with sales charge (POP) | ||||||||||||
Class A | 20.09 | % | 4.69 | % | 5.57% | — | ||||||
Class B | 19.56 | % | 4.53 | % | 5.34% | — | ||||||
Class C | 23.67 | % | 4.84 | % | 5.32% | — | ||||||
Average annual return without sales charge (NAV) | ||||||||||||
Class A | 25.47 | % | 5.60 | % | 6.09% | — | ||||||
Class B | 24.56 | % | 4.82 | % | 5.34% | — | ||||||
Class C | 24.67 | % | 4.84 | % | 5.32% | — | ||||||
Class R | 25.12 | % | 5.35 | % | — | 6.53% | ||||||
Class Y | 25.75 | % | 5.87 | % | 6.38% | — | ||||||
Barclays Capital High Yield 2% Issuer Capped Index3 | 26.66 | % | 7.22 | % | 8.26% | 9.20% |
The performance data quoted on this page represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance data quoted. Performance data current to the most recent month-end may be obtained by calling 800.677.3863.
1 | Total returns at net asset value (“NAV”) reflect performance over the time period indicated without including the fund’s maximum sales charge and assume reinvestment of all distributions at NAV. |
Total returns at public offering price (“POP”) reflect performance over the time period indicated including maximum sales charges of 4.25% for Class A shares and the maximum contingent deferred sales charge (“CDSC”) for Class C shares for the relevant period. Maximum CDSC is 5.00% for Class B shares, decreasing annually to 0.0% in the seventh year following purchase, and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. |
The fund invests in lower-rated and non-rated securities which present a greater risk of loss to principal and interest than higher-rated securities. |
Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities.
The fund may also invest in foreign securities. International investment involves risks not typically associated with domestic investing including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, limited liquidity, and volatile prices.
As of the most recent prospectus, the fund’s total annual operating expense ratio (including acquired fund fees and expenses) for Class A, Class B, Class C, Class R, and Class Y shares was 1.42%, 2.17%, 2.17%, 1.67%, and 1.17%, respectively. The advisor has contractually agreed to waive fees and reimburse other fund expenses through at least October 31, 2010 so that total annual fund operating expenses (after all waivers and excluding acquired fund fees and expenses) for Class A, Class B, Class C, Class R, and Class Y shares do not exceed 1.10%, 1.85%, 1.85%, 1.35%, and 0.85%, respectively. These fee waivers and expense reimbursements may be terminated at any time after October 31, 2010, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund’s board of directors.
Value of $10,000 Investment1,2,5 as of June 30, 2010 | ||||||||||||||||
High Income Bond Fund, Class A (NAV) | $ | 16,863 | ||||||||||||||
High Income Bond Fund, Class A (POP) | $ | 16,147 | ||||||||||||||
Barclays Capital High Yield 2% Issuer Capped Index3 | $ | 20,152 | ||||||||||||||
This chart illustrates the total value of an assumed $10,000 investment in the fund’s Class A shares (from 8/30/2001 to 6/30/2010) as compared to the Barclays Capital High Yield 2% Issuer Capped Index3. |
| |||||||||||||||
2 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Performance reflects fee waivers that are or were in effect. In the absence of such fee waivers, total returns would be reduced. Index performance is for illustrative purposes only and does not reflect any expenses, transaction costs, or cash flow effects. Direct investment in the index is not available. |
3 | An unmanaged index that covers the universe of fixed-rate, dollar denominated, below-investment-grade debt with at least one year to final maturity with total index allocation to an individual issuer being limited to 2%. |
4 | The performance since inception of the index is calculated from the month end following the inception of the class. |
5 | Performance for Class B, Class C, Class R, and Class Y shares is not presented. Performance for these classes will vary due to the different expense structures. |
8 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Inflation Protected Securities Fund
Investment Objective: providing total return while providing protection against inflation
How did the fund perform for the fiscal year ended June 30, 2010?
The First American Inflation Protected Securities Fund (the “fund”), Class Y shares, returned 10.92% for the fiscal year ended June 30, 2010 (Class A shares returned 10.62% without taking the sales charge into account). By comparison, the fund’s benchmark, the Barclays Capital U.S. TIPS Index*, returned 9.52% for the same period.
What were the general economic and market conditions during the fiscal year?
The economy returned to growth and financial markets solidified and extended their sharp recovery from the height of the financial crisis. In the second half of 2009, financial conditions continued to normalize, supported by significantly improved conditions at large banks, and strong corporate earnings and cash flow. Most large U.S. banks repaid government Troubled Asset Relief Program (TARP) support funds ahead of schedule and at significant profit to taxpayers, readily accessing private capital markets for both equity and debt. Low interest rates and federal programs supported the housing market even as foreclosures continued to climb. Employment conditions improved, albeit haltingly. Federal Reserve support programs helped ease financial conditions and have since been largely eliminated, with growth being increasingly driven by private demand. Fiscal stimulus policies in the U.S., China, and elsewhere – key drivers of growth early in the period – have begun to be scaled back or expire, prompting concerns about the durability of economic recovery.
As 2010 unfolded, market concerns focused on debt sustainability issues for sovereign states, particularly in Europe, highlighted by the Greek debt crisis. The crisis came to a peak the second quarter of 2010, resulting in a $1 trillion support facility created by the European Union. Sovereign debt fears combined with uncertainty surrounding China policy shifts, financial reform legislation, and the gulf oil spill drove an increase in market risk premiums for equities and corporate bonds, and drove interest rates to low levels as the period came to a close. Despite these economic and market pressures late in the period, fixed-income markets, particularly corporate bonds and other non-government sectors, posted strong returns during the fiscal year. The broad improvement in fundamental factors and normalization of market liquidity helped corporates, high yield, and securitized assets outperform. Interest rates moved significantly lower, with the largest declines in intermediate maturities. The U.S. dollar generally declined amid resumption of global activity and normalization of capital flows, however the euro and British pound declined significantly amid financial stress and economic and policy uncertainty.
How did market conditions and investment strategies affect the fund’s performance?
An economic recovery, driven by significant government stimulus plans, caused all risk assets to perform well. The fund had an allocation to non-government sectors and benefited substantially from the economic and financial conditions during the period. Specifically, positions in high-yield corporate bonds and securitized debt drove investment returns as these securities recovered from their distressed prices of late 2008 and early 2009. Strong fundamental credit analysis and trading conviction helped the fund avoid permanent impairments that provided the basis for the recovery in fund holdings and returns from issue selection. The fund was successful in its tactical duration strategy during the period, taking advantage of extreme shifts in sentiment that saw rates traverse a wide range. Our strategy to benefit from differences between Treasury Inflation-Protected Securities (TIPS) and Treasury yields centered on a view that TIPS could perform on a recovery of inflation risk premium but would ultimately be capped by still declining core inflation. This proved to be a drag on fund returns as TIPS delivered a much stronger performance than expected. Our positioning for a steeper yield curve was productive for most of the fiscal year, as both investors’ preference for safety and aversion for interest rate risk benefited the front end of the Treasury curve, while increasingly poor sponsorship of the Treasury market, particularly at ever-richer yield levels, punished the longer maturities.
What strategic moves were made by the fund and why?
Continued improvement of fundamental economic conditions and substantial gains in corporate balance sheet health and cash flow dynamics have supported our ongoing overweight to risk assets in the fixed-income sector. For most of the period, we were positioned with a meaningful allocation to credit and securitized sectors given the unique opportunity the market offered in 2009. When the prices of these assets recovered, we opportunistically reduced our exposure to these sectors to better reflect the return opportunity from here and to lock in some gains. Additionally, we have reduced issuer-specific weights and sub-sector weights within the broad credit sectors. We have also looked to move into the highest-rated securities of specific issuers; a move that recognizes the large relative recovery of lower-quality securities at the issuer level. In addition, the significant recovery across the mortgage and securitized sectors provided us with an opportunity to reduce positions in non-agency and commercial mortgage-backed securities.
* | Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 9 |
Inflation Protected Securities Fund
Looking forward, we anticipate a sustained, though moderate economic growth and generally favorable developments in the global factors that have recently caused concern for the markets. Although moderate, the economic expansion and ongoing liquidity conditions should be sufficient to cause most non-Treasury securities to outperform. Spreads available in these sectors continue to reflect a risk premium that offer an attractive compensation to investors.
We anticipate that TIPS should trade directionally with rates and risk, doing better if yields rise and risk assets perform. We think that near-term Consumer Price Index adjustments may be quite modest; as such, we favor TIPS with longer maturities. We are positioned short to the benchmark in duration, looking for rates to correct higher as fears subside about a double-dip economic recession and deflation.
Sector Allocation as of June 30, 20101 (% of net assets) | ||||||
U.S. Government & Agency Securities | 87.7 | % | ||||
Corporate Bonds | 5.8 | |||||
Asset-Backed Securities | 3.2 | |||||
Municipal Bond | 0.4 | |||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Security | 0.4 | |||||
Preferred Stocks | 0.2 | |||||
Exchange-Traded Fund | 0.1 | |||||
Convertible Security | 0.1 | |||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Security | 0.0 | |||||
Short-Term Investments | 2.2 | |||||
Other Assets and Liabilities, Net2 | (0.1 | ) | ||||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of June 30, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
10 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Annual Performance1,2 as of June 30, 2010 | ||||||||||
Since Inception | ||||||||||
1 year | 5 years | 10/01/2004 | ||||||||
Average annual return with sales charge (POP) | ||||||||||
Class A | 5 .87 | % | 3.48 | % | 3.94% | |||||
Class C | 8 .76 | % | 3.58 | % | 3.90% | |||||
Average annual return without sales charge (NAV) | ||||||||||
Class A | 10 .62 | % | 4.39 | % | 4.72% | |||||
Class C | 9 .76 | % | 3.58 | % | 3.90% | |||||
Class R | 10 .32 | % | 4.15 | % | 4.48% | |||||
Class Y | 10 .92 | % | 4.63 | % | 4.96% | |||||
Barclays Capital U.S. TIPS Index3 | 9 .52 | % | 4.98 | % | 5.36% |
The performance data quoted on this page represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance data quoted. Performance data current to the most recent month-end may be obtained by calling 800.677.3863.
1 | Total returns at net asset value (“NAV”) reflect performance over the time period indicated without including the fund’s maximum sales charge and assume reinvestment of all distributions at NAV. |
Total returns at public offering price (“POP”) reflect performance over the time period indicated including maximum sales charges of 4.25% for Class A shares and the maximum contingent deferred sales charge (“CDSC”) for Class C shares for the relevant period. Maximum CDSC is 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. |
The fund invests in lower-rated and nonrated securities, which present a greater risk of loss to principal and interest than higher-rated securities. |
Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. |
The fund may also invest in foreign securities. International investment involves risks not typically associated with domestic investing including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, limited liquidity, and volatile prices.
As of the most recent prospectus, the fund’s total annual operating expense ratio (before waivers and including any acquired fund fees and expenses) for Class A, Class C, Class R, and Class Y shares was 1.10%, 1.84%, 1.35%, and 0.85%, respectively. The advisor has contractually agreed to waive fees and reimburse other fund expenses through at least October 31, 2010 so that total annual fund operating expenses (after all waivers and excluding any acquired fund fees and expenses) for Class A, Class C, Class R, and Class Y shares do not exceed 0.85%, 1.60%, 1.10%, and 0.60%, respectively. These fee waivers and expense reimbursements may be terminated at any time after October 31, 2010, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund’s board of directors.
Value of $10,000 Investment1,2,4 as of June 30, 2010 | ||||||||||||||||
Inflation Protected Securities Fund, | $ | 13,032 | ||||||||||||||
Inflation Protected Securities Fund, | $ | 12,483 | ||||||||||||||
Barclays Capital U.S. TIPS Index3 | $ | 13,497 | ||||||||||||||
This chart illustrates the total value of an assumed $10,000 investment in the fund’s Class A shares (from 10/01/2004 to 6/30/2010) as compared to the Barclays Capital U.S. TIPS Index3. |
| |||||||||||||||
2 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Performance reflects fee waivers that are or were in effect. In the absence of such fee waivers, total returns would be reduced. Index performance is for illustrative purposes only and does not reflect any expenses, transaction costs, or cash flow effects. Direct investment in the index is not available. |
3 | An unmanaged index comprised of inflation-protected securities issued by the U.S. Treasury that have at least one year to final maturity, at least $250 million par amount outstanding, and are investment-grade rated (Baa or better). |
4 | Performance for Class C, Class R, and Class Y shares is not presented. Performance for these classes will vary due to the different expense structures. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 11 |
Intermediate Government Bond Fund
Investment Objective: providing current income that is exempt from state income tax, to the extent consistent with the preservation of capital
How did the fund perform for the fiscal year ended June 30, 2010?
The First American Intermediate Government Bond Fund (the “fund”), Class Y shares, returned 5.66% for the fiscal year ended June 30, 2010 (Class A shares returned 5.50% without taking the sales charge into account). By comparison, the fund’s benchmark, the Barclays Capital Intermediate Government Bond Index*, returned 5.68% for the same period.
What were the general economic and market conditions during the fiscal year?
The economy returned to growth and financial markets solidified and extended their sharp recovery from the height of financial crisis. In the second half of 2009, financial conditions continued to normalize, supported by significantly improved conditions at large banks and strong corporate earnings and cash flow. Most large U.S. banks repaid government Troubled Asset Relief Program (TARP) support funds ahead of schedule and at significant profit to taxpayers, readily accessing private capital markets for both equity and debt. Low interest rates and federal programs supported the housing market even as foreclosures continued to climb. Employment conditions improved, albeit haltingly. Federal Reserve support programs helped ease financial conditions and have since been largely eliminated, with growth being increasingly driven by private demand. Fiscal stimulus policies in the U.S., China, and elsewhere – key drivers of growth early in the period – have begun to be scaled back or expire, prompting concerns about the durability of economic recovery.
As 2010 unfolded, market concerns focused on debt sustainability issues for sovereign states, particularly in Europe, highlighted by the Greek debt crisis. The crisis came to a peak the second quarter of 2010, resulting in a $1 trillion support facility created by the European Union. Sovereign debt fears combined with uncertainty surrounding China policy shifts, financial reform legislation, and the Gulf oil spill to drive an increase in market risk premiums for equities and corporate bonds and drove interest rates to low levels as the period came to a close. Despite these economic and market pressures late in the period, fixed income markets, particularly corporate bonds and other non-government sectors, posted strong returns during the fiscal year. The broad improvement in fundamental factors and normalization of market liquidity helped corporates, high yield, and securitized assets outperform. Interest rates moved significantly lower, with the largest declines in intermediate maturities. The U.S. dollar generally declined amid resumption of global activity and normalization of capital flows, however the euro and British pound
declined significantly amid financial stress and economic and policy uncertainty.
How did market conditions and investment strategies affect the fund’s performance?
An economic recovery, driven by significant government stimulus plans, caused all risk assets to perform well. The fund had an allocation to non-government sectors and benefited substantially from the economic and financial conditions during the period. Specifically, positions in agency debt, mortgage-backed securities and other securitized debt drove investment returns as these securities recovered from their distressed prices of late 2008 and early 2009. Strong fundamental credit analysis and trading conviction helped the fund avoid permanent impairments that provided the basis for the recovery in fund holdings and returns from issue selection. The fund was successful in its tactical duration strategy during the period, taking advantage of extreme shifts in sentiment that saw rates traverse a wide range. Our positioning for a steeper yield curve was productive for most of the fiscal year, as both investors’ preference for safety and aversion to interest rate risk benefited the front end of the Treasury curve, while increasingly poor sponsorship of the Treasury market, particularly at ever-richer yield levels, punished the longer maturities.
What strategic moves were made by the fund and why?
Continued improvement of fundamental economic conditions has supported our ongoing allocation to risk assets in the fixed-income sector. For most of the period, we were positioned with a meaningful allocation to agency and securitized sectors given the unique opportunity the market offered in 2009. Given the remarkable recovery in the prices of these assets, we opportunistically reduced our exposure to these sectors to better reflect the return opportunity from here and to lock in some gains. In addition, the significant recovery across the mortgage and securitized sectors provided us with an opportunity to reduce positions in non-agency and commercial mortgage-backed securities.
Looking forward, we anticipate a sustained, though moderate economic growth and generally favorable developments in the global factors that have recently caused concern for the markets. Although moderate, the economic expansion and ongoing liquidity conditions should be sufficient to cause most non-Treasury securities to outperform. Spreads available in these sectors continue to reflect a risk premium that offers an attractive compensation to investors.
* | Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. |
12 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
We are positioned short to the benchmark in duration, looking for rates to correct higher as fears subside about a double-dip economic recession and deflation.
Sector Allocation as of June 30, 20101 (% of net assets) | ||||||
U.S. Government & Agency Securities | 54.7 | % | ||||
U.S. Government Agency Mortgage-Backed Securities | 24.0 | |||||
Asset-Backed Securities | 8.5 | |||||
Corporate Bonds | 3.9 | |||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 3.8 | |||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 3.3 | |||||
Short-Term Investments | 1.3 | |||||
Other Assets and Liabilities, Net2 | 0.5 | |||||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of June 30, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 13 |
Intermediate Government Bond Fund
Annual Performance1,2 as of June 30, 2010 | ||||||||||||||
Since Inception | ||||||||||||||
1 year | 5 years | 10/25/2002 | 10/28/2009 | |||||||||||
Average annual return with sales charge (POP) | ||||||||||||||
Class A | 3.12 | % | 4.28 | % | 3.61 | % | — | |||||||
Class C | — | — | — | 2.00% | ||||||||||
Average annual return without sales charge (NAV) | ||||||||||||||
Class A | 5.50 | % | 4.75 | % | 3.92 | % | — | |||||||
Class C | — | — | — | 3.00% | ||||||||||
Class R | — | — | — | 3.34% | ||||||||||
Class Y | 5.66 | % | 4.90 | % | 4.07 | % | — | |||||||
Barclays Capital Intermediate Government Bond Index3 | 5.68 | % | 5.31 | % | 4.52 | % | 5.83% |
The performance data quoted on this page represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance data quoted. Performance data current to the most recent month-end may be obtained by calling 800.677.3863.
1 | Total returns at net asset value (“NAV”) reflect performance over the time period indicated without including the fund’s maximum sales charge and assume reinvestment of all distributions at NAV. |
Total returns at public offering price (“POP”) reflect performance over the time period indicated including maximum sales charges of 2.25% for Class A shares. Total returns assume reinvestment of all distributions at NAV. |
Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. |
As of the most recent prospectus, the fund’s total annual operating expense ratio (before waivers and including any acquired fund fees and expenses) for Class A, Class C, Class R, and Class Y shares was 1.16%, 1.91%, 1.41%, and 0.91%, respectively. The advisor has contractually agreed to waive fees and reimburse other fund expenses through at least October 31, 2010 so that total annual fund operating expenses (after all waivers and excluding any acquired fund fees and expenses) for Class A, Class C, Class R, and Class Y shares do not exceed 0.75%, 1.60%, 1.10%, and 0.60%, respectively. These fee waivers and expense reimbursements may be terminated at any time after October 31, 2010, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund’s board of directors.
Value of $10,000 Investment1,2,4 as of June 30, 2010 | ||||||||||||
Intermediate Government Bond Fund, Class A (NAV) | $ | 13,434 | ||||||||||
Intermediate Government Bond Fund, Class A (POP) | $ | 13,132 | ||||||||||
Barclays Capital Intermediate Government Bond Index3 | $ | 14,047 | ||||||||||
This chart illustrates the total value of an assumed $10,000 investment in the fund’s Class A shares (from 10/25/2002 to 6/30/2010) as compared to the Barclays Capital Intermediate Government Bond Index3. |
| |||||||||||
2 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Performance reflects fee waivers that are or were in effect. In the absence of such fee waivers, total returns would be reduced. Index performance is for illustrative purposes only and does not reflect any expenses, transaction costs, or cash flow effects. Direct investment in the index is not available. |
3 | The Barclays Capital Intermediate Government Bond Index is an unmanaged index comprised of 70% U.S. Treasury securities and 30% agency securities, all with remaining maturities of between one and ten years. |
4 | Performance for Class C, Class R, and Class Y shares is not presented. Performance for these classes will vary due to the different expense structures. |
14 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Term Bond Fund
Investment Objective: providing current income to the extent consistent with preservation of capital
How did the fund perform for the fiscal year ended June 30, 2010?
The First American Intermediate Bond Fund (the “fund”), Class Y shares, returned 13.87% for the fiscal year ended June 30, 2010 (Class A shares returned 13.64% without taking the sales charge into account). By comparison, the fund’s benchmark, the Barclays Capital Intermediate Government/Credit Bond Index* returned 8.29% for the same period.
What were the general economic and market conditions during the fiscal year?
The economy returned to growth and financial markets solidified and extended their sharp recovery from the height of financial crisis. In the second half of 2009, financial conditions continued to normalize, supported by significantly improved conditions at large banks and strong corporate earnings and cash flow. Most large U.S. banks repaid government Troubled Asset Relief Program (TARP) support funds ahead of schedule and at significant profit to taxpayers, readily accessing private capital markets for both equity and debt. Low interest rates and federal programs supported the housing market even as foreclosures continued to climb. Employment conditions improved, albeit haltingly. Federal Reserve support programs helped ease financial conditions and have since been largely eliminated, with growth being increasingly driven by private demand. Fiscal stimulus policies in the U.S., China and elsewhere – key drivers of growth early in the period – have begun to be scaled back or expire, prompting concerns about the durability of economic recovery.
As 2010 unfolded, market concerns focused on debt sustainability issues for sovereign states, particularly in Europe, highlighted by the Greek debt crisis. The crisis came to a peak the second quarter of 2010, resulting in a $1 trillion support facility created by the European Union. Sovereign debt fears combined with uncertainty surrounding China policy shifts, financial reform legislation, and the gulf oil spill to drive an increase in market risk premiums for equities and corporate bonds, and drove interest rates to low levels as the period came to a close. Despite these economic and market pressures late in the period, fixed-income markets, particularly corporate bonds and other non-government sectors, posted strong returns during the fiscal year. The broad improvement in fundamental factors and normalization of market liquidity helped corporates, high yield, and securitized assets outperform. Interest rates moved significantly lower, with the largest declines in intermediate maturities. The U.S. dollar generally declined amid resumption of global activity and normalization of capital flows; however, the euro and British pound
declined significantly amid financial stress and economic and policy uncertainty.
How did market conditions and investment strategies affect the fund’s performance?
An economic recovery, driven by significant government stimulus plans, caused all risk assets to perform well. The fund was positioned with a significant overweight to non-government sectors and benefited substantially from the economic and financial conditions during the period. Overweight positions to corporate bonds (especially in the financial sector) and securitized debt drove investment returns as these securities recovered from their distressed prices of late 2008 and early 2009. Strong fundamental credit analysis and trading conviction helped the fund avoid permanent impairments that provided the base for the recovery in fund holdings and returns from issue selection. During much of the period, the portfolio was defensively positioned for rising interest rates. This positioning detracted from fund performance as interest rates declined, particularly late in the period.
What strategic moves were made by the fund and why?
Continued improvement of fundamental economic conditions and substantial gains in corporate balance sheet health and cash flow dynamics have supported our ongoing overweight to risk assets in the fixed-income sector. For most of the period, we were positioned with a substantial overweight to credit and securitized sectors – given the unique opportunity the market offered in 2009. Given the remarkable recovery in the prices of these assets, we opportunistically reduced our exposure to these sectors to better reflect the return opportunity from here and to lock in some gains. Additionally, we have reduced issuer-specific weights and sub-sector weights within the broad credit sectors. We have also looked to move into the highest-rated securities of specific issuers; a move that recognizes the large relative recovery of lower-quality securities at the issuer level. In addition, the significant recovery across the mortgage and securitized sectors provided us with an opportunity to reduce positions in non-agency and commercial mortgage-backed securities. During the year, the fund remained significantly underweight Treasury securities, as they offered poor value in our assessment. Portfolio interest rate sensitivity remained defensive at the end of the period, given the low level of Treasury yields.
* | Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 15 |
Intermediate Term Bond Fund
Looking forward, we anticipate a sustained, although moderate economic growth and generally favorable developments in the global factors that have recently caused concern for the markets. Although moderate, the economic expansion and ongoing liquidity conditions
should be sufficient to cause most non-Treasury securities to outperform. Yields and spreads available in these sectors continue to reflect a substantial risk premium that offer attractive compensation to investors.
Sector Allocation as of June 30, 20101 (% of net assets) | ||||||
Corporate Bonds | 52.2 | % | ||||
Asset-Backed Securities | 19.9 | |||||
U.S. Government & Agency Securities | 9.3 | |||||
U.S. Government Agency Mortgage-Backed Securities | 7.9 | |||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 7.5 | |||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 2.6 | |||||
Municipal Bond | 0.2 | |||||
Preferred Stock | 0.0 | |||||
Short-Term Investments | 0.8 | |||||
Other Assets and Liabilities, Net2 | (0.4 | ) | ||||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of June 30, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
16 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Annual Performance1,2 as of June 30, 2010 | ||||||||||
1 year | 5 years | 10 years | ||||||||
Average annual return with sales charge (POP) | ||||||||||
Class A | 11.06 | % | 4.48 | % | 5.24% | |||||
Average annual return without sales charge (NAV) | ||||||||||
Class A | 13.64 | % | 4.95 | % | 5.48% | |||||
Class Y | 13.87 | % | 5.10 | % | 5.65% | |||||
Barclays Capital Intermediate Government/Credit Bond Index3 | 8.29 | % | 5.26 | % | 6.06% |
The performance data quoted on this page represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance data quoted. Performance data current to the most recent month-end may be obtained by calling 800.677.3863.
1 | Total returns at net asset value (“NAV”) reflect performance over the time period indicated without including the fund’s maximum sales charge and assume reinvestment of all distributions at NAV. |
Total returns at public offering price (“POP”) reflect performance over the time period indicated including maximum sales charges of 2.25% for Class A shares. Total returns assume reinvestment of all distributions at NAV. |
Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. |
The fund may also invest in foreign securities. International investment involves risks not typically associated with domestic investing including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, limited liquidity, and volatile prices.
As of the most recent prospectus, the fund’s total annual operating expense ratio (before waivers and including any acquired fund fees and expenses) for Class A and Class Y shares was 1.02% and 0.77%, respectively. The advisor has contractually agreed to waive fees and reimburse other fund expenses through at least October 31, 2010 so that total annual fund operating expenses (after all waivers and excluding any acquired fund fees and expenses) for Class A and Class Y shares do not exceed 0.85% and 0.70%, respectively. These fee waivers and expense reimbursements may be terminated at any time after October 31, 2010, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund’s board of directors.
Value of $10,000 Investment1,2,4 as of June 30, 2010 | ||||||||||
Intermediate Term Bond Fund, Class A (NAV) | $ | 17,044 | ||||||||
Intermediate Term Bond Fund, Class A (POP) | $ | 16,662 | ||||||||
Barclays Capital Intermediate Government/Credit Bond Index3 | $ | 18,015 | ||||||||
This chart illustrates the total value of an assumed $10,000 investment in the fund’s Class A shares (from 6/30/2000 to 6/30/2010) as compared to the Barclays Capital Intermediate Government/Credit Bond Index3. |
| |||||||||
2 Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Performance reflects fee waivers that are or were in effect. In the absence of such fee waivers, total returns would be reduced. Index performance is for illustrative purposes only and does not reflect any expenses, transaction costs, or cash flow effects. Direct investment in the index is not available.
3 An unmanaged index of Treasury securities, other securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and investment-grade corporate debt securities. In each case with maturities of one to 10 years.
4 Performance for Class Y shares is not presented. Performance for this class will vary due to the different expense structure.
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 17 |
Short Term Bond Fund
Investment Objective: providing current income while maintaining a high degree of principal stability
How did the fund perform for the fiscal year ended June 30, 2010?
The First American Short Term Bond Fund (the “fund”), Class Y shares, returned 6.92% for the fiscal year ended June 30, 2010 (Class A shares returned 6.77% without taking the sales charge into account). By comparison, the fund’s benchmark, the Barclays Capital 1-3 Year U.S. Government/Credit Bond Index*, returned 3.77% for the same period.
What were the general economic and market conditions during the fiscal year?
Policy initiatives to stabilize the financial sector and revive the economy took hold as 2009 progressed, leading to a return of investor confidence and a modest recovery in the domestic economy. Improved capital market access gave many large banks the ability to raise equity and debt in order to repay government Troubled Asset Relief Program (TARP) support funds at a profit to taxpayers. As the expansion appeared to be self-sustaining, most of these programs have been largely eliminated. Inventories were rebuilt from the credit crunch-induced low levels, corporate earnings surprised to the upside, payrolls grew at a modest pace, and consumer spending recovered. Even housing showed signs of life, though concerns of a renewed bout of weakness mounted due to poor sales numbers after expiration of the first-time homebuyer credit.
Financial markets remained volatile as 2009 progressed, but risk taking re-emerged as the uncertainty surrounding the U.S. economy subsided. Broad improvement in fundamentals and liquidity enabled non-government bonds to recover steadily throughout 2009. Investors who accumulated large cash positions during the financial crisis moved off the sidelines, hastening the recovery in fixed-income markets to where many risk premiums approached pre-Lehman bankruptcy levels in early 2010. This spread rally proved to be somewhat short lived, however, as new market headwinds surfaced due to the European sovereign debt crisis, financial reform, the gulf oil spill, and a soft patch in domestic growth. Accordingly, many bond market sectors lagged the strong performance posted by Treasuries, which rallied hard given macro concerns and a flight to quality. Still, fixed-income assets such as corporate bonds, commercial mortgage securities, asset-backed securities, and non-agency mortgage securities posted incredibly strong results during the fiscal year, outperforming Treasuries by hundreds, if not thousands, of basis points.
How did market conditions and investment strategies affect the fund’s performance?
Fund performance was solid over the fiscal year, with returns well ahead of benchmark and strong peer group results. With a historical emphasis on high-quality, transparent assets, the fund came through the credit crisis well and investment results were boosted by avoiding significant permanent impairments in both its structured asset and corporate debt holdings. As demand for high-quality assets increased through 2009, most of the fund’s holdings saw valuations returning to pre-crisis levels. We also added significantly to both our short structured assets and corporate bond holdings throughout the year at historically cheap levels in both the new issue and secondary markets. Overall, our underweights to government-related sectors and overweights to other high-quality securities accounted for the majority of our outperformance relative to the benchmark.
What strategic moves were made by the fund and why?
With short-term interest rates at extremely low levels, we have positioned the duration of the fund at the absolute short end of the one-to-three year range allowed by policy. Though we don’t expect an imminent or meaningful rise in rates, we don’t see any significant downside to this conservative posture and expect that this strategy will pay off over the balance of 2010 and 2011 and will be a key factor in managing downside risk associated with higher interest rates. Along the same lines, we have added meaningfully to extremely high-quality floating rate securities, which we believe offer significant yield advantages over cash while limiting an increase in interest rate risk. Though we remain underweight in high-quality government securities relative to the fund’s benchmark (which we believe will boost portfolio income), we have scaled back risk levels in portions of the structured assets sectors as valuation targets were achieved. We have, however, maintained a diversified overweight within the high-grade corporate bond sector and have selectively added a small amount of high-yield bonds to the portfolio as we believe this sector is poised to continue to perform well into 2011 as corporate balance sheets continue to improve and default rates drop.
* | Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. |
18 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Sector Allocation as of June 30, 20101 (% of net assets) | ||||||
Corporate Bonds | 40.1 | % | ||||
Asset-Backed Securities | 25.1 | |||||
U.S. Government Agency Mortgage-Backed Securities | 11.7 | |||||
U.S. Government & Agency Securities | 8.0 | |||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 7.9 | |||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 2.4 | |||||
Short-Term Investments | 4.2 | |||||
Other Assets and Liabilities, Net2 | 0.6 | |||||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of June 30, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 19 |
Short Term Bond Fund
Annual Performance1,2 as of June 30, 2010 | ||||||||||||||
Since Inception | ||||||||||||||
1 year | 5 years | 10 years | 10/28/2009 | |||||||||||
Average annual return with sales charge (POP) | ||||||||||||||
Class A | 4.39 | % | 3.50 | % | 3.90 | % | — | |||||||
Class C | — | — | — | 0.90% | ||||||||||
Average annual return without sales charge (NAV) | ||||||||||||||
Class A | 6.77 | % | 3.97 | % | 4.14 | % | — | |||||||
Class C | — | — | — | 1.90% | ||||||||||
Class Y | 6.92 | % | 4.12 | % | 4.30 | % | — | |||||||
Barclays Capital 1-3 Year U.S. Government/Credit Bond Index3 | 3.77 | % | 4.52 | % | 4.76 | % | 3.08% |
The performance data quoted on this page represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance data quoted. Performance data current to the most recent month-end may be obtained by calling 800.677.3863.
1 | Total returns at net asset value (“NAV”) reflect performance over the time period indicated without including the fund’s maximum sales charge and assume reinvestment of all distributions at NAV. |
Total returns at public offering price (“POP”) reflect performance over the time period indicated including maximum sales charges of 2.25% for Class A shares. Total returns assume reinvestment of all distributions at NAV. |
The fund invests in lower-rated and non-rated securities which present a greater risk of loss to principal and interest than higher-rated securities. |
Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. |
The fund may also invest in foreign securities. International investment involves risks not typically associated with domestic investing including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, limited liquidity, and volatile prices.
As of the most recent prospectus, the fund’s total annual operating expense ratio (before waivers and including any acquired fund fees and expenses) for Class A, Class C, and Class Y shares was 1.07%, 1.82%, and 0.82%, respectively. The advisor has contractually agreed to waive fees and reimburse other fund expenses through at least October 31, 2010 so that total annual fund operating expenses (after all waivers and excluding any acquired fund fees and expenses) for Class A, Class C, and Class Y shares do not exceed 0.75%, 1.60%, and 0.60%, respectively. These fee waivers and expense reimbursements may be terminated at any time after October 31, 2010, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund’s board of directors.
Value of $10,000 Investment1,2,4 as of June 30, 2010 | ||||||||||
Short Term Bond Fund, Class A (NAV) | $ | 15,003 | ||||||||
Short Term Bond Fund, Class A (POP) | $ | 14,659 | ||||||||
Barclays Capital 1-3 Year U.S. Government/Credit Bond Index3 | $ | 15,921 | ||||||||
This chart illustrates the total value of an assumed $10,000 investment in the fund’s Class A shares (from 6/30/2000 to 6/30/2010) as compared to the Barclays Capital 1-3 Year U.S. Government/Credit Bond Index3. |
| |||||||||
2 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Performance reflects fee waivers that are or were in effect. In the absence of such fee waivers, total returns would be reduced. Index performance is for illustrative purposes only and does not reflect any expenses, transaction costs, or cash flow effects. Direct investment in the index is not available. |
3 | An unmanaged index of one-to-three-year U.S. Treasury securities, other securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and investment-grade corporate debt securities. |
4 | Performance for Class C and Class Y shares are not presented. Performance for these class will vary due to the different expense structure. |
20 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return Bond Fund
Investment Objective: providing high level of current income consistent with prudent risk to capital
How did the fund perform for the fiscal year ended June 30, 2010?
The First American Total Return Bond Fund (the “fund”), Class Y shares, returned 20.31% for the fiscal year ended June 30, 2010 (Class A shares returned 20.08% without taking the sales charge into account). By comparison, the fund’s benchmark, the Barclays Capital Aggregate Bond Index*, returned 9.50% for the same period.
What were the general economic and market conditions during the fiscal year?
Policy initiatives to stabilize the financial sector and revive the economy took hold as 2009 progressed, leading to a return of investor confidence and a modest recovery in the domestic economy. Improved capital market access gave many large banks the ability to raise equity and debt in order to repay government Troubled Asset Relief Program (TARP) support funds at a profit to taxpayers. As the expansion appeared to be self-sustaining, most of these programs have been largely eliminated. Inventories were rebuilt from the credit crunch-induced low levels, corporate earnings surprised to the upside, payrolls grew at a modest pace, and consumer spending recovered. Even housing showed signs of life, though concerns of a renewed bout of weakness mounted due to poor sales numbers after expiration of the first-time homebuyer credit.
Financial markets remained volatile as 2009 progressed, but risk taking re-emerged as the uncertainty surrounding the U.S. economy subsided. Broad improvement in fundamentals and liquidity enabled non-government bonds such as corporates, high yield, and securitized assets to recover steadily throughout 2009. Investors who accumulated large cash positions during the financial crisis moved off the sidelines, further supporting the bond market as many risk premiums approached pre-Lehman bankruptcy levels in early 2010. Yield spreads reversed, however, as new market headwinds surfaced due to the European sovereign debt crisis, policy uncertainty in China, financial reform legislation, the gulf oil spill, and a soft patch in domestic growth. The resulting flight-to-quality drove interest rates significantly lower, with the largest declines in intermediate maturities. The U.S. dollar generally declined amid resumption of global activity and normalization of capital flows; however, the euro and British pound declined significantly due in part to sovereign debt concerns and economic and policy uncertainty. Despite these economic and market pressures late in the period, corporate bonds, commercial mortgage securities, asset-backed securities, and non-agency mortgage securities posted incredibly strong results during the fiscal year, outperforming Treasuries by hundreds, if not thousands, of basis points.
How did market conditions and investment strategies affect the fund’s performance?
The fund was positioned with a significant overweight to non-government sectors and benefitted substantially from the recovery in economic and financial conditions during the period. Overweight positions in investment-grade corporate bonds (particularly in the financial sector), securitized debt, and high-yield corporates were key drivers of performance. Continued strong fundamental underwriting and credit analysis helped the fund avoid credit problems in both corporates and securitized sectors, and this lack of permanent impairments provided further basis for a strong recovery in fund holdings and returns from issue selection. The portfolio’s weightings in emerging markets and foreign-currency denominated holdings also added to performance. During much of the period, the portfolio was defensively positioned for rising interest rates. This positioning detracted from fund performance as interest rates declined, particularly late in the fiscal year.
What strategic moves were made by the fund and why?
Continued improvement of fundamental economic conditions and substantial gains in corporate balance sheets and cash flow dynamics has supported our ongoing overweight to the sector. Nonetheless, as valuations for corporates began to normalize, particularly in early 2010, we took the opportunity to reduce positions in corporate bonds and emerging market debt, lowering exposure and locking in some prior gains. In addition, the significant recovery across the mortgage and securitized sectors provided us with an opportunity to reduce positions in non-agency and commercial mortgage-backed securities. During the period, we took advantage of a weakening in high yield to add to the sector. The fund’s position in high-quality, short-maturity asset-backed securities was increased during the period, given the improving credit and attractive yields in the sector. We continue to see significant value in foreign markets, particularly in fiscally stable, growth-oriented countries, such as Canada and Australia, and we added to these during the year. During the period, the fund remained significantly underweight Treasury and mortgage-backed securities, as these sectors have offered poor value in our assessment. Portfolio interest rate sensitivity remained defensive at the end of the period, given the low level of Treasury yields. Looking forward, we anticipate sustained, though moderate economic growth and generally favorable developments in the global factors that have recently caused concern for the markets.
* | Unlike mutual funds, index returns do not reflect any expenses, transaction costs, or cash flow effects. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 21 |
Total Return Bond Fund
Although moderate, the economic expansion and ongoing liquidity conditions should be sufficient to cause most non-Treasury securities to outperform. Yields and spreads available in these sectors continue to reflect a substantial risk premium and thus offer attractive compensation to investors.
Sector Allocation as of June 30, 20101 (% of net assets) | ||||||
Corporate Bonds | 61.0 | % | ||||
Asset-Backed Securities | 14.0 | |||||
U.S. Government Agency Mortgage-Backed Securities | 11.8 | |||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 4.4 | |||||
U.S. Government & Agency Securities | 3.4 | |||||
Preferred Stocks | 0.4 | |||||
Municipal Bond | 0.2 | |||||
Closed-End Funds | 0.1 | |||||
Short-Term Investments | 5.2 | |||||
Other Assets and Liabilities, Net2 | (0.5 | ) | ||||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of June 30, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
22 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Annual Performance1,2 as of June 30, 2010 | ||||||||||||||
Since Inception | ||||||||||||||
1 year | 5 years | 10 years | 9/24/2001 | |||||||||||
Average annual return with sales charge (POP) | ||||||||||||||
Class A | 15.10 | % | 4.82 | % | 6.08 | % | — | |||||||
Class B | 14.22 | % | 4.59 | % | 5.72 | % | — | |||||||
Class C | 18.13 | % | 4.93 | % | 5.73 | % | — | |||||||
Average annual return without sales charge (NAV) | ||||||||||||||
Class A | 20.21 | % | 5.74 | % | 6.55 | % | — | |||||||
Class B | 19.22 | % | 4.92 | % | 5.72 | % | — | |||||||
Class C | 19.13 | % | 4.93 | % | 5.73 | % | — | |||||||
Class R | 19.47 | % | 5.40 | % | — | 5.73% | ||||||||
Class Y | 20.31 | % | 5.98 | % | 6.80 | % | — | |||||||
Barclays Capital Aggregate Bond Index3
|
| 9.50
| %
|
| 5.54
| %
|
| 6.47
| %
| 5.65%
|
The performance data quoted on this page represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance data quoted. Performance data current to the most recent month-end may be obtained by calling 800.677.3863.
1 | Total returns at net asset value (“NAV”) reflect performance over the time period indicated without including the fund’s maximum sales charge and assume reinvestment of all distributions at NAV. |
Total returns at public offering price (“POP”) reflect performance over the time period indicated including maximum sales charges of 4.25% for Class A shares and the maximum contingent deferred sales charge (“CDSC”) for Class C shares for the relevant period. Maximum CDSC is 5.00% for Class B shares, decreasing annually to 0.0% in the seventh year following purchase, and 1.00% for Class C shares. Total returns assume reinvestment of all distributions at NAV. |
The fund invests in lower-rated and nonrated securities, which present a greater risk of loss to principal and interest than higher-rated securities. |
Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. |
The fund may also invest in foreign securities. International investment involves risks not typically associated with domestic investing including risks of adverse currency fluctuations, potential political and economic instability, different accounting standards, limited liquidity, and volatile prices.
As of the most recent prospectus, the fund’s total annual operating expense ratio (including acquired fund fees and expenses) for Class A, Class B, Class C, Class R, and Class Y shares was 1.14%, 1.89%, 1.89%, 1.39%, and 0.89%, respectively. The advisor has contractually agreed to waive fees and reimburse other fund expenses through at least October 31, 2010 so that total annual fund operating expenses (after all waivers and excluding acquired fund fees and expenses) for Class A, Class B, Class C, Class R, and Class Y shares do not exceed 0.89%, 1.75%, 1.75%, 1.25%, and 0.75%, respectively. These fee waivers and expense reimbursements may be terminated at any time after October 31, 2010, at the discretion of the advisor. Prior to that time, such waivers and reimbursements may not be terminated without the approval of the fund’s board of directors.
Value of $10,000 Investment1,2,4 as of June 30, 2010 | ||||||||||
Total Return Bond Fund, Class A (NAV) | $ | 18,855 | ||||||||
Total Return Bond Fund, Class A (POP) | $ | 18,050 | ||||||||
Barclays Capital Aggregate Bond Index3 | $ | 18,714 | ||||||||
This chart illustrates the total value of an assumed $10,000 investment in the fund’s Class A shares (from 6/30/2000 to 6/30/2010) as compared to the Barclays Capital Aggregate Bond Index3. |
| |||||||||
2 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Performance reflects fee waivers that are or were in effect. In the absence of such fee waivers, total returns would be reduced. Index performance is for illustrative purposes only and does not reflect any expenses, transaction costs, or cash flow effects. Direct investment in the index is not available. |
3 | An unmanaged index comprised of mortgage-backed pass-through securities of Ginnie Mae, Fannie Mae, and Freddie Mac. It is formed by grouping the universe of more than |
600,000 individual fixed-rate MBS pools into approximately 3,500 generic aggregates. The aggregates included are priced daily using a matrix pricing routine based on trade price quotations by agency, program, coupon, and degree of seasoning. |
4 | Performance for Class B, Class C, Class R, and Class Y shares is not presented. Performance of these classes will vary due to the different expense structures. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 23 |
As a shareholder of one or more of the funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees, and other fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the funds and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested in a fund at the beginning of the period and held for the entire period from January 1, 2010 to June 30, 2010.
Actual Expenses
For each class of each fund, two lines are presented in the table below – the first line for each class provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested in the particular fund and class, to estimate the expenses that you paid over the period. Simply divide your account value in the fund and class by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” for your fund and class to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
For each class of each fund, the second line for each class provides information about hypothetical account values and hypothetical expenses based on the respective fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the tables for each class of each fund is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Core Bond Fund | ||||||
Beginning Account Value (1/01/10) | Ending Account Value (6/30/10) | Expenses Paid During Period1 (1/01/10 to 6/30/10) | ||||
Class A Actual2 | $ 1,000.00 | $ 1,045.60 | $ 4.77 | |||
Class A Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,020.13 | $ 4.71 | |||
Class B Actual2 | $ 1,000.00 | $ 1,042.20 | $ 8.61 | |||
Class B Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,016.41 | $ 8.50 | |||
Class C Actual2 | $ 1,000.00 | $ 1,041.90 | $ 8.56 | |||
Class C Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,016.41 | $ 8.45 | |||
Class R Actual2 | $ 1,000.00 | $ 1,044.10 | $ 6.08 | |||
Class R Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,018.84 | $ 6.01 | |||
Class Y Actual2 | $ 1,000.00 | $ 1,046.90 | $ 3.50 | |||
Class Y Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,021.37 | $ 3.46 |
1 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.94%, 1.69%, 1.69%, 1.20%, and 0.69% for Class A, Class B, Class C, Class R, and Class Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
2 | Based on the actual returns for the six-month period ended June 30, 2010 of 4.56%, 4.22%, 4.19%, 4.41%, and 4.69% for Class A, Class B, Class C, Class R, and Class Y, respectively. |
24 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
High Income Bond Fund | ||||||
Beginning Account Value (1/01/10) | Ending Account Value (6/30/10) | Expenses Paid During Period1 (1/01/10 to 6/30/10) | ||||
Class A Actual2 | $ 1,000.00 | $ 1,028.50 | $ 5.53 | |||
Class A Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,019.34 | $ 5.51 | |||
Class B Actual2 | $ 1,000.00 | $ 1,024.90 | $ 9.29 | |||
Class B Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,015.62 | $ 9.25 | |||
Class C Actual2 | $ 1,000.00 | $ 1,026.10 | $ 9.29 | |||
Class C Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,015.62 | $ 9.25 | |||
Class R Actual2 | $ 1,000.00 | $ 1,027.90 | $ 6.79 | |||
Class R Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,018.10 | $ 6.76 | |||
Class Y Actual2 | $ 1,000.00 | $ 1,031.00 | $ 4.28 | |||
Class Y Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,020.58 | $ 4.26 |
1 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 1.10%, 1.85%, 1.85%, 1.35%, and 0.85% for Class A, Class B, Class C, Class R, and Class Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
2 | Based on the actual returns for the six-month period ended June 30, 2010 of 2.85%, 2.49%, 2.61%, 2.79%, and 3.10% for Class A, Class B, Class C, Class R, and Class Y, respectively. |
Inflation Protected Securities Fund | ||||||
Beginning Account Value (1/01/10) | Ending Account Value (6/30/10) | Expenses Paid During Period3 (1/01/10 to 6/30/10) | ||||
Class A Actual4 | $ 1,000.00 | $ 1,047.90 | $ 4.32 | |||
Class A Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,020.58 | $ 4.26 | |||
Class C Actual4 | $ 1,000.00 | $ 1,043.40 | $ 8.11 | |||
Class C Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,016.86 | $ 8.00 | |||
Class R Actual4 | $ 1,000.00 | $ 1,046.70 | $ 5.58 | |||
Class R Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,019.34 | $ 5.51 | |||
Class Y Actual4 | $ 1,000.00 | $ 1,049.10 | $ 3.05 | |||
Class Y Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,021.82 | $ 3.01 |
3 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.85%, 1.60%, 1.10%, and 0.60% for Class A, Class C, Class R, and Class Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
4 | Based on the actual returns for the six-month period ended June 30, 2010 of 4.79%, 4.34%, 4.67%, and 4.91% for Class A, Class C, Class R, and Class Y, respectively. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 25 |
Expense Examples
Intermediate Government Bond Fund | ||||||
Beginning Account Value (1/01/10) | Ending Account Value (6/30/10) | Expenses Paid During Period1 (1/01/10 to 6/30/10) | ||||
Class A Actual2 | $1,000.00 | $1,042.00 | $3.80 | |||
Class A Hypothetical (5% return before expenses) | $1,000.00 | $1,021.08 | $3.76 | |||
Class C Actual2 | $1,000.00 | $1,037.60 | $8.08 | |||
Class C Hypothetical (5% return before expenses) | $1,000.00 | $1,016.86 | $8.00 | |||
Class R Actual2 | $1,000.00 | $1,040.20 | $5.56 | |||
Class R Hypothetical (5% return before expenses) | $1,000.00 | $1,019.34 | $5.51 | |||
Class Y Actual2 | $1,000.00 | $1,042.80 | $3.04 | |||
Class Y Hypothetical (5% return before expenses) | $1,000.00 | $1,021.82 | $3.01 |
1 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.75%, 1.60%, 1.10% and 0.60% for Class A, Class C, Class R, and Class Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
2 | Based on the actual returns for the six-month period ended June 30, 2010 of 4.20%, 3.76%, 4.02% and 4.28% for Class A, Class C, Class R, and Class Y, respectively. |
Intermediate Term Bond Fund | ||||||
Beginning Account Value (1/01/10) | Ending Account Value (6/30/10) | Expenses Paid During Period3 (1/01/10 to 6/30/10) | ||||
Class A Actual4 | $1,000.00 | $1,041.80 | $4.30 | |||
Class A Hypothetical (5% return before expenses) | $1,000.00 | $1,020.58 | $4.26 | |||
Class Y Actual4 | $1,000.00 | $1,042.70 | $3.55 | |||
Class Y Hypothetical (5% return before expenses) | $1,000.00 | $1,021.32 | $3.51 |
3 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.85% and 0.70% for Class A and Class Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
4 | Based on the actual returns for the six-month period ended June 30, 2010 of 4.18% and 4.27% for Class A and Class Y, respectively. |
Short Term Bond Fund | ||||||
Beginning Account Value (1/01/10) | Ending Account Value (6/30/10) | Expenses Paid During Period5 (1/01/10 to 6/30/10) | ||||
Class A Actual6 | $1,000.00 | $1,018.40 | $3.75 | |||
Class A Hypothetical (5% return before expenses) | $1,000.00 | $1,021.08 | $3.76 | |||
Class C Actual6 | $1,000.00 | $1,013.10 | $7.94 | |||
Class C Hypothetical (5% return before expenses) | $1,000.00 | $1,016.91 | $7.95 | |||
Class Y Actual6 | $1,000.00 | $1,019.20 | $3.00 | |||
Class Y Hypothetical (5% return before expenses) | $1,000.00 | $1,021.82 | $3.01 |
5 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.75%, 1.59% and 0.60% for Class A, Class C and Class Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
6 | Based on the actual returns for the six-month period ended June 30, 2010 of 1.84%, 1.31% and 1.92% for Class A, Class C and Class Y, respectively. |
26 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return Bond Fund | ||||||||||
Beginning Account Value (1/01/10) | Ending Account Value (6/30/10) | Expenses Paid During Period1 (1/01/10 to 6/30/10) | ||||||||
Class A Actual2 | $ | 1,000.00 | $ | 1,036.40 | $ 4.49 | |||||
Class A Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.38 | $ 4.46 | |||||
Class B Actual2 | $ | 1,000.00 | $ | 1,032.20 | $ 8.77 | |||||
Class B Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.17 | $ 8.70 | |||||
Class C Actual2 | $ | 1,000.00 | $ | 1,031.30 | $ 8.76 | |||||
Class C Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.17 | $ 8.70 | |||||
Class R Actual2 | $ | 1,000.00 | $ | 1,034.50 | $ 6.26 | |||||
Class R Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,018.65 | $ 6.21 | |||||
Class Y Actual2 | $ | 1,000.00 | $ | 1,037.20 | $ 3.74 | |||||
Class Y Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.12 | $ 3.71 |
1 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.89%, 1.74%, 1.74%, 1.24%, and 0.74% for Class A, Class B, Class C, Class R, and Class Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
2 | Based on the actual returns for the six-month period ended June 30, 2010 of 3.64%, 3.22%, 3.13%, 3.45%, and 3.72% for Class A, Class B, Class C, Class R, and Class Y, respectively. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 27 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
First American Investment Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of the Core Bond, High Income Bond, Inflation Protected Securities, Intermediate Government Bond, Intermediate Term Bond, Short Term Bond, and Total Return Bond (series of First American Investment Funds, Inc.) (the “funds”) as of June 30, 2010, and the related statements of operations, changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2010, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the funds listed above of First American Investment Funds, Inc. at June 30, 2010, the results of their operations, changes in their net assets and their financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Minneapolis, Minnesota
August 23, 2010
28 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Core Bond Fund | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Corporate Bonds – 44.0% |
| |||||||
Banking – 7.5% | ||||||||
Bank of America | ||||||||
5.625%, 07/01/2020 | $ | 6,810 | $ | 6,864 | ||||
8.000%, 12/29/2049 r | 6,225 | 6,013 | ||||||
Barclays Bank | ||||||||
5.125%, 01/08/2020 ¬ | 3,665 | 3,646 | ||||||
Citigroup | ||||||||
8.125%, 07/15/2039 | 3,500 | 4,175 | ||||||
Citigroup Capital XXI | ||||||||
8.300%, 12/21/2077 r | 8,545 | 8,322 | ||||||
Fifth Third Bancorp | ||||||||
6.250%, 05/01/2013 | 2,620 | 2,850 | ||||||
First National Bank of Chicago | ||||||||
8.080%, 01/05/2018 | 1,211 | 1,355 | ||||||
HSBC Holdings | ||||||||
6.800%, 06/01/2038 ¬ | 6,370 | 6,865 | ||||||
JPMorgan Chase | ||||||||
5.150%, 10/01/2015 | 3,695 | 3,954 | ||||||
Series 1 | ||||||||
7.900%, 04/29/2049 r q | 9,800 | 10,101 | ||||||
JPMorgan Chase Capital XX | ||||||||
6.550%, 09/29/2066 | 2,510 | 2,400 | ||||||
JPMorgan Chase Capital XXII | ||||||||
6.450%, 01/15/2087 | 2,110 | 1,992 | ||||||
Lloyds TSB Bank | ||||||||
4.375%, 01/12/2015 ¬ n | 2,275 | 2,192 | ||||||
5.800%, 01/13/2020 ¬ n | 6,940 | 6,551 | ||||||
Sovereign Bank | ||||||||
8.750%, 05/30/2018 | 3,675 | 4,213 | ||||||
UBS Preferred Funding Trust V | ||||||||
6.243%, 05/29/2049 r | 2,525 | 2,165 | ||||||
Wells Fargo | ||||||||
7.980%, 03/29/2049 r | 6,630 | 6,829 | ||||||
Wells Fargo Bank | ||||||||
5.950%, 08/26/2036 | 3,415 | 3,477 | ||||||
Wells Fargo Capital X | ||||||||
5.950%, 12/15/2086 | 2,760 | 2,448 | ||||||
Wells Fargo Capital XIII | ||||||||
7.700%, 12/29/2049 r | 9,600 | 9,696 | ||||||
96,108 | ||||||||
Basic Industry – 4.1% | ||||||||
Arcelormittal | ||||||||
6.125%, 06/01/2018 ¬ | 6,200 | 6,485 | ||||||
Celulosa Arauco y Constitucion | ||||||||
5.625%, 04/20/2015 ¬ q | 3,000 | 3,223 | ||||||
Georgia-Pacific | ||||||||
7.125%, 01/15/2017 n | 1,500 | 1,530 | ||||||
Incitec Pivot Finance | ||||||||
6.000%, 12/10/2019 n | 3,830 | 3,923 | ||||||
International Paper | ||||||||
8.700%, 06/15/2038 | 2,300 | 2,934 | ||||||
Newmont Mining | ||||||||
6.250%, 10/01/2039 | 6,000 | 6,548 | ||||||
Rio Tinto Finance U.S.A. | ||||||||
6.500%, 07/15/2018 ¬ | 3,385 | 3,858 | ||||||
Southern Copper | ||||||||
7.500%, 07/27/2035 | 2,640 | 2,849 | ||||||
6.750%, 04/16/2040 | 2,000 | 1,977 | ||||||
Teck Cominco Limited | ||||||||
6.125%, 10/01/2035 ¬ | 2,785 | 2,771 |
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
U.S. Steel | ||||||||
7.000%, 02/01/2018 | $ | 3,595 | $ | 3,555 | ||||
Vale Overseas | ||||||||
5.625%, 09/15/2019 ¬ | 1,000 | 1,055 | ||||||
6.875%, 11/10/2039 ¬ | 3,895 | 4,069 | ||||||
Vedanta Resources | ||||||||
9.500%, 07/18/2018 ¬ n | 2,055 | 2,183 | ||||||
Yara International | ||||||||
7.875%, 06/11/2019 ¬ n | 5,000 | 5,984 | ||||||
52,944 | ||||||||
Brokerage – 2.2% | ||||||||
Bear Stearns | ||||||||
7.250%, 02/01/2018 | 3,750 | 4,379 | ||||||
Goldman Sachs Capital II | ||||||||
5.793%, 12/29/2049 q r | 2,415 | 1,823 | ||||||
Goldman Sachs Group | ||||||||
6.750%, 10/01/2037 | 3,685 | 3,613 | ||||||
Merrill Lynch | ||||||||
6.050%, 05/16/2016 | 9,935 | 10,266 | ||||||
Morgan Stanley | ||||||||
7.300%, 05/13/2019 | 2,450 | 2,635 | ||||||
Series MTN | ||||||||
6.625%, 04/01/2018 | 4,830 | 5,062 | ||||||
27,778 | ||||||||
Capital Goods – 0.2% | ||||||||
L-3 Communications | ||||||||
4.750%, 07/15/2020 | 3,190 | 3,214 | ||||||
Communications – 5.9% | ||||||||
AT&T | ||||||||
6.550%, 02/15/2039 q | 5,530 | 6,194 | ||||||
British Sky Broadcasting | ||||||||
6.100%, 02/15/2018 ¬ n | 3,450 | 3,872 | ||||||
British Telecom | ||||||||
5.950%, 01/15/2018 ¬ | 5,345 | 5,574 | ||||||
CBS | ||||||||
5.750%, 04/15/2020 | 2,270 | 2,437 | ||||||
Comcast | ||||||||
6.300%, 11/15/2017 | 2,952 | 3,370 | ||||||
6.400%, 03/01/2040 q | 1,565 | 1,685 | ||||||
DirecTV Holdings | ||||||||
5.200%, 03/15/2020 | 6,215 | 6,477 | ||||||
Embarq | ||||||||
7.082%, 06/01/2016 | 2,575 | 2,745 | ||||||
NBC Universal | ||||||||
6.400%, 04/30/2040 n | 3,060 | 3,269 | ||||||
New Communications Holdings | ||||||||
8.500%, 04/15/2020 q n | 3,500 | 3,509 | ||||||
News America | ||||||||
6.900%, 03/01/2019 q | 3,500 | 4,146 | ||||||
6.650%, 11/15/2037 | 3,590 | 4,029 | ||||||
Rogers Communications | ||||||||
6.800%, 08/15/2018 ¬ | 5,530 | 6,537 | ||||||
Sprint Nextel | ||||||||
6.000%, 12/01/2016 q | 2,000 | 1,795 | ||||||
Telecom Italia Capital | ||||||||
7.175%, 06/18/2019 ¬ | 4,740 | 5,103 | ||||||
Telefonica Emisiones | ||||||||
7.045%, 06/20/2036 ¬ q | 2,875 | 3,181 | ||||||
Time Warner Cable | ||||||||
8.750%, 02/14/2019 | 2,000 | 2,524 | ||||||
6.750%, 06/15/2039 q | 2,410 | 2,662 | ||||||
Verizon Communications | ||||||||
6.900%, 04/15/2038 | 5,870 | 6,860 | ||||||
75,969 | ||||||||
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 29 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Consumer Cyclical – 2.3% | ||||||||
Home Depot | ||||||||
5.875%, 12/16/2036 | $ | 3,570 | $ | 3,660 | ||||
International Game Technology | ||||||||
7.500%, 06/15/2019 | 3,000 | 3,484 | ||||||
J.C. Penney | ||||||||
5.650%, 06/01/2020 | 2,585 | 2,527 | ||||||
R.R. Donnelley & Sons | ||||||||
7.625%, 06/15/2020 | 1,990 | 1,973 | ||||||
Target | ||||||||
7.000%, 01/15/2038 | 4,285 | 5,474 | ||||||
Viacom | ||||||||
6.875%, 04/30/2036 | 4,105 | 4,647 | ||||||
Whirlpool | ||||||||
5.500%, 03/01/2013 | 4,905 | 5,253 | ||||||
Wyndham Worldwide | ||||||||
6.000%, 12/01/2016 | 2,000 | 1,940 | ||||||
28,958 | ||||||||
Consumer Non Cyclical – 3.8% |
| |||||||
Altria Group | ||||||||
9.950%, 11/10/2038 q | 6,055 | 7,955 | ||||||
Anheuser-Busch InBev Worldwide | ||||||||
8.200%, 01/15/2039 n | 3,850 | 5,065 | ||||||
Boston Scientific | ||||||||
4.500%, 01/15/2015 | 3,655 | 3,590 | ||||||
Bunge Limited Finance | ||||||||
8.500%, 06/15/2019 | 5,000 | 5,971 | ||||||
ConAgra Foods | ||||||||
7.000%, 04/15/2019 | 2,090 | 2,507 | ||||||
Constellation Brands | ||||||||
7.250%, 05/15/2017 q | 1,000 | 1,014 | ||||||
General Mills | ||||||||
5.400%, 06/15/2040 | 3,780 | 4,019 | ||||||
HCA | ||||||||
9.250%, 11/15/2016 | 1,090 | 1,155 | ||||||
Kraft Foods | ||||||||
6.500%, 08/11/2017 | 3,455 | 4,013 | ||||||
6.500%, 02/09/2040 | 3,825 | 4,278 | ||||||
Lorillard Tobacco | ||||||||
8.125%, 06/23/2019 | 3,350 | 3,715 | ||||||
Smithfield Foods | ||||||||
7.000%, 08/01/2011 q | 1,385 | 1,408 | ||||||
UnitedHealth Group | ||||||||
6.875%, 02/15/2038 | 3,185 | 3,601 | ||||||
48,291 | ||||||||
Electric – 2.1% | ||||||||
Dynegy Holdings | ||||||||
7.750%, 06/01/2019 | 1,825 | 1,261 | ||||||
Majapahit Holding | ||||||||
7.750%, 01/20/2020 ¬ n | 1,800 | 1,971 | ||||||
MidAmerican Energy Holdings | ||||||||
6.125%, 04/01/2036 | 5,185 | 5,709 | ||||||
Ohio Power | ||||||||
6.000%, 06/01/2016 | 4,100 | 4,643 | ||||||
Pacific Gas & Electric | ||||||||
5.400%, 01/15/2040 q | 5,665 | 5,866 | ||||||
Transalta | ||||||||
6.650%, 05/15/2018 ¬ | 3,470 | 3,866 | ||||||
Virginia Electric Power | ||||||||
5.950%, 09/15/2017 | 2,880 | 3,315 | ||||||
26,631 | ||||||||
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Energy – 3.9% | ||||||||
Anadarko Petroleum | ||||||||
6.200%, 03/15/2040 | $ | 3,230 | $ | 2,556 | ||||
Canadian Oil Sands | ||||||||
7.750%, 05/15/2019 ¬ n | 4,690 | 5,658 | ||||||
Cenovus Energy | ||||||||
5.700%, 10/15/2019 ¬ n | 3,000 | 3,277 | ||||||
Cloud Peak Energy Resources | ||||||||
8.500%, 12/15/2019 n | 2,000 | 1,990 | ||||||
ConocoPhillips | ||||||||
6.500%, 02/01/2039 | 3,045 | 3,677 | ||||||
Forest Oil | ||||||||
7.250%, 06/15/2019 | 2,500 | 2,413 | ||||||
Marathon Oil | ||||||||
7.500%, 02/15/2019 | 2,500 | 2,998 | ||||||
Nexen | ||||||||
6.400%, 05/15/2037 ¬ | 3,475 | 3,624 | ||||||
Petrobras International Finance | ||||||||
6.875%, 01/20/2040 ¬ | 2,495 | 2,515 | ||||||
Petro-Canada | ||||||||
6.800%, 05/15/2038 ¬ | 3,235 | 3,712 | ||||||
Pride International | ||||||||
8.500%, 06/15/2019 q | 1,000 | 1,038 | ||||||
Smith International | ||||||||
9.750%, 03/15/2019 | 3,180 | 4,328 | ||||||
Suncor Energy | ||||||||
6.100%, 06/01/2018 ¬ | 3,650 | 4,111 | ||||||
Valero Energy | ||||||||
6.125%, 02/01/2020 | 4,290 | 4,408 | ||||||
Weatherford International | ||||||||
7.000%, 03/15/2038 ¬ | 3,740 | 3,539 | ||||||
49,844 | ||||||||
Finance – 3.8% | ||||||||
American Express Credit Series C | ||||||||
7.300%, 08/20/2013 | 2,230 | 2,525 | ||||||
Anglogold Holdings | ||||||||
6.500%, 04/15/2040 ¬ | 4,530 | 4,673 | ||||||
Capital One Bank | ||||||||
8.800%, 07/15/2019 | 5,780 | 7,216 | ||||||
Capital One Capital III | ||||||||
7.686%, 08/15/2036 | 2,755 | 2,590 | ||||||
Countrywide Financial | ||||||||
6.250%, 05/15/2016 | 4,390 | 4,576 | ||||||
Credit Agricole | ||||||||
6.637%, 05/29/2049 r ¬ n | 3,270 | 2,403 | ||||||
Discover Financial Services | ||||||||
10.250%, 07/15/2019 | 3,690 | 4,392 | ||||||
General Electric Capital | ||||||||
6.000%, 08/07/2019 | 1,500 | 1,624 | ||||||
Series MTN | ||||||||
6.875%, 01/10/2039 | 4,915 | 5,427 | ||||||
International Lease Finance | ||||||||
6.375%, 03/25/2013 | 3,855 | 3,614 | ||||||
Rockies Express Pipeline | ||||||||
5.625%, 04/15/2020 n | 3,120 | 2,967 | ||||||
SLM | ||||||||
5.400%, 10/25/2011 | 2,010 | 1,998 | ||||||
Transcapitalinvest | ||||||||
5.670%, 03/05/2014 ¬ n | 4,995 | 5,091 | ||||||
49,096 | ||||||||
The accompanying notes are an integral part of the financial statements.
30 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Insurance – 3.8% | ||||||||
Allied World Assurance | ||||||||
7.500%, 08/01/2016 ¬ | $ | 4,805 | $ | 5,292 | ||||
American International Group | ||||||||
8.175%, 05/15/2068 r | 3,360 | 2,654 | ||||||
Genworth Financial | ||||||||
6.515%, 05/22/2018 | 3,940 | 3,793 | ||||||
Hartford Financial Services Group | ||||||||
6.625%, 03/30/2040 | 3,190 | 2,962 | ||||||
Series MTN | ||||||||
6.000%, 01/15/2019 | 5,860 | 5,912 | ||||||
Lincoln National | ||||||||
8.750%, 07/01/2019 q | 4,795 | 5,876 | ||||||
6.050%, 04/20/2067 r | 3,205 | 2,404 | ||||||
MetLife | ||||||||
6.750%, 06/01/2016 | 3,400 | 3,846 | ||||||
7.717%, 02/15/2019 | 860 | 1,024 | ||||||
MetLife Capital Trust IV | ||||||||
7.875%, 12/15/2067 r n | 3,735 | 3,586 | ||||||
Pacific Life Insurance | ||||||||
6.000%, 02/10/2020 q n | 1,640 | 1,740 | ||||||
Prudential Financial | ||||||||
5.900%, 03/17/2036 | 2,500 | 2,370 | ||||||
Series MTN | ||||||||
6.625%, 12/01/2037 | 4,590 | 4,814 | ||||||
ZFS Finance USA Trust V | ||||||||
6.500%, 05/09/2067 r n | 2,755 | 2,466 | ||||||
48,739 | ||||||||
Natural Gas – 1.0% | ||||||||
Duke Energy | ||||||||
5.050%, 09/15/2019 | 3,430 | 3,657 | ||||||
Kinder Morgan Energy | ||||||||
6.950%, 01/15/2038 | 3,060 | 3,252 | ||||||
NGPL Pipeco | ||||||||
7.119%, 12/15/2017 n | 2,640 | 2,518 | ||||||
Transocean | ||||||||
6.000%, 03/15/2018 ¬ q | 3,015 | 2,775 | ||||||
12,202 | ||||||||
Other Utility – 0.3% | ||||||||
American Water Capital | ||||||||
6.085%, 10/15/2017 | 3,105 | 3,424 | ||||||
Real Estate – 1.4% | ||||||||
Health Care Properties – REIT Series MTN | ||||||||
6.300%, 09/15/2016 | 3,310 | 3,426 | ||||||
Prologis – REIT | ||||||||
6.875%, 03/15/2020 q | 5,995 | 5,666 | ||||||
Simon Property Group – REIT | ||||||||
5.650%, 02/01/2020 | 3,000 | 3,177 | ||||||
Vornado Realty – REIT | ||||||||
4.250%, 04/01/2015 | 5,700 | 5,667 | ||||||
17,936 | ||||||||
Technology – 0.1% | ||||||||
Avnet | ||||||||
5.875%, 06/15/2020 | 1,570 | 1,591 | ||||||
Transportation – 1.6% | ||||||||
American Airlines | ||||||||
10.375%, 07/02/2019 | 2,483 | 2,756 | ||||||
Continental Airlines Series 2007-1, Class C | ||||||||
7.339%, 04/19/2014 | 1,814 | 1,714 |
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Delta Airlines | ||||||||
7.711%, 03/18/2013 | $ | 2,100 | $ | 2,079 | ||||
Series 2002-1, Class G-1 | ||||||||
6.718%, 07/02/2024 | 1,094 | 1,028 | ||||||
Erac USA Finance | ||||||||
6.375%, 10/15/2017 n | 2,945 | 3,315 | ||||||
Norfolk Southern | ||||||||
5.900%, 06/15/2019 q | 5,000 | 5,748 | ||||||
Northwest Airlines | ||||||||
7.027%, 11/01/2019 q | 2,086 | 1,982 | ||||||
United Airlines | ||||||||
6.636%, 01/02/2024 | 2,357 | 2,169 | ||||||
20,791 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $523,711) | 563,516 | |||||||
U.S. Government Agency Mortgage-Backed Securities – 22.6% |
| |||||||
Adjustable Rate r – 2.2% | ||||||||
Federal Home Loan Mortgage | ||||||||
2.722%, 05/01/2025, #846757 | 165 | 172 | ||||||
2.748%, 04/01/2029, #847190 | 932 | 974 | ||||||
2.961%, 03/01/2030, #847180 | 1,334 | 1,396 | ||||||
2.598%, 07/01/2030, #847240 | 1,633 | 1,704 | ||||||
2.574%, 06/01/2031, #846984 | 644 | 666 | ||||||
5.811%, 07/01/2036, #1K1238 | 6,219 | 6,622 | ||||||
Federal National Mortgage Association Pool | ||||||||
2.707%, 08/01/2030, #555843 | 3,655 | 3,816 | ||||||
2.700%, 03/01/2031, #545359 | 231 | 241 | ||||||
2.638%, 09/01/2033, #725553 | 1,334 | 1,393 | ||||||
5.246%, 11/01/2034, #735054 | 5,577 | 5,939 | ||||||
5.812%, 09/01/2037, #946441 | 4,948 | 5,289 | ||||||
Government National Mortgage Association Pool | ||||||||
3.625%, 08/20/2023, #008259 | 1 | 1 | ||||||
28,213 | ||||||||
Fixed Rate – 20.4% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
4.500%, 03/01/2018, #P10023 | 1,628 | 1,716 | ||||||
4.500%, 05/01/2018, #P10032 | 3,066 | 3,236 | ||||||
6.500%, 01/01/2028, #G00876 | 665 | 736 | ||||||
6.500%, 11/01/2028, #C00676 | 1,242 | 1,382 | ||||||
6.500%, 12/01/2028, #C00689 | 921 | 1,026 | ||||||
6.500%, 04/01/2029, #C00742 | 525 | 585 | ||||||
6.500%, 07/01/2031, #A17212 | 1,951 | 2,172 | ||||||
6.000%, 11/01/2033, #A15521 | 1,851 | 2,035 | ||||||
7.000%, 08/01/2037, #H09059 | 1,684 | 1,862 | ||||||
5.849%, 09/01/2037, #1G2163 | 4,701 | 5,023 | ||||||
7.000%, 09/01/2037, #H01292 | 964 | 1,065 | ||||||
Federal National Mortgage Association Pool | ||||||||
3.790%, 07/01/2013, #386314 | 10,167 | 10,638 | ||||||
5.500%, 02/01/2014, #440780 | 743 | 804 | ||||||
7.000%, 02/01/2015, #535206 | 190 | 203 | ||||||
7.000%, 08/01/2016, #591038 | 318 | 349 | ||||||
5.500%, 12/01/2017, #673010 | 2,019 | 2,188 | ||||||
6.000%, 10/01/2022, #254513 | 2,167 | 2,391 | ||||||
5.500%, 01/01/2025, #255575 | 5,443 | 5,918 | ||||||
7.000%, 04/01/2026, #340798 | 231 | 261 | ||||||
7.000%, 05/01/2026, #250551 | 250 | 283 | ||||||
6.000%, 08/01/2027, #256852 | 5,121 | 5,588 | ||||||
6.500%, 02/01/2029, #252255 | 1,171 | 1,307 | ||||||
6.500%, 12/01/2031, #254169 | 2,373 | 2,599 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 31 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
6.000%, 04/01/2032, #745101 | $ | 5,060 | $ | 5,455 | ||||
7.000%, 07/01/2032, #254379 | 1,577 | 1,780 | ||||||
7.000%, 07/01/2032, #545813 | 674 | 763 | ||||||
7.000%, 07/01/2032, #545815 | 424 | 481 | ||||||
6.000%, 09/01/2032, #254447 | 2,404 | 2,652 | ||||||
6.000%, 03/01/2033, #688330 | 4,086 | 4,507 | ||||||
5.500%, 04/01/2033, #694605 | 5,021 | 5,415 | ||||||
6.500%, 05/01/2033, #555798 | 3,371 | 3,764 | ||||||
5.500%, 07/01/2033, #709446 | 6,385 | 6,886 | ||||||
5.500%, 10/01/2033, #555800 | 3,855 | 4,157 | ||||||
6.000%, 11/01/2033, #772130 | 331 | 364 | ||||||
6.000%, 11/01/2033, #772256 | 796 | 877 | ||||||
5.000%, 03/01/2034, #725248 | 2,449 | 2,604 | ||||||
5.000%, 03/01/2034, #725250 | 4,454 | 4,737 | ||||||
5.000%, 06/01/2034, #782909 | 1 | 1 | ||||||
6.500%, 06/01/2034, #735273 | 5,447 | 6,081 | ||||||
4.500%, 07/01/2034 « | 12,900 | 13,370 | ||||||
6.000%, 10/01/2034, #781776 | 1,048 | 1,150 | ||||||
5.500%, 07/01/2036, #995112 | 16,714 | 18,000 | ||||||
6.000%, 08/01/2036, #885536 | 2,328 | 2,534 | ||||||
6.000%, 09/01/2036, #900555 | 4,421 | 4,861 | ||||||
5.500%, 04/01/2037, #918883 | 4,703 | 5,055 | ||||||
6.000%, 06/01/2037, #944340 | 2,990 | 3,249 | ||||||
6.500%, 08/01/2037, #256845 | 1,543 | 1,692 | ||||||
6.000%, 09/01/2037, #256890 | 3,089 | 3,331 | ||||||
5.000%, 03/01/2038, #973241 | 17,756 | 18,816 | ||||||
5.000%, 05/01/2038, #983077 | 3,220 | 3,412 | ||||||
5.500%, 05/01/2038, #889618 | 15,450 | 16,606 | ||||||
6.000%, 06/01/2038, #889706 | 535 | 581 | ||||||
5.500%, 07/01/2038, #985344 | 16,127 | 17,334 | ||||||
6.000%, 08/01/2038, #257307 | 3,723 | 4,043 | ||||||
6.000%, 10/01/2038, #993138 | 5,856 | 6,359 | ||||||
5.500%, 01/01/2039, #995258 | 9,558 | 10,274 | ||||||
4.500%, 12/01/2039, #932323 | 9,476 | 9,839 | ||||||
5.000%, 05/01/2040, #AD4375 | 14,963 | 15,854 | ||||||
Government National Mortgage Association | ||||||||
7.500%, 11/15/2030, #537699 | 269 | 306 | ||||||
260,557 | ||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $295,754) | 288,770 | |||||||
Asset-Backed Securities – 17.7% |
| |||||||
Automotive – 3.0% | ||||||||
Bank of America Auto Trust | ||||||||
1.310%, 07/15/2014 | 4,680 | 4,694 | ||||||
Chrysler Financial Lease Trust | ||||||||
1.780%, 06/15/2011 n | 7,265 | 7,290 | ||||||
Ford Credit Auto Owner Trust | ||||||||
3.960%, 05/15/2013 | 6,500 | 6,663 | ||||||
Harley-Davidson Motorcycle Trust | ||||||||
4.850%, 06/15/2012 | 1,480 | 1,483 | ||||||
Santander Drive Auto Receivables Trust | ||||||||
1.360%, 03/15/2013 | 10,790 | 10,798 | ||||||
USAA Auto Owner Trust | ||||||||
Series 2008-1, Class A3 | ||||||||
4.160%, 04/16/2012 | 797 | 802 | ||||||
Series 2010-1, Class A2 | ||||||||
0.630%, 06/15/2012 | 5,000 | 4,997 |
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
World Omni Auto Receivables | ||||||||
0.700%, 05/15/2011 | $ | 1,530 | $ | 1,529 | ||||
38,256 | ||||||||
Credit Cards – 2.6% | ||||||||
American Express Issuance | ||||||||
0.680%, 08/15/2011 r | 4,125 | 4,117 | ||||||
Bank of America Credit Card | ||||||||
0.930%, 04/15/2013 r | 3,000 | 3,005 | ||||||
Capital One Multi-Asset Execution Trust Series 2006-14A, Class A | ||||||||
0.360%, 08/15/2013 r | 3,900 | 3,898 | ||||||
Chase Issuance Trust | ||||||||
4.260%, 05/15/2013 | 5,000 | 5,147 | ||||||
Discover Card Master Trust | ||||||||
Series 2007-A1, Class A1 | ||||||||
5.650%, 03/16/2020 | 5,185 | 5,964 | ||||||
Series 2007-C1, Class C1 | ||||||||
0.670%, 01/15/2013 r | 4,150 | 4,148 | ||||||
Series 2008-A3, Class A3 | ||||||||
5.100%, 10/15/2013 | 5,000 | 5,166 | ||||||
Discover Card Master Trust I | ||||||||
Series 2003-4, Class B2 | ||||||||
0.780%, 05/15/2013 r | 697 | 696 | ||||||
Series 2005-4, Class B1 | ||||||||
0.600%, 06/18/2013 r | 1,430 | 1,425 | ||||||
33,566 | ||||||||
Equipment Leases – 0.1% | ||||||||
GE Equipment Small Ticket | ||||||||
0.382%, 11/15/2010 n | 1,193 | 1,193 | ||||||
Home Equity – 2.6% | ||||||||
Amresco Residential Security | ||||||||
6.960%, 03/25/2027 ¥ | 36 | 35 | ||||||
Countrywide Asset-Backed Certificates | ||||||||
Series 2003-SC1, Class M2 | ||||||||
2.597%, 09/25/2023 r | 766 | 455 | ||||||
Series 2007-1, Class 2A-1 | ||||||||
0.397%, 07/25/2037 r | 5,388 | 5,236 | ||||||
Renaissance Home Equity | ||||||||
5.140%, 11/25/2035 | 4,365 | 3,147 | ||||||
RBSSP Resecuritization Trust | ||||||||
Series 2009-10, Class 8A1 | ||||||||
0.495%, 05/26/2036 r n | 4,818 | 4,555 | ||||||
Series 2009-11, Class 4A1 | ||||||||
2.095%, 12/26/2037 r n | 1,805 | 1,796 | ||||||
Series 2009-8, Class 3A1 | ||||||||
0.485%, 03/26/2037 r n | 1,790 | 1,747 | ||||||
Series 2009-9, Class 9A1 | ||||||||
0.565%, 09/26/2037 r n | 5,918 | 5,473 | ||||||
Series 2010-4, Class 1A1 | ||||||||
0.455%, 03/26/2036 r n | 7,534 | 6,508 | ||||||
Series 2010-4, Class 5A1 | ||||||||
0.505%, 02/26/2037 r n | 5,203 | 4,758 | ||||||
33,710 | ||||||||
The accompanying notes are an integral part of the financial statements.
32 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Manufactured Housing – 0.2% | ||||||||
Green Tree Financial | ||||||||
Series 2008-MH1, Class A1 | ||||||||
7.000%, 04/25/2038 n | $ | 2,203 | $ | 2,251 | ||||
Other – 9.0% | ||||||||
Banc of America Commercial Mortgage | ||||||||
4.561%, 11/10/2041 r | 6,515 | 6,652 | ||||||
Bear Stearns Commercial Mortgage Securities | ||||||||
Series 2005-PW10, Class A4 | ||||||||
5.405%, 12/11/2040 r | 6,640 | 6,979 | ||||||
Series 2007-T28, Class D | ||||||||
6.176%, 09/11/2042 r n ¥ | 3,165 | 1,102 | ||||||
Citigroup Commercial Mortgage Trust | ||||||||
6.297%, 12/10/2049 r | 3,095 | 1,923 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||
Series 2005-CD1, Class A4 | ||||||||
5.397%, 07/15/2044 r | 4,570 | 4,896 | ||||||
Series 2007-CD4, Class A2B | ||||||||
5.205%, 12/11/2049 q | 4,700 | 4,837 | ||||||
Series 2007-CD5, Class A4 | ||||||||
5.886%, 11/15/2044 | 620 | 628 | ||||||
Commercial Mortgage Pass-Through Certificates | ||||||||
5.449%, 02/05/2019 n | 4,225 | 4,215 | ||||||
GE Capital Commercial Mortgage Corporation | ||||||||
4.853%, 07/10/2045 | 1,967 | 1,966 | ||||||
Greenwich Capital Commercial Funding | ||||||||
3.285%, 07/05/2035 | 727 | 727 | ||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
3.853%, 06/15/2043 n | 7,815 | 8,008 | ||||||
LB-UBS Commercial Mortgage Trust | ||||||||
Series 2004-C2, Class A4 | ||||||||
4.367%, 03/15/2036 | 6,000 | 6,077 | ||||||
Series 2005-C7, Class A2 | ||||||||
5.103%, 11/15/2030 | 5,574 | 5,602 | ||||||
Series 2007-C7, Class AM | ||||||||
6.374%, 09/15/2045 r | 4,775 | 3,884 | ||||||
Merrill Lynch Mortgage Trust | ||||||||
Series 2005-CIP1, Class C | ||||||||
5.330%, 07/12/2038 r ¥ | 3,102 | 2,075 | ||||||
Series 2008-C1, Class A4 | ||||||||
5.690%, 02/12/2051 | 7,820 | 7,878 | ||||||
Morgan Stanley Capital I | ||||||||
Series 2006-IQ12, Class A4 | ||||||||
5.332%, 12/15/2043 | 4,485 | 4,591 | ||||||
Series 2007-HQ11, Class A4 | ||||||||
5.447%, 02/12/2044 r | 9,400 | 9,341 | ||||||
Morgan Stanley Dean Witter Capital I | ||||||||
5.980%, 01/15/2039 | 7,505 | 7,915 | ||||||
Small Business Administration | ||||||||
Series 2006-P10B, Class 1 | ||||||||
5.681%, 08/10/2016 | 8,131 | 8,800 | ||||||
Series 2010-10A, Class 1 | ||||||||
4.108%, 03/10/2020 | 7,000 | 7,112 |
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||
Series 2005-C19, Class A5 | ||||||||
4.661%, 05/15/2044 | $ | 9,660 | $ | 9,941 | ||||
115,149 | ||||||||
Utilities – 0.2% | ||||||||
PG&E Energy Recovery Funding | ||||||||
5.030%, 03/25/2014 | 2,923 | 3,036 | ||||||
Total Asset-Backed Securities | ||||||||
(Cost $222,115) | 227,161 | |||||||
Collateralized Mortgage Obligation – U.S. Government Agency |
| |||||||
Adjustable Rate r – 1.6% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
Series 2704, Class JF | ||||||||
0.900%, 05/15/2023 | 4,256 | 4,221 | ||||||
Series 2755, Class FN | ||||||||
0.800%, 04/15/2032 | 4,400 | 4,402 | ||||||
Series 3591, Class FP | ||||||||
0.950%, 06/15/2039 | 6,000 | 6,004 | ||||||
Federal National Mortgage Association | ||||||||
Series 2005-59, Class DF | ||||||||
0.547%, 05/25/2035 | 6,081 | 6,042 | ||||||
20,669 | ||||||||
Fixed Rate – 3.9% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
Series 1022, Class J | ||||||||
6.000%, 12/15/2020 | 25 | 27 | ||||||
Series 162, Class F | ||||||||
7.000%, 05/15/2021 | 71 | 79 | ||||||
Series 1790, Class A | ||||||||
7.000%, 04/15/2022 | 42 | 45 | ||||||
Series 188, Class H | ||||||||
7.000%, 09/15/2021 | 134 | 149 | ||||||
Series 2763, Class TA | ||||||||
4.000%, 03/15/2011 | 2,261 | 2,298 | ||||||
Series 2901, Class UB | ||||||||
5.000%, 03/15/2033 | 5,000 | 5,386 | ||||||
Series 6, Class C | ||||||||
9.050%, 06/15/2019 | 14 | 16 | ||||||
Federal National Mortgage Association | ||||||||
Series 1988-24, Class G | ||||||||
7.000%, 10/25/2018 | 30 | 34 | ||||||
Series 1989-44, Class H | ||||||||
9.000%, 07/25/2019 | 28 | 32 | ||||||
Series 1989-90, Class E | ||||||||
8.700%, 12/25/2019 | 4 | 5 | ||||||
Series 1990-102, Class J | ||||||||
6.500%, 08/25/2020 | 26 | 29 | ||||||
Series 1990-105, Class J | ||||||||
6.500%, 09/25/2020 | 229 | 259 | ||||||
Series 1990-30, Class E | ||||||||
6.500%, 03/25/2020 | 20 | 22 | ||||||
Series 1990-61, Class H | ||||||||
7.000%, 06/25/2020 | 23 | 25 | ||||||
Series 1990-72, Class B | ||||||||
9.000%, 07/25/2020 | 19 | 23 | ||||||
Series 1991-56, Class M | ||||||||
6.750%, 06/25/2021 | 76 | 81 | ||||||
Series 1992-120, Class C | ||||||||
6.500%, 07/25/2022 | 26 | 28 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 33 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Series 2002-83, Class MD | ||||||||
5.000%, 09/25/2016 | $ | 4,354 | $ | 4,467 | ||||
Series 2003-3, Class BC | ||||||||
5.000%, 02/25/2018 | 14,030 | 15,245 | ||||||
Series 2003-30, Class AE | ||||||||
3.900%, 10/25/2017 | 9,894 | 10,211 | ||||||
Series 2005-44, Class PC | ||||||||
5.000%, 11/25/2027 | 5,900 | 6,091 | ||||||
Series 2005-62, Class JE | ||||||||
5.000%, 06/25/2035 | 5,269 | 5,621 | ||||||
50,173 | ||||||||
Z-Bonds x – 0.1% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
8.250%, 07/15/2021 | 44 | 51 | ||||||
Federal National Mortgage Association | ||||||||
7.000%, 10/25/2021 | 158 | 181 | ||||||
Series 1996-35, Class Z | ||||||||
7.000%, 07/25/2026 | 751 | 847 | ||||||
1,079 | ||||||||
Total Collateralized Mortgage Obligation – | ||||||||
(Cost $48,333) | 71,921 | |||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities – 4.4% |
| |||||||
Adjustable Rate r – 1.4% | ||||||||
Arkle Master Issuer | ||||||||
0.480%, 05/17/2011 n | 7,120 | 7,076 | ||||||
Countrywide Home Loans | ||||||||
5.281%, 02/25/2034 | 1,555 | 1,562 | ||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
0.896%, 02/25/2048 n | 1,835 | 1,842 | ||||||
Indymac Index Mortgage Loan Trust | ||||||||
2.820%, 03/25/2035 | 1,489 | 1,034 | ||||||
JPMorgan Alternative Loan Trust | ||||||||
0.627%, 04/25/2047 | 3,647 | 2,042 | ||||||
JPMorgan Mortgage Trust | ||||||||
5.935%, 01/25/2037 | 1,026 | 230 | ||||||
Structured Adjustable Rate Mortgage Loan Trust | ||||||||
3.128%, 08/25/2034 | 363 | 305 | ||||||
Wachovia Mortgage Loan Trust | ||||||||
3.522%, 10/20/2035 | 5,291 | 4,057 | ||||||
Washington Mutual | ||||||||
5.796%, 09/25/2036 | 1,713 | 296 | ||||||
18,444 | ||||||||
Fixed Rate – 3.0% | ||||||||
Banc of America Funding | ||||||||
5.500%, 06/25/2037 ¥ | 1,784 | 619 |
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Banc of America Mortgage Securities | ||||||||
4.750%, 08/25/2033 | $ | 267 | $ | 267 | ||||
Countrywide Alternative Loan Trust | ||||||||
Series 2004-2CB, Class 1A1 | ||||||||
4.250%, 03/25/2034 | 926 | 929 | ||||||
Series 2004-J1, Class 1A1 | ||||||||
6.000%, 02/25/2034 | 512 | 524 | ||||||
Series 2006-19CB, Class A15 | ||||||||
6.000%, 08/25/2036 | 2,629 | 2,022 | ||||||
Credit Suisse First Boston Mortgage Securities | ||||||||
6.248%, 04/25/2033 | 4,076 | 3,646 | ||||||
GMAC Mortgage Corporation Loan Trust | ||||||||
Series 2006-J1, Class A1 | ||||||||
5.750%, 04/25/2036 | 2,949 | 2,617 | ||||||
Series 2010-1, Class A | ||||||||
4.250%, 07/25/2040 n | 5,785 | 5,771 | ||||||
GSMPS Mortgage Loan Trust | ||||||||
6.848%, 03/25/2043 ¥ | 738 | 511 | ||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
5.440%, 06/12/2047 q | 6,280 | 6,272 | ||||||
Lehman Brothers Mortgage Trust | ||||||||
6.420%, 07/25/2047 | 2,509 | 2,362 | ||||||
Master Alternative Loans Trust | ||||||||
Series 2004-1, Class 3A1 | ||||||||
7.000%, 01/25/2034 | 1,005 | 1,019 | ||||||
Series 2005-2, Class 1A3 | ||||||||
6.500%, 03/25/2035 | 2,173 | 1,912 | ||||||
OBP Depositor Trust | ||||||||
4.646%, 07/15/2045 « n | 5,590 | 5,614 | ||||||
Residential Asset Mortgage Products | ||||||||
6.500%, 07/25/2032 | 1,645 | 1,697 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
5.750%, 03/25/2037 | 2,295 | 2,012 | ||||||
Westam Mortgage Financial | ||||||||
6.360%, 08/26/2020 ¥ | 38 | 40 | ||||||
37,834 | ||||||||
Total Collateralized Mortgage Obligations – Private Mortgage-Backed Securities | ||||||||
(Cost $62,048) | 56,278 | |||||||
U.S. Government & Agency Securities – 4.2% |
| |||||||
U.S. Treasuries – 4.2% | ||||||||
U.S. Treasury Bond | ||||||||
4.625%, 02/15/2040 q | 3,230 | 3,631 | ||||||
U.S. Treasury Note | ||||||||
0.875%, 02/28/2011 | 2,245 | 2,254 | ||||||
1.000%, 08/31/2011 | 4,865 | 4,896 | ||||||
2.250%, 05/31/2014 q | 2,315 | 2,389 | ||||||
2.625%, 06/30/2014 q | 2,650 | 2,770 | ||||||
2.375%, 02/28/2015 q | 8,500 | 8,760 | ||||||
3.375%, 11/15/2019 q | 4,900 | 5,075 |
The accompanying notes are an integral part of the financial statements.
34 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Core Bond Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
3.625%, 02/15/2020 | $ | 9,745 | $ | 10,296 | ||||
3.500%, 05/15/2020 q | 12,925 | 13,527 | ||||||
Total U.S. Government & Agency Securities |
| |||||||
(Cost $51,910) | 53,598 | |||||||
Preferred Stock – 0.0% |
| |||||||
Sovereign – 0.0% | ||||||||
Fannie Mae | ||||||||
(Cost $5,173) | 218,000 | 74 | ||||||
Short-Term Investments – 2.3% |
| |||||||
Money Market Fund – 2.0% |
| |||||||
First American Prime Obligations Fund, Class Z | ||||||||
0.089% Å W | 25,358,922 | 25,359 | ||||||
U.S. Treasury Obligations – 0.3% |
| |||||||
U.S. Treasury Bills ¨ | ||||||||
0.128%, 07/29/2010 | $ | 865 | 865 | |||||
0.205%, 12/16/2010 | 2,000 | 1,998 | ||||||
0.231%, 04/07/2011 | 1,540 | 1,537 | ||||||
4,400 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $29,759) | 29,759 | |||||||
Investment Purchased with Proceeds from Securities Lending –6.4% |
| |||||||
Mount Vernon Securities Lending Prime Portfolio 0.282% W † | ||||||||
(Cost $81,712) | 81,711,633 | 81,712 | ||||||
Total Investments p – 107.2% |
| |||||||
(Cost $1,320,515) | 1,372,789 | |||||||
Other Assets and Liabilities, Net – (7.2)% |
| (92,180 | ) | |||||
Total Net Assets – 100.0% |
| $ | 1,280,609 | |||||
> | Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements. |
r | A Variable Rate Security – The rate shown is the rate in effect as of June 30, 2010. |
¬ | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of June 30, 2010, the fair value of foreign securities was $125,656 or 9.8% of total net assets. |
q | This security or a portion of this security is out on loan at June 30, 2010. Total loaned securities had a fair value of $79,807 at June 30, 2010. See note 2 in Notes to Financial Statements. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of June 30, 2010, the fair value of these investments was $144,259 or 11.3% of total net assets. See note 2 in Notes to Financial Statements. |
« | Security purchased on a when-issued basis. On June 30, 2010, the total cost of investments purchased on a when-issued basis was $18,834 or 1.5% of total net assets. See note 2 in Notes to Financial Statements. |
¥ | Security considered illiquid. As of June 30, 2010, the fair value of the fund’s investments considered to be illiquid was $4,382 or 0.3% of total net assets. See note 2 in Notes to Financial Statements. |
x | Z-Bonds – Represents securities that pay no interest or principal during their accrual periods, but accrue additional principal at specified rates. Interest rate shown represents current yield based upon the cost basis and estimated future cash flows. |
l | Non-income producing security. |
Å | Investment in affiliated security. This money market fund is advised by FAF Advisors, Inc., which also serves as advisor for this fund. See note 3 in Notes to Financial Statements. |
Core Bond Fund (concluded) | ||||
W | The rate shown is the annualized seven-day effective yield as of June 30, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts and/or swap agreements. Yield shown is the annualized effective yield as of June 30, 2010. See note 2 in Notes to Financial Statements. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. See note 2 in Notes to Financial Statements. |
p | On June 30, 2010, the cost of investments for federal income tax purposes was $1,328,898. The aggregate gross unrealized appreciation and depreciation of investments, based on this cost, were as follows: |
Gross unrealized appreciation | $ | 75,623 | ||
Gross unrealized depreciation | (31,742 | ) | ||
Net unrealized appreciation | $ | 43,891 | ||
REIT | – Real Estate Investment Trust |
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Sold | Notional Contract Value | Unrealized Depreciation | ||||||||||||
U.S. Treasury 2 Year | | September 2010 | | (25 | ) | $ | (5,471 | ) | $ (22) | |||||||
U.S. Treasury 5 Year | | September 2010 | | (948 | ) | (112,197 | ) | (1,159 | ) | |||||||
U.S. Treasury 10 Year | | September 2010 | | (320 | ) | (39,215 | ) | (491 | ) | |||||||
U.S. Treasury Long | | September 2010 | | (149 | ) | (18,998 | ) | (445 | ) | |||||||
$(2,117) | ||||||||||||||||
Interest Rate Swap Agreements | ||||||||||||||||||||||||
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Depreciation | ||||||||||||||||||
JPMorgan Chase | | 3-Month LIBOR | | Receive | 1.255 | % | 11/03/2011 | $ | 33,000 | $ (259) | ||||||||||||||
JPMorgan Chase | | 3-Month LIBOR | | Receive | 3.858 | % | 01/19/2020 | 8,000 | (745 | ) | ||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.358 | % | 09/25/2011 | 35,000 | (378 | ) | ||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.133 | % | 03/25/2012 | 33,000 | (242 | ) | ||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.048 | % | 06/25/2012 | 33,000 | (54 | ) | ||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 3.001 | % | 08/03/2014 | 14,000 | (861 | ) | ||||||||||||||
$(2,539) | ||||||||||||||||||||||||
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 35 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
High Income Bond Fund | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
High Yield Corporate Bonds – 86.4% |
| |||||||
Banking – 0.4% | ||||||||
ABN AMRO | ||||||||
6.523%, 12/29/2049 r n | $ | 2,000 | $ | 1,580 | ||||
Basic Industry – 12.2% | ||||||||
AbitibiBowater | ||||||||
9.000%, 08/01/2011 ª | 4,000 | 1,320 | ||||||
AK Steel | ||||||||
7.625%, 05/15/2020 q | 1,750 | 1,698 | ||||||
Aleris International | ||||||||
10.000%, 12/15/2016 ª | 1,000 | 9 | ||||||
Appleton Papers | ||||||||
11.250%, 12/15/2015 n | 1,000 | 850 | ||||||
Berry Plastics | ||||||||
8.875%, 09/15/2014 | 1,500 | 1,444 | ||||||
10.250%, 03/01/2016 | 1,350 | 1,178 | ||||||
Boise Cascade | ||||||||
7.125%, 10/15/2014 | 1,800 | 1,694 | ||||||
Boise Paper Holdings | ||||||||
9.000%, 11/01/2017 n q | 1,100 | 1,133 | ||||||
Cascades | ||||||||
7.750%, 12/15/2017 ¬ | 1,500 | 1,492 | ||||||
Cellu Tissue Holdings | ||||||||
11.500%, 06/01/2014 | 1,000 | 1,080 | ||||||
CF Industries | ||||||||
6.875%, 05/01/2018 | 1,500 | 1,526 | ||||||
Cleaver-Brooks | ||||||||
12.250%, 05/01/2016 n | 1,000 | 973 | ||||||
Crown Cork & Seal | ||||||||
7.375%, 12/15/2026 q | 895 | 814 | ||||||
Drummond | ||||||||
9.000%, 10/15/2014 n | 750 | 754 | ||||||
Exopack Holding | ||||||||
11.250%, 02/01/2014 | 1,000 | 1,012 | ||||||
Georgia Gulf | ||||||||
9.000%, 01/15/2017 n | 1,300 | 1,319 | ||||||
Hexion US Finance | ||||||||
9.750%, 11/15/2014 q | 2,000 | 1,890 | ||||||
Huntsman International | ||||||||
7.875%, 11/15/2014 | 2,000 | 1,930 | ||||||
Intertape Polymer Group | ||||||||
8.500%, 08/01/2014 | 2,615 | 2,118 | ||||||
Massey Energy | ||||||||
6.875%, 12/15/2013 | 2,000 | 1,953 | ||||||
Mercer International | ||||||||
9.250%, 02/15/2013 | 750 | 726 | ||||||
Millar Western Forest | ||||||||
7.750%, 11/15/2013 ¬ | 1,700 | 1,462 | ||||||
Momentive Performance | ||||||||
9.750%, 12/01/2014 q | 1,350 | 1,276 | ||||||
Nova Chemicals | ||||||||
3.748%, 11/15/2013 r ¬ | 2,000 | 1,835 | ||||||
Olin | ||||||||
8.875%, 08/15/2019 | 2,100 | 2,226 | ||||||
Patriot Coal | ||||||||
8.250%, 04/30/2018 | 1,500 | 1,444 | ||||||
PE Paper Escrow | ||||||||
12.000%, 08/01/2014 n ¬ | 1,500 | 1,648 | ||||||
Ply Gem Industries | ||||||||
11.750%, 06/15/2013 | 1,000 | 1,045 | ||||||
Severstal Columbus | ||||||||
10.250%, 02/15/2018 n | 1,000 | 1,033 | ||||||
Solutia | ||||||||
7.875%, 03/15/2020 q | 2,250 | 2,244 |
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Steel Dynamics | ||||||||
7.625%, 03/15/2020 n q | $ | 1,575 | $ | 1,567 | ||||
Vedanta Resources | ||||||||
9.500%, 07/18/2018 n ¬ | 1,750 | 1,859 | ||||||
Verso Paper Holdings | ||||||||
9.125%, 08/01/2014 q | 1,750 | 1,671 | ||||||
Weyerhaeuser | ||||||||
7.375%, 03/15/2032 | 1,000 | 988 | ||||||
47,211 | ||||||||
Brokerage – 0.4% | ||||||||
E*Trade Financial | ||||||||
12.500%, 11/30/2017 | 1,593 | 1,693 | ||||||
Capital Goods – 3.9% | ||||||||
BE Aerospace | ||||||||
8.500%, 07/01/2018 q | 1,000 | 1,050 | ||||||
Bombardier | ||||||||
7.500%, 03/15/2018 n ¬ | 2,600 | 2,678 | ||||||
Case New Holland | ||||||||
7.875%, 12/01/2017 n q | 1,250 | 1,259 | ||||||
Hawker Beechcraft Acquisition | ||||||||
9.750%, 04/01/2017 | 700 | 432 | ||||||
Kratos Defense & Security Solutions | ||||||||
10.000%, 06/01/2017 n | 1,500 | 1,523 | ||||||
Manitowoc | ||||||||
9.500%, 02/15/2018 q | 1,750 | 1,750 | ||||||
Spirit Aerosystems | ||||||||
7.500%, 10/01/2017 | 1,300 | 1,274 | ||||||
Transdigm | ||||||||
7.750%, 07/15/2014 n | 1,000 | 1,000 | ||||||
Triumph Group | ||||||||
8.625%, 07/15/2018 n | 1,000 | 1,020 | ||||||
United Rentals North America | ||||||||
10.875%, 06/15/2016 | 1,600 | 1,716 | ||||||
Wyle Services | ||||||||
10.500%, 04/01/2018 n | 1,500 | 1,492 | ||||||
15,194 | ||||||||
Communications – 10.3% | ||||||||
Belo | ||||||||
7.250%, 09/15/2027 | 1,950 | 1,638 | ||||||
Citizens Communications | ||||||||
9.000%, 08/15/2031 | 1,800 | 1,670 | ||||||
Clear Channel Communications | ||||||||
10.750%, 08/01/2016 | 800 | 562 | ||||||
6.875%, 06/15/2018 | 1,910 | 926 | ||||||
Clear Channel Worldwide | ||||||||
9.250%, 12/15/2017 n | 1,300 | 1,307 | ||||||
Clearwire Communications | ||||||||
12.000%, 12/01/2015 n | 2,000 | 1,982 | ||||||
CSC Holdings | ||||||||
8.625%, 02/15/2019 | 1,000 | 1,051 | ||||||
Digicel Group | ||||||||
8.250%, 09/01/2017 n q ¬ | 2,750 | 2,722 | ||||||
Fairpoint Communications | ||||||||
13.125%, 04/02/2018 ª | 1,043 | 94 | ||||||
Frontier Communications | ||||||||
7.875%, 04/15/2015 n | 1,500 | 1,511 | ||||||
Gannett | ||||||||
9.375%, 11/15/2017 n | 2,000 | 2,105 | ||||||
Intelsat Bermuda | ||||||||
11.250%, 02/04/2017 ¬ | 1,500 | 1,519 |
The accompanying notes are an integral part of the financial statements.
36 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Intelsat Jackson Holdings | ||||||||
11.250%, 06/15/2016 q ¬ | $ | 1,000 | $ | 1,065 | ||||
8.500%, 11/01/2019 n ¬ | 1,500 | 1,515 | ||||||
Level 3 Financing | ||||||||
10.000%, 02/01/2018 n | 1,800 | 1,593 | ||||||
McClatchy | ||||||||
11.500%, 02/15/2017 n q | 1,750 | 1,776 | ||||||
Media General | ||||||||
11.750%, 02/15/2017 n q | 1,850 | 1,878 | ||||||
Mediacom Capital | ||||||||
9.125%, 08/15/2019 q | 1,325 | 1,279 | ||||||
MTS International Funding | ||||||||
8.625%, 06/22/2020 n ¬ | 1,500 | 1,552 | ||||||
Qwest Communications International | ||||||||
8.000%, 10/01/2015 n q | 1,000 | 1,028 | ||||||
Sirius XM Radio | ||||||||
8.750%, 04/01/2015 n q | 2,300 | 2,265 | ||||||
Sprint Nextel | ||||||||
8.375%, 08/15/2017 | 3,175 | 3,175 | ||||||
Unitymedia | ||||||||
8.125%, 12/01/2017 n ¬ | 1,500 | 1,470 | ||||||
UPC Holding | ||||||||
9.875%, 04/15/2018 n q ¬ | 2,300 | 2,312 | ||||||
Wind Acquisition | ||||||||
11.750%, 07/15/2017 n ¬ | 1,850 | 1,896 | ||||||
Young Broadcasting | ||||||||
10.000%, 03/01/2011 ª | 500 | — | ||||||
39,891 | ||||||||
Consumer Cyclical – 16.1% | ||||||||
Allison Transmission | ||||||||
11.000%, 11/01/2015 n q | 1,425 | 1,493 | ||||||
AMC Entertainment | ||||||||
8.750%, 06/01/2019 q | 1,000 | 1,005 | ||||||
American Axle & Manufacturing | ||||||||
7.875%, 03/01/2017 | 2,100 | 1,822 | ||||||
Arvinmeritor | ||||||||
10.625%, 03/15/2018 | 1,250 | 1,325 | ||||||
Beazer Homes USA | ||||||||
9.125%, 06/15/2018 | 1,750 | 1,619 | ||||||
Bon-Ton Department Stores | ||||||||
10.250%, 03/15/2014 q | 1,250 | 1,228 | ||||||
Boyd Gaming | ||||||||
6.750%, 04/15/2014 q | 1,000 | 875 | ||||||
Burlington Coat Factory | ||||||||
14.500%, 10/15/2014 q | 750 | 787 | ||||||
Chukchansi Economic | ||||||||
8.000%, 11/15/2013 n q | 1,000 | 700 | ||||||
Corporativo Javer | ||||||||
13.000%, 08/04/2014 n ¬ | 1,150 | 1,271 | ||||||
Desarrolladora Homex | ||||||||
9.500%, 12/11/2019 n ¬ | 1,350 | 1,384 | ||||||
Felcor Lodging – REIT | ||||||||
10.000%, 10/01/2014 q | 1,300 | 1,359 | ||||||
Fontainebleau Las Vegas | ||||||||
11.000%, 06/15/2015 n ª | 1,000 | 4 | ||||||
Ford Motor Credit | ||||||||
7.000%, 04/15/2015 | 1,000 | 989 | ||||||
8.000%, 12/15/2016 | 3,000 | 3,068 | ||||||
General Motors | ||||||||
8.250%, 07/15/2023 ª q | 3,750 | 1,134 | ||||||
Geo Group | ||||||||
7.750%, 10/15/2017 n | 1,300 | 1,310 | ||||||
Giti Tire | ||||||||
12.250%, 01/26/2012 ¬ | 700 | 675 |
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Greektown Holdings | ||||||||
10.750%, 12/01/2013 n ª | $ | 30 | $ | 2 | ||||
Hanesbrands | ||||||||
8.000%, 12/15/2016 | 1,000 | 1,014 | ||||||
Harrahs | ||||||||
11.250%, 06/01/2017 | 1,250 | 1,316 | ||||||
12.750%, 04/15/2018 n q | 1,500 | 1,432 | ||||||
Hilton Hotels | ||||||||
4.936%, 11/15/2013 r n | 3,000 | 2,603 | ||||||
Lear | ||||||||
7.875%, 03/15/2018 | 2,300 | 2,306 | ||||||
Levi Strauss | ||||||||
7.625%, 05/15/2020 n q | 1,000 | 980 | ||||||
Macys Retail Holdings | ||||||||
5.900%, 12/01/2016 | 1,800 | 1,805 | ||||||
7.000%, 02/15/2028 | 1,000 | 962 | ||||||
MCE Finance | ||||||||
10.250%, 05/15/2018 n q ¬ | 1,000 | 1,039 | ||||||
MGM Mirage | ||||||||
6.750%, 09/01/2012 | 1,500 | 1,395 | ||||||
7.625%, 01/15/2017 q | 2,350 | 1,839 | ||||||
Navistar International | ||||||||
8.250%, 11/01/2021 | 2,500 | 2,537 | ||||||
Oxford Industries | ||||||||
11.375%, 07/15/2015 | 1,000 | 1,100 | ||||||
Pinnacle Entertainment | ||||||||
8.625%, 08/01/2017 n q | 2,500 | 2,575 | ||||||
Quintiles Transnational | ||||||||
9.500%, 12/30/2014 n | 1,500 | 1,507 | ||||||
QVC | ||||||||
7.500%, 10/01/2019 n q | 1,750 | 1,719 | ||||||
Realogy | ||||||||
11.000%, 04/15/2014 | 2,875 | 2,437 | ||||||
Rite Aid | ||||||||
9.750%, 06/12/2016 | 2,000 | 2,090 | ||||||
7.500%, 03/01/2017 | 2,300 | 2,035 | ||||||
Sally Holdings | ||||||||
10.500%, 11/15/2016 q | 1,300 | 1,391 | ||||||
Snoqualmie Entertainment | ||||||||
9.125%, 02/01/2015 n | 1,500 | 1,256 | ||||||
Sonic Automotive | ||||||||
9.000%, 03/15/2018 | 1,500 | 1,522 | ||||||
Standard Pacific | ||||||||
8.375%, 05/15/2018 q | 1,500 | 1,425 | ||||||
Trimas | ||||||||
9.750%, 12/15/2017 n | 1,000 | 1,012 | ||||||
TRW Automotive | ||||||||
8.875%, 12/01/2017 n | 1,000 | 1,030 | ||||||
62,377 | ||||||||
Consumer Non Cyclical – 9.4% |
| |||||||
Alliance One International | ||||||||
10.000%, 07/15/2016 n q | 2,000 | 2,035 | ||||||
Apria Healthcare Group I | ||||||||
12.375%, 11/01/2014 n | 1,450 | 1,548 | ||||||
Biomet | ||||||||
10.375%, 10/15/2017 q | 1,500 | 1,612 | ||||||
Cardinal Health | ||||||||
9.500%, 04/15/2015 | 829 | 789 | ||||||
Central Garden & Pet Company | ||||||||
8.250%, 03/01/2018 | 1,250 | 1,239 | ||||||
Community Health Systems | ||||||||
8.875%, 07/15/2015 | 2,000 | 2,063 | ||||||
Dole Foods | ||||||||
13.875%, 03/15/2014 | 790 | 926 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 37 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Dyncorp International | ||||||||
10.375%, 07/01/2017 n | $ | 1,250 | $ | 1,253 | ||||
Fage Dairy | ||||||||
9.875%, 02/01/2020 n ¬ | 1,350 | 1,134 | ||||||
Grupo Papelero Scribe | ||||||||
8.875%, 04/07/2020 n ¬ | 1,000 | 864 | ||||||
HCA | ||||||||
6.750%, 07/15/2013 | 1,250 | 1,225 | ||||||
7.875%, 02/15/2020 | 1,465 | 1,507 | ||||||
Health Management Association | ||||||||
6.125%, 04/15/2016 | 550 | 521 | ||||||
Healthsouth | ||||||||
8.125%, 02/15/2020 q | 1,500 | 1,474 | ||||||
Ingles Markets | ||||||||
8.875%, 05/15/2017 | 1,250 | 1,272 | ||||||
Land O Lakes Capital Trust I | ||||||||
7.450%, 03/15/2028 n | 2,000 | 1,720 | ||||||
Marfrig Overseas | ||||||||
9.625%, 11/16/2016 n ¬ | 1,500 | 1,493 | ||||||
National Mentor Holdings | ||||||||
11.250%, 07/01/2014 | 1,000 | 997 | ||||||
Pinnacle Foods Finance | ||||||||
9.250%, 04/01/2015 n | 1,800 | 1,836 | ||||||
Radiation Therapy Services | ||||||||
9.875%, 04/15/2017 n | 750 | 720 | ||||||
Revlon Consumer Products | ||||||||
9.750%, 11/15/2015 n | 1,350 | 1,384 | ||||||
Reynolds Group | ||||||||
8.500%, 05/15/2018 n | 1,750 | 1,717 | ||||||
Smithfield Foods | ||||||||
7.750%, 05/15/2013 | 1,500 | 1,486 | ||||||
Spectrum Brands | ||||||||
9.500%, 06/15/2018 n | 1,500 | 1,547 | ||||||
Symbion | ||||||||
11.000%, 08/23/2015 | 1,250 | 1,091 | ||||||
Tenet Healthcare | ||||||||
7.375%, 02/01/2013 | 1,600 | 1,600 | ||||||
10.000%, 05/01/2018 n | 1,500 | 1,658 | ||||||
36,711 | ||||||||
Electric – 3.7% | ||||||||
AES | ||||||||
8.000%, 10/15/2017 q | 2,100 | 2,121 | ||||||
CMS Energy | ||||||||
1.253%, 01/15/2013 r | 2,500 | 2,356 | ||||||
Dynegy Holdings | ||||||||
7.750%, 06/01/2019 | 1,350 | 933 | ||||||
Edison Mission Energy | ||||||||
7.200%, 05/15/2019 q | 1,500 | 923 | ||||||
Energy Future Holdings | ||||||||
10.875%, 11/01/2017 | 1,500 | 1,110 | ||||||
9.750%, 10/15/2019 | 2,000 | 1,878 | ||||||
10.000%, 01/15/2020 n q | 1,000 | 995 | ||||||
PPL Capital Funding | ||||||||
6.700%, 03/30/2067 r | 2,300 | 2,024 | ||||||
RRI Energy | ||||||||
7.625%, 06/15/2014 q | 2,000 | 1,970 | ||||||
14,310 | ||||||||
Energy – 8.2% | ||||||||
Aquilex Holdings | ||||||||
11.125%, 12/15/2016 n q | 1,600 | 1,600 | ||||||
Arch Coal | ||||||||
8.750%, 08/01/2016 n | 1,000 | 1,043 |
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Atlas Energy | ||||||||
12.125%, 08/01/2017 | $ | 1,050 | $ | 1,160 | ||||
10.750%, 02/01/2018 | 1,750 | 1,866 | ||||||
ATP Oil & Gas | ||||||||
11.875%, 05/01/2015 n q | 900 | 653 | ||||||
Chesapeake Energy | ||||||||
9.500%, 02/15/2015 | 1,350 | 1,492 | ||||||
Cloud Peak Energy Resources | ||||||||
8.250%, 12/15/2017 n | 1,775 | 1,757 | ||||||
Concho Resources | ||||||||
8.625%, 10/01/2017 | 1,550 | 1,596 | ||||||
DDI Holdings | ||||||||
5.143%, 03/15/2012 r n ¬ | 2,144 | 1,972 | ||||||
Forest Oil | ||||||||
8.500%, 02/15/2014 | 1,500 | 1,564 | ||||||
Headwaters | ||||||||
11.375%, 11/01/2014 | 1,750 | 1,767 | ||||||
Holly | ||||||||
9.875%, 06/15/2017 n | 1,250 | 1,284 | ||||||
Indo Integrated Energy II | ||||||||
9.750%, 11/05/2016 n ¬ | 750 | 780 | ||||||
Linn Energy | ||||||||
8.625%, 04/15/2020 n q | 2,125 | 2,175 | ||||||
Opti Canada | ||||||||
7.875%, 12/15/2014 ¬ | 1,250 | 1,088 | ||||||
Petroplus Finance | ||||||||
9.375%, 09/15/2019 n ¬ | 1,500 | 1,290 | ||||||
Pioneer Drilling | ||||||||
9.875%, 03/15/2018 n | 1,350 | 1,323 | ||||||
RDS Ultra-Deepwater | ||||||||
11.875%, 03/15/2017 n ¬ | 1,000 | 943 | ||||||
Sabine Pass LNG | ||||||||
7.500%, 11/30/2016 | 1,245 | 1,036 | ||||||
Sandridge Energy | ||||||||
9.875%, 05/15/2016 n | 1,850 | 1,878 | ||||||
SKDP 1 | ||||||||
12.000%, 05/19/2017 ¬ | 1,000 | 940 | ||||||
Stallion Oilfield Holdings | ||||||||
10.500%, 02/15/2015 n q | 1,000 | 940 | ||||||
Stone Energy | ||||||||
6.750%, 12/15/2014 | 1,900 | 1,615 | ||||||
31,762 | ||||||||
Finance – 5.8% | ||||||||
American Real Estate Partners | ||||||||
7.750%, 01/15/2016 n q | 1,500 | 1,459 | ||||||
Americredit | ||||||||
8.500%, 07/01/2015 | 1,000 | 1,027 | ||||||
CIT Group | ||||||||
7.000%, 05/01/2016 q | 4,735 | 4,321 | ||||||
Credit Acceptance | ||||||||
9.125%, 02/01/2017 n | 2,600 | 2,613 | ||||||
Glen Meadow | ||||||||
6.505%, 02/12/2067 r n | 2,000 | 1,437 | ||||||
GMAC | ||||||||
6.750%, 12/01/2014 | 2,800 | 2,709 | ||||||
8.300%, 02/12/2015 n | 3,090 | 3,129 | ||||||
ILFC E-Capital Trust I | ||||||||
5.900%, 12/21/2065 r n | 1,800 | 1,154 | ||||||
LBI Escrow | ||||||||
8.000%, 11/01/2017 n | 1,500 | 1,545 | ||||||
National Money Mart | ||||||||
10.375%, 12/15/2016 n ¬ | 1,000 | 1,015 | ||||||
Nuveen Investments | ||||||||
10.500%, 11/15/2015 | 1,500 | 1,305 |
The accompanying notes are an integral part of the financial statements.
38 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Squaretwo Financial | ||||||||
11.625%, 04/01/2017 n | $ | 1,000 | $ | 946 | ||||
22,660 | ||||||||
Industrial Other – 1.3% | ||||||||
Edgen Murray | ||||||||
12.250%, 01/15/2015 n | 1,500 | 1,267 | ||||||
Goodman Global Group | ||||||||
11.320%, 12/15/2014 n q € | 2,500 | 1,525 | ||||||
Lupatech Finance | ||||||||
9.875%, 07/10/2049 n ¬ | 750 | 716 | ||||||
RBS Global & Rexnord | ||||||||
8.500%, 05/01/2018 n | 1,700 | 1,649 | ||||||
5,157 | ||||||||
Insurance – 3.1% | ||||||||
American International Group | ||||||||
6.250%, 03/15/2087 r | 5,300 | 3,604 | ||||||
Genworth Financial | ||||||||
6.150%, 11/15/2066 r | 2,700 | 1,842 | ||||||
Liberty Mutual Group | ||||||||
10.750%, 06/15/2088 r n | 2,825 | 3,051 | ||||||
Lincoln National | ||||||||
6.050%, 04/20/2067 r | 2,585 | 1,939 | ||||||
XL Capital | ||||||||
6.500%, 12/29/2049 r q ¬ | 2,500 | 1,725 | ||||||
12,161 | ||||||||
Natural Gas – 1.4% | ||||||||
Crosstex Energy | ||||||||
8.875%, 02/15/2018 | 1,300 | 1,298 | ||||||
El Paso | ||||||||
7.750%, 01/15/2032 | 1,300 | 1,285 | ||||||
Plains Exploration & Production | ||||||||
7.750%, 06/15/2015 | 1,500 | 1,485 | ||||||
Southern Union | ||||||||
7.200%, 11/01/2066 r | 1,600 | 1,418 | ||||||
5,486 | ||||||||
Real Estate – 1.5% | ||||||||
Agile Property Holdings | ||||||||
8.875%, 04/28/2017 n q ¬ | 1,350 | 1,256 | ||||||
China Properties Group | ||||||||
9.125%, 05/04/2014 n ¬ | 750 | 577 | ||||||
Country Garden Holding | ||||||||
11.750%, 09/10/2014 n q ¬ | 1,500 | 1,549 | ||||||
Evergrande Real Estate Group | ||||||||
13.000%, 01/27/2015 n ¬ | 1,400 | 1,337 | ||||||
Sigma Capital | ||||||||
9.000%, 04/30/2015 ¬ | 1,029 | 1,004 | ||||||
5,723 | ||||||||
Technology – 3.2% | ||||||||
Amkor Technologies | ||||||||
7.375%, 05/01/2018 n q | 1,800 | 1,746 | ||||||
Aspect Software | ||||||||
10.625%, 05/15/2017 n q | 1,250 | 1,250 | ||||||
Coleman Cable | ||||||||
9.000%, 02/15/2018 n | 1,000 | 955 | ||||||
First Data | ||||||||
9.875%, 09/24/2015 q | 2,850 | 2,166 | ||||||
Freescale Semiconductor | ||||||||
9.125%, 12/15/2014 q | 2,114 | 1,892 | ||||||
9.250%, 04/15/2018 n q | 1,000 | 988 | ||||||
NXP BV/NXP Funding | ||||||||
3.053%, 10/15/2013 r ¬ | 3,250 | 2,779 |
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
Unisys | ||||||||
12.750%, 10/15/2014 n | $ | 750 | $ | 838 | ||||
12,614 | ||||||||
Transportation – 5.5% | ||||||||
Avis Budget Car Rental | ||||||||
7.625%, 05/15/2014 q | 2,250 | 2,166 | ||||||
BLT Finance BV | ||||||||
7.500%, 05/15/2014 n ¬ | 700 | 460 | ||||||
Continental Airlines | ||||||||
7.020%, 05/01/2017 | 496 | 478 | ||||||
Series 2007-1, Class C | ||||||||
7.339%, 04/19/2014 | 2,080 | 1,966 | ||||||
Delta Airlines | ||||||||
12.250%, 03/15/2015 n | 2,350 | 2,509 | ||||||
Series 2002-1, Class G-1 | ||||||||
6.718%, 07/02/2024 | 1,367 | 1,285 | ||||||
Greenbrier | ||||||||
8.375%, 05/15/2015 | 1,325 | 1,249 | ||||||
Hertz | ||||||||
8.875%, 01/01/2014 | 2,000 | 2,025 | ||||||
Marquette Transportation | ||||||||
10.875%, 01/15/2017 n | 1,000 | 980 | ||||||
Martin Midstream Partners | ||||||||
8.875%, 04/01/2018 n | 2,500 | 2,475 | ||||||
Navios Maritime Holdings | ||||||||
9.500%, 12/15/2014 ¬ | 1,750 | 1,680 | ||||||
United Airlines | ||||||||
10.400%, 11/01/2016 q | 1,462 | 1,572 | ||||||
Series 2007-1, Class A | ||||||||
6.636%, 01/02/2024 | 1,908 | 1,755 | ||||||
Western Express | ||||||||
12.500%, 04/15/2015 n | 750 | 684 | ||||||
21,284 | ||||||||
Total High Yield Corporate Bonds | ||||||||
(Cost $338,690) | 335,814 | |||||||
Preferred Stocks – 3.4% |
| |||||||
Banking – 0.3% | ||||||||
Bank of America | 42,500 | 1,059 | ||||||
Communications – 0.2% | ||||||||
US Cellular | 32,000 | 796 | ||||||
Energy – 0.2% | ||||||||
Constellation Energy Group | 25,000 | 644 | ||||||
Finance – 1.8% | ||||||||
Bank of America | 129,000 | 2,054 | ||||||
Citigroup Capital XII | 80,000 | 1,999 | ||||||
Freddie Mac l | 46,322 | 14 | ||||||
Goldman Sachs Group | 49,000 | 879 | ||||||
Morgan Stanley q | 65,000 | 1,128 | ||||||
Regions Financing Trust III | 22,300 | 557 | ||||||
Royal Bank Scotland Group ¬ | 38,000 | 529 | ||||||
7,160 | ||||||||
Insurance – 0.3% | ||||||||
Aspen Insurance Holdings ¬ | 50,000 | 1,129 | ||||||
Real Estate – 0.6% | ||||||||
American Home Mortgage Investments – REIT | 10,000 | — |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 39 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | SHARES/PAR | FAIR VALUE > | ||||||
Ashford Hospitality Trust – REIT | 46,900 | 941 | ||||||
Duke Realty – REIT | 36,600 | 942 | ||||||
Hospitality Properties Trust – REIT | 20,000 | 441 | ||||||
2,324 | ||||||||
Transportation – 0.0% | ||||||||
Delta Air Contingent Value l | 8,000,000 | 170 | ||||||
Total Preferred Stocks | ||||||||
(Cost $14,460) | 13,282 | |||||||
Investment Grade Corporate Bonds – 2.4% |
| |||||||
Basic Industry – 0.4% | ||||||||
Vale Overseas Limited | ||||||||
8.250%, 01/17/2034 ¬ | $ | 1,200 | $ | 1,408 | ||||
Consumer Non Cyclical – 0.2% | ||||||||
CVS Caremark | ||||||||
6.302%, 06/01/2062 r | 750 | 671 | ||||||
Energy – 0.9% | ||||||||
Encana | ||||||||
6.500%, 02/01/2038 ¬ | 750 | 834 | ||||||
Gaz Capital | ||||||||
6.510%, 03/07/2022 n q ¬ | 1,375 | 1,325 | ||||||
Valero Energy | ||||||||
6.625%, 06/15/2037 | 1,500 | 1,460 | ||||||
3,619 | ||||||||
Natural Gas – 0.4% | ||||||||
Transocean | ||||||||
6.800%, 03/15/2038 q ¬ | 1,850 | 1,667 | ||||||
Real Estate – 0.5% | ||||||||
Prologis – REIT | ||||||||
6.250%, 03/15/2017 | 2,000 | 1,905 | ||||||
Total Investment Grade Corporate Bonds | ||||||||
(Cost $9,187) | 9,270 | |||||||
Exchange-Traded Funds – 1.6% |
| |||||||
iShares iBoxx $ High Yield Corporate Bond Fund | 37,000 | 3,141 | ||||||
PowerShares Emerging Markets Sovereign Debt Portfolio q | 40,500 | 1,058 | ||||||
SPDR DB International Government Inflation-Protected Bond Fund q | 20,900 | 1,084 | ||||||
SPDR S&P Dividend | 16,500 | 745 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $6,140) | 6,028 | |||||||
Convertible Securities – 1.5% |
| |||||||
Basic Industry – 0.2% | ||||||||
Peabody Energy | ||||||||
4.750%, 12/15/2066 | $ | 750 | 731 | |||||
Consumer Discretionary – 0.2% | ||||||||
Ford Motor Capital Trust II | 14,500 | 640 | ||||||
Consumer Non Cyclical – 0.3% |
| |||||||
Archer Daniels Midland q | 21,000 | 760 | ||||||
Bunge Limited ¬ | 6,625 | 550 | ||||||
1,310 | ||||||||
Energy – 0.2% | ||||||||
Carrizo Oil & Gas | ||||||||
4.375%, 06/01/2028 | $ | 1,000 | 860 | |||||
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
Industrial Other – 0.2% | ||||||||
Evergreen Solar | ||||||||
13.000%, 04/15/2015 n | $ | 1,000 | $ | 653 | ||||
Technology – 0.4% | ||||||||
Hutchinson Technology | ||||||||
3.250%, 01/15/2026 | 2,000 | 1,620 | ||||||
Total Convertible Securities | ||||||||
(Cost $6,432) | 5,814 | |||||||
Closed-End Funds – 1.1% |
| |||||||
Blackrock Global Opportunities Equity Trust q | 30,000 | 482 | ||||||
First Trust/Aberdeen Global Opportunities Income Fund q | 73,000 | 1,171 | ||||||
Gabelli Global Gold Natural Resources & Income Trust | 13,000 | 204 | ||||||
Highland Credit Strategies Fund | 60,000 | 428 | ||||||
ING Clarion Global Real Estate Income Fund | 69,000 | 444 | ||||||
Nuveen Equity Premium Opportunity Fund q | 24,600 | 297 | ||||||
Nuveen Multi-Strategy Income and Growth Fund | 96,000 | 704 | ||||||
Pioneer Diversified High Income Trust | 35,800 | 708 | ||||||
Total Closed-End Funds | ||||||||
(Cost $4,727) | 4,438 | |||||||
Common Stocks – 0.6% |
| |||||||
Banking – 0.1% | ||||||||
Bank of America | 18,110 | 260 | ||||||
Basic Industry – 0.1% | ||||||||
Georgia Gulf l ¥ | 13,588 | 181 | ||||||
Nortek l | 9,000 | 378 | ||||||
559 | ||||||||
Consumer Discretionary – 0.1% |
| |||||||
Target | 11,100 | 546 | ||||||
Energy – 0.2% | ||||||||
Pengrowth Energy Trust ¬ | 44,000 | 403 | ||||||
Provident Energy Trust ¬ | 35,000 | 241 | ||||||
644 | ||||||||
Finance – 0.1% | ||||||||
Citigroup q | 51,153 | 192 | ||||||
Real Estate – 0.0% | ||||||||
Macerich – REIT q | 3,550 | 132 | ||||||
Technology – 0.0% | ||||||||
Magnachip Semiconductor Escrow l | 22,874 | 22 | ||||||
Total Common Stocks | ||||||||
(Cost $3,157) | 2,355 | |||||||
Asset-Backed Securities – 0.1% |
| |||||||
Manufactured Housing – 0.0% |
| |||||||
Green Tree Financial | ||||||||
6.040%, 11/01/2029 ¥ | $ | 5 | 5 | |||||
Other – 0.1% | ||||||||
Exum | ||||||||
3.638%, 03/22/2014 r n ¬ | 1,063 | 156 | ||||||
Series 2007-2A, Class C | ||||||||
4.038%, 06/22/2014 r n ¬ | 1,101 | 167 | ||||||
323 | ||||||||
Total Asset-Backed Securities | ||||||||
(Cost $2,169) | 328 | |||||||
The accompanying notes are an integral part of the financial statements.
40 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | SHARES/PAR | FAIR VALUE > | ||||||
Short-Term Investments – 2.6% |
| |||||||
Money Market Fund – 2.6% |
| |||||||
First American Prime Obligations Fund, Class Z | ||||||||
0.089% Å W | 10,099,959 | $ | 10,100 | |||||
U.S. Treasury Obligations – 0.0% |
| |||||||
U.S. Treasury Bills ¨ | ||||||||
0.095%, 07/15/2010 | $ | 110 | 110 | |||||
0.205%, 12/16/2010 | 30 | 30 | ||||||
140 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $10,240) | 10,240 | |||||||
Investment Purchased with Proceeds from Securities Lending –19.9% |
| |||||||
Mount Vernon Securities Lending Prime Portfolio 0.282% W † | ||||||||
(Cost $77,333) | 77,332,704 | 77,333 | ||||||
Total Investments p – 119.6% |
| |||||||
(Cost $472,535) | 464,902 | |||||||
Other Assets and Liabilities, Net – (19.6)% |
| (76,364 | ) | |||||
Total Net Assets – 100.0% |
| $ | 388,538 | |||||
> | Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements. |
r | Variable Rate Security – The rate shown is the rate in effect as of June 30, 2010. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of June 30, 2010, the fair value of these investments was $148,870 or 38.3% of total net assets. See note 2 in Notes to Financial Statements. |
ª | Security in default at June 30, 2010. |
q | This security or a portion of this security is out on loan at June 30, 2010. Total loaned securities had a fair value of $75,028 at June 30, 2010. See note 2 in Notes to Financial Statements. |
¬ | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of June 30, 2010, the fair value of foreign securities was $62,405 or 16.1% of total net assets. |
€ | Zero coupon bonds make no periodic interest payments, but are issued at deep discounts from par value. The rate shown is the effective yield as of June 30, 2010. |
l | Non-income producing security. |
¥ | Security considered illiquid. As of June 30, 2010, the fair value of the fund’s investments considered to be illiquid was $509 or 0.1% of total net assets. See note 2 in Notes to Financial Statements. |
§ | Security is internally fair valued. As of June 30, 2010, the fair value of these investments was $323 or 0.1% of total net assets. See note 2 in Notes to Financial Statements. |
Å | Investment in affiliated security. This money market fund is advised by FAF Advisors, Inc., which also serves as advisor for this fund. See note 3 in Notes to Financial Statements. |
W | The rate shown is the annualized seven-day effective yield as of June 30, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts. Yield shown is the annualized effective yield as of June 30, 2010. See note 2 in Notes to Financial Statements. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. See note 2 in Notes to Financial Statements. |
High Income Bond Fund (concluded) | ||||
p | On June 30, 2010, the cost of investments for federal income tax purposes was $472,725. The aggregate gross unrealized appreciation and depreciation of investments, based on this cost, were as follows: |
Gross unrealized appreciation | $ | 10,504 | ||
Gross unrealized depreciation | (18,327 | ) | ||
Net unrealized depreciation | $ | (7,823 | ) | |
REIT | – Real Estate Investment Trust |
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Purchased | Notional Contract Value | Unrealized Appreciation | ||||||||||||
U.S. Treasury 10 Year Note Futures | September 2010 | 100 | $ | 12,255 | $ | 179 | ||||||||||
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 41 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Inflation Protected Securities Fund | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
U.S. Government & Agency Securities – 87.7% |
| |||||||
U.S. Treasuries – 86.4% | ||||||||
U.S. Treasury Bonds | ||||||||
2.375%, 01/15/2025 t | $ | 11,016 | $ | 12,221 | ||||
2.000%, 01/15/2026 t | 3,927 | 4,152 | ||||||
2.375%, 01/15/2027 t | 5,243 | 5,808 | ||||||
1.750%, 01/15/2028 t | 2,654 | 2,692 | ||||||
3.625%, 04/15/2028 t | 8,290 | 10,728 | ||||||
2.500%, 01/15/2029 t | 2,031 | 2,295 | ||||||
3.875%, 04/15/2029 t | 8,852 | 11,879 | ||||||
2.125%, 02/15/2040 t | 3,177 | 3,481 | ||||||
U.S. Treasury Notes | ||||||||
3.500%, 01/15/2011 t | 1,973 | 2,006 | ||||||
2.375%, 04/15/2011 t | 6,700 | 6,812 | ||||||
2.000%, 04/15/2012 t | 1,612 | 1,669 | ||||||
3.000%, 07/15/2012 t | 3,698 | 3,934 | ||||||
1.875%, 07/15/2013 t | 4,689 | 4,959 | ||||||
2.000%, 01/15/2014 t | 4,495 | 4,789 | ||||||
2.000%, 07/15/2014 t | 4,511 | 4,840 | ||||||
1.625%, 01/15/2015 t | 7,593 | 8,015 | ||||||
2.250%, 01/31/2015 q | 1,600 | 1,640 | ||||||
0.500%, 04/15/2015 t | 3,798 | 3,848 | ||||||
1.875%, 07/15/2015 t | 4,668 | 5,002 | ||||||
2.000%, 01/15/2016 t | 4,943 | 5,332 | ||||||
2.500%, 07/15/2016 t | 4,658 | 5,184 | ||||||
2.375%, 01/15/2017 t | 4,005 | 4,422 | ||||||
2.625%, 07/15/2017 t | 3,392 | 3,827 | ||||||
1.625%, 01/15/2018 t | 4,683 | 4,936 | ||||||
1.375%, 07/15/2018 t | 2,927 | 3,033 | ||||||
2.125%, 01/15/2019 t | 3,980 | 4,344 | ||||||
1.875%, 07/15/2019 t | 5,161 | 5,533 | ||||||
3.375%, 11/15/2019 q | 4,075 | 4,220 | ||||||
1.375%, 01/15/2020 t | 7,496 | 7,675 | ||||||
149,276 | ||||||||
U.S. Agency Debentures – 1.3% | ||||||||
Federal Home Loan Bank | ||||||||
1.500%, 01/16/2013 | 760 | 769 | ||||||
Federal National Mortgage Association | ||||||||
1.750%, 02/22/2013 | 720 | 734 | ||||||
4.375%, 10/15/2015 | 735 | 813 | ||||||
2,316 | ||||||||
Total U.S. Government & Agency Securities | ||||||||
(Cost $146,162) | 151,592 | |||||||
Corporate Bonds – 5.8% |
| |||||||
Basic Industry – 1.5% | ||||||||
FMG Finance | ||||||||
10.000%, 09/01/2013 n ¬ | 500 | 525 | ||||||
Georgia-Pacific | ||||||||
7.125%, 01/15/2017 n | 150 | 153 | ||||||
Southern Copper | ||||||||
7.500%, 07/27/2035 | 950 | 1,026 | ||||||
Steel Dynamics | ||||||||
7.625%, 03/15/2020 n q | 175 | 174 | ||||||
Teck Resources | ||||||||
10.750%, 05/15/2019 ¬ | 200 | 245 | ||||||
USG | ||||||||
9.500%, 01/15/2018 | 100 | 99 | ||||||
Vedanta Resources | ||||||||
9.500%, 07/18/2018 n ¬ | 400 | 425 | ||||||
2,647 | ||||||||
Inflation Protected Securities Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Capital Goods – 0.1% | ||||||||
Bombardier | ||||||||
7.500%, 03/15/2018 n ¬ | $ | 200 | $ | 206 | ||||
Consumer Cyclical – 0.2% | ||||||||
Macys Retail Holdings | ||||||||
5.900%, 12/01/2016 | 200 | 201 | ||||||
Wyndham Worldwide | ||||||||
9.875%, 05/01/2014 | 175 | 196 | ||||||
397 | ||||||||
Consumer Non Cyclical – 0.2% | ||||||||
HCA | ||||||||
9.250%, 11/15/2016 | 100 | 106 | ||||||
Smithfield Foods | ||||||||
7.000%, 08/01/2011 q | 275 | 280 | ||||||
386 | ||||||||
Electric – 0.2% | ||||||||
AES | ||||||||
8.000%, 10/15/2017 q | 150 | 152 | ||||||
Majapahit Holding | ||||||||
7.750%, 01/20/2020 n ¬ | 200 | 219 | ||||||
371 | ||||||||
Energy – 0.6% | ||||||||
Cloud Peak Energy Resources | ||||||||
8.250%, 12/15/2017 n | 200 | 198 | ||||||
Concho Resources | ||||||||
8.625%, 10/01/2017 | 200 | 206 | ||||||
Gaz Capital | ||||||||
6.510%, 03/07/2022 n q ¬ | 250 | 241 | ||||||
Linn Energy | ||||||||
8.625%, 04/15/2020 n q | 175 | 179 | ||||||
Pride International | ||||||||
7.375%, 07/15/2014 | 205 | 204 | ||||||
1,028 | ||||||||
Insurance – 0.6% | ||||||||
Pacific Life Global Funding | ||||||||
4.490%, 02/06/2016 n r | 1,000 | 960 | ||||||
Natural Gas – 0.1% | ||||||||
El Paso | ||||||||
6.875%, 06/15/2014 | 175 | 178 | ||||||
Sovereigns – 2.1% | ||||||||
Australian Government | ||||||||
5.750%, 04/15/2012 ¬ | AUD | 800 | 688 | |||||
Canadian Government | ||||||||
1.500%, 03/01/2012 ¬ | CAD | 800 | 754 | |||||
3.500%, 06/01/2020 ¬ | CAD | 750 | 730 | |||||
Norwegian Government | ||||||||
6.000%, 05/16/2011 ¬ | NOK | 5,000 | 793 | |||||
6.500%, 05/15/2013 ¬ | NOK | 3,300 | 565 | |||||
3,530 | ||||||||
Transportation – 0.2% | ||||||||
Avis Budget Car Rental | ||||||||
7.750%, 05/15/2016 | $ | 150 | 140 | |||||
Continental Airlines | ||||||||
Series 2007-1, Class C | ||||||||
7.339%, 04/19/2014 | 177 | 167 | ||||||
307 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $9,930) | 10,010 | |||||||
The accompanying notes are an integral part of the financial statements.
42 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Inflation Protected Securities Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
Asset-Backed Securities – 3.2% |
| |||||||
Credit Cards – 0.3% | ||||||||
Discover Card Master Trust | ||||||||
0.670%, 01/15/2013 r | $ | 500 | $ | 500 | ||||
Other – 2.9% | ||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||
5.397%, 07/15/2044 r | 1,255 | 1,344 | ||||||
Greenwich Capital Commercial Funding | ||||||||
5.736%, 12/10/2049 | 1,000 | 984 | ||||||
GS Mortgage Securities II | ||||||||
5.999%, 08/10/2045 r | 1,300 | 1,278 | ||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
3.853%, 06/15/2043 n | 1,020 | 1,045 | ||||||
Merrill Lynch Mortgage Trust | ||||||||
5.690%, 02/12/2051 | 380 | 383 | ||||||
5,034 | ||||||||
Total Asset-Backed Securities | ||||||||
(Cost $5,414) | 5,534 | |||||||
Municipal Bond – 0.4% | ||||||||
Sullivan County Health, Education & Housing Facilities, Hospital Revenue, Wellmont Health, Class B | ||||||||
6.950% 09/01/2016 | ||||||||
(Cost $760) | 760 | 760 | ||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Security – 0.4% |
| |||||||
Fixed Rate – 0.4% | ||||||||
OBP Depositor Trust | ||||||||
4.646% 07/15/2045 n | ||||||||
(Cost $700) | 700 | 703 | ||||||
Preferred Stocks – 0.2% | ||||||||
Banking – 0.1% | ||||||||
Goldman Sachs Group | 10,000 | 180 | ||||||
Finance – 0.1% | ||||||||
Bank of America | 13,000 | 207 | ||||||
Sovereign – 0.0% | ||||||||
Fannie Mae | 16,000 | 5 | ||||||
Total Preferred Stocks | ||||||||
(Cost $791) | 392 | |||||||
Exchange-Traded Fund – 0.1% |
| |||||||
iShares iBoxx $ High Yield Corporate Bond Fund q |
| |||||||
Total Exchange-Traded Fund | ||||||||
(Cost $205) | 2,500 | 212 | ||||||
Convertible Security – 0.1% |
| |||||||
Consumer Non Cyclical – 0.1% | ||||||||
Bunge Limited ¬ | ||||||||
(Cost $136) | 1,300 | 108 | ||||||
Inflation Protected Securities Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
Collateralized Mortgage Obligation – U.S. Government |
| |||||||
Fixed Rate – 0.0% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
4.000% 03/15/2011 | ||||||||
(Cost $79) | $ | 79 | $ | 80 | ||||
Short-Term Investments – 2.2% |
| |||||||
Money Market Fund – 2.1% | ||||||||
First American Prime Obligations Fund, Class Z | ||||||||
0.089% Å W | 3,532,644 | 3,533 | ||||||
U.S. Treasury Obligations – 0.1% | ||||||||
U.S. Treasury Bills ¨ | ||||||||
0.134%, 07/15/2010 | $ | 95 | 95 | |||||
0.205%, 12/16/2010 | 30 | 29 | ||||||
0.232%, 04/07/2011 | 65 | 65 | ||||||
189 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $3,722) | 3,722 | |||||||
Investment Purchased with Proceeds from |
| |||||||
Mount Vernon Securities Lending Prime Portfolio 0.282% W † | ||||||||
(Cost $7,192) | 7,191,898 | 7,192 | ||||||
Total Investments p – 104.3% | ||||||||
(Cost $175,091) | 180,305 | |||||||
Other Assets and Liabilities, Net – (4.3)% | (7,423 | ) | ||||||
Total Net Assets – 100.0% | $ | 172,882 | ||||||
> | Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements. |
t | U.S. Treasury inflation-protection securities (TIPS) are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. |
q | This security or a portion of this security is out on loan at June 30, 2010. Total loaned securities had a fair value of $7,033 at June 30, 2010. See note 2 in Notes to Financial Statements. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of June 30, 2010, the fair value of these investments was $5,028 or 2.9% of total net assets. See note 2 in Notes to Financial Statements. |
¬ | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of June 30, 2010, the fair value of foreign securities was $5,499 or 3.2% of total net assets. |
r | Variable Rate Security – The rate shown is the rate in effect as of June 30, 2010. |
Å | Investment in affiliated security. This money market fund is advised by FAF Advisors, Inc., which also serves as advisor for this fund. See note 3 in Notes to Financial Statements. |
W | The rate shown is the annualized seven-day effective yield as of June 30, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts and/or swap agreements. Yield shown is the annualized effective yield as of June 30, 2010. See note 2 in Notes to Financial Statements. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. See note 2 in Notes to Financial Statements. |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 43 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Inflation Protected Securities Fund (concluded) | ||||
p | On June 30, 2010, the cost of investments for federal income tax purposes was $175,713. The aggregate gross unrealized appreciation and depreciation of investments, based on this cost, were as follows: |
Gross unrealized appreciation | $ | 5,893 | ||
Gross unrealized depreciation | (1,301 | ) | ||
Net unrealized appreciation | $ | 4,592 | ||
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Sold | Notional Contract Value | Unrealized Depreciation | ||||||||||||
U.S. Treasury | September 2010 | (17 | ) | $ | (2,012 | ) | $ (7) | |||||||||
U.S. Treasury | September 2010 | (45 | ) | (5,515 | ) | (90 | ) | |||||||||
U.S. Treasury Long Bond Futures | September 2010 | (16 | ) | (2,040 | ) | (37 | ) | |||||||||
$(134 | ) | |||||||||||||||
Interest Rate Swap Agreements | ||||||||||||||||||||||||
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Depreciation | ||||||||||||||||||
JPMorgan Chase | | 3-Month LIBOR | | Receive | 1.255 | % | 11/03/2011 | $ | 4,000 | $ | (31) | |||||||||||||
JPMorgan Chase | | 3-Month LIBOR | | Receive | 3.858 | % | 01/19/2020 | 1,000 | (93) | |||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.358 | % | 09/25/2011 | 4,000 | (43) | |||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.133 | % | 03/25/2012 | 2,000 | (15) | |||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.048 | % | 06/25/2012 | 4,000 | (7) | |||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 3.001 | % | 08/03/2014 | 2,000 | (123) | |||||||||||||||
$ | (312) | |||||||||||||||||||||||
Intermediate Government Bond Fund | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
U.S. Government & Agency Securities – 54.7% |
| |||||||
U.S. Agency Debentures – 32.6% |
| |||||||
Federal Farm Credit Bank | ||||||||
2.250%, 07/01/2010 | $ | 1,365 | $ | 1,365 | ||||
5.250%, 09/13/2010 | 1,000 | 1,010 | ||||||
5.750%, 01/18/2011 | 1,800 | 1,853 | ||||||
4.875%, 02/18/2011 | 1,000 | 1,028 | ||||||
3.875%, 08/25/2011 | 3,600 | 3,739 | ||||||
2.250%, 04/24/2012 | 905 | 930 | ||||||
2.125%, 06/18/2012 | 1,130 | 1,160 | ||||||
4.500%, 10/17/2012 | 1,565 | 1,692 | ||||||
1.875%, 12/07/2012 | 2,035 | 2,079 | ||||||
1.750%, 02/21/2013 | 1,885 | 1,913 | ||||||
1.375%, 06/25/2013 | 1,705 | 1,715 | ||||||
3.875%, 10/07/2013 | 1,350 | 1,460 | ||||||
2.625%, 04/17/2014 | 1,400 | 1,455 | ||||||
3.000%, 09/22/2014 | 700 | 735 | ||||||
4.875%, 01/17/2017 | 1,025 | 1,159 | ||||||
Federal Home Loan Bank | ||||||||
5.125%, 09/10/2010 | 900 | 909 | ||||||
4.250%, 06/10/2011 | 1,500 | 1,551 | ||||||
1.875%, 06/20/2012 | 2,000 | 2,044 | ||||||
1.625%, 09/26/2012 | 515 | 524 | ||||||
1.500%, 01/16/2013 | 2,000 | 2,025 | ||||||
1.625%, 03/20/2013 q | 850 | 862 | ||||||
3.125%, 12/13/2013 | 1,865 | 1,971 | ||||||
Federal Home Loan Mortgage Corporation | ||||||||
1.125%, 07/27/2012 q | 1,330 | 1,339 | ||||||
2.500%, 04/23/2014 | 2,825 | 2,925 | ||||||
Federal National Mortgage Association | ||||||||
0.875%, 01/12/2012 q | 2,030 | 2,037 | ||||||
1.125%, 07/30/2012 | 1,355 | 1,364 | ||||||
1.800%, 12/28/2012 | 1,715 | 1,724 | ||||||
1.750%, 05/07/2013 | 1,150 | 1,171 | ||||||
2.375%, 07/28/2015 | 2,350 | 2,374 | ||||||
4.375%, 10/15/2015 | 1,600 | 1,770 | ||||||
Tennessee Valley Authority | ||||||||
5.625%, 01/18/2011 | 2,000 | 2,057 | ||||||
6.790%, 05/23/2012 | 3,175 | 3,530 | ||||||
6.000%, 03/15/2013 | 2,725 | 3,077 | ||||||
56,547 | ||||||||
U.S. Treasuries – 22.1% | ||||||||
U.S. Treasury Bonds | ||||||||
8.750%, 05/15/2017 | 1,135 | 1,597 | ||||||
9.125%, 05/15/2018 q | 560 | 826 | ||||||
9.000%, 11/15/2018 | 635 | 940 | ||||||
8.875%, 02/15/2019 | 340 | 501 | ||||||
8.125%, 08/15/2019 | 1,105 | 1,574 | ||||||
8.500%, 02/15/2020 | 1,250 | 1,834 | ||||||
8.750%, 08/15/2020 | 2,850 | 4,273 | ||||||
8.000%, 11/15/2021 | 1,245 | 1,811 | ||||||
U.S. Treasury Notes | ||||||||
3.500%, 01/15/2011 t | 1,566 | 1,592 | ||||||
2.250%, 05/31/2014 q | 475 | 490 | ||||||
2.375%, 08/31/2014 q | 6,270 | 6,482 | ||||||
4.250%, 11/15/2014 q | 2,000 | 2,227 | ||||||
2.250%, 01/31/2015 | 3,150 | 3,228 | ||||||
2.625%, 04/30/2016 q | 5,850 | 6,011 | ||||||
7.500%, 11/15/2016 | 2,265 | 2,968 | ||||||
3.375%, 11/15/2019 q | 1,185 | 1,227 | ||||||
3.500%, 05/15/2020 | 855 | 895 | ||||||
38,476 | ||||||||
Total U.S. Government & Agency Securities | ||||||||
(Cost $91,581) | 95,023 | |||||||
The accompanying notes are an integral part of the financial statements.
44 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Government Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
U.S. Government Agency Mortgage-Backed Securities – 24.0% |
| |||||||
Adjustable Rate r – 6.8% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
2.718%, 09/01/2033, #780836 | $ | 1,078 | $ | 1,115 | ||||
4.067%, 03/01/2036, #848193 | 838 | 864 | ||||||
5.517%, 05/01/2037, #1H1396 | 1,370 | 1,452 | ||||||
Federal National Mortgage Association Pool | ||||||||
2.683%, 04/01/2034, #AD0486 | 1,890 | 1,970 | ||||||
2.774%, 03/01/2035, #819652 | 646 | 675 | ||||||
2.301%, 12/01/2035, #848390 | 653 | 665 | ||||||
2.935%, 07/01/2036, #886034 | 1,196 | 1,249 | ||||||
2.791%, 09/01/2036, #995949 | 743 | 776 | ||||||
5.440%, 03/01/2037, #914224 | 1,373 | 1,455 | ||||||
5.470%, 04/01/2037, #913187 | 1,154 | 1,228 | ||||||
2.725%, 03/01/2038, #AD0706 | 424 | 443 | ||||||
11,892 | ||||||||
Fixed Rate – 17.2% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
7.000%, 07/01/2011, #E20252 | 3 | 3 | ||||||
7.500%, 09/01/2012, #G10735 | 26 | 27 | ||||||
6.000%, 10/01/2013, #E72802 | 66 | 71 | ||||||
5.500%, 01/01/2014, #E00617 | 265 | 280 | ||||||
7.000%, 09/01/2014, #E00746 | 47 | 51 | ||||||
6.500%, 01/01/2028, #G00876 | 211 | 234 | ||||||
7.500%, 01/01/2030, #C35768 | 33 | 38 | ||||||
6.500%, 03/01/2031, #G01244 | 369 | 411 | ||||||
Federal National Mortgage Association Pool | ||||||||
7.000%, 11/01/2011, #250738 | 2 | 2 | ||||||
7.000%, 11/01/2011, #349630 | 1 | 1 | ||||||
7.000%, 11/01/2011, #351122 | 2 | 2 | ||||||
6.000%, 04/01/2013, #425550 | 40 | 43 | ||||||
6.500%, 08/01/2013, #251901 | 32 | 35 | ||||||
6.000%, 11/01/2013, #556195 | 61 | 66 | ||||||
7.000%, 10/01/2014, #252799 | 33 | 35 | ||||||
3.030%, 01/01/2015, #464373 | 1,900 | 1,976 | ||||||
3.120%, 01/01/2015, #464158 | 1,897 | 1,959 | ||||||
5.500%, 04/01/2016, #580516 | 270 | 292 | ||||||
6.500%, 07/01/2017, #254373 | 413 | 450 | ||||||
7.000%, 07/01/2017, #254414 | 425 | 468 | ||||||
5.500%, 12/01/2017, #673010 | 283 | 306 | ||||||
5.500%, 04/01/2018, #695765 | 390 | 423 | ||||||
4.500%, 05/01/2018, #254720 | 1,432 | 1,530 | ||||||
5.500%, 09/01/2019, #725793 | 1,728 | 1,876 | ||||||
6.000%, 01/01/2022, #254179 | 336 | 370 | ||||||
6.500%, 06/01/2022, #254344 | 336 | 374 | ||||||
7.000%, 09/01/2031, #596680 | 436 | 483 | ||||||
6.500%, 12/01/2031, #254169 | 475 | 520 | ||||||
6.000%, 04/01/2032, #745101 | 1,580 | 1,703 | ||||||
6.500%, 06/01/2032, #596712 | 1,197 | 1,314 | ||||||
6.000%, 08/01/2032, #656269 | 367 | 396 | ||||||
6.000%, 03/01/2034, #745324 | 1,487 | 1,642 | ||||||
6.500%, 08/01/2036, #887017 | 1,641 | 1,802 | ||||||
7.000%, 06/01/2037, #928519 | 1,184 | 1,317 | ||||||
5.500%, 06/01/2039, #995959 | 5,970 | 6,417 | ||||||
6.000%, 07/01/2039 « | 540 | 586 | ||||||
Government National Mortgage Association Pool | ||||||||
8.000%, 10/15/2010, #414750 | 1 | 1 | ||||||
7.500%, 12/15/2022, #347332 | 53 | 60 | ||||||
7.000%, 09/15/2027, #455304 | 12 | 13 | ||||||
6.500%, 07/15/2028, #780825 | 375 | 424 | ||||||
6.500%, 08/20/2031, #003120 | 139 | 156 |
Intermediate Government Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
7.500%, 12/15/2031, #570134 | $ | 147 | $ | 168 | ||||
6.000%, 09/15/2034, #633605 | 1,352 | 1,487 | ||||||
29,812 | ||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $39,931) | 41,704 | |||||||
Asset-Backed Securities – 8.5% |
| |||||||
Automotive – 1.1% | ||||||||
Ally Auto Receivables Trust | ||||||||
2.330%, 06/17/2013 n | 500 | 509 | ||||||
Bank of America Auto Trust | ||||||||
1.160%, 02/15/2012 n | 381 | 381 | ||||||
Ford Credit Auto Owner Trust | ||||||||
1.210%, 01/15/2012 | 439 | 440 | ||||||
Nissan Auto Lease Trust Series 2009-B, Class A3 | ||||||||
2.070%, 01/15/2015 | 500 | 505 | ||||||
1,835 | ||||||||
Credit Cards – 0.4% | ||||||||
American Express Issuance Trust | ||||||||
0.667%, 08/15/2011 r | 355 | 354 | ||||||
Discover Card Master Trust | ||||||||
0.670%, 01/15/2013 r | 375 | 375 | ||||||
729 | ||||||||
Equipment Leases – 0.3% | ||||||||
CNH Equipment Trust | ||||||||
0.950%, 08/15/2012 | 500 | 500 | ||||||
Home Equity – 0.0% | ||||||||
GRMT Mortgage Loan Trust | ||||||||
8.272%, 07/20/2031 n ¥ | 41 | 37 | ||||||
Manufactured Housing – 0.5% | ||||||||
Origen Manufactured Housing | ||||||||
5.990%, 01/15/2037 | 750 | 768 | ||||||
Other – 5.6% | ||||||||
Bear Stearns Commercial Mortgage Securities Series 2005-T20, Class A4A | ||||||||
5.297%, 10/12/2042 r | 550 | 588 | ||||||
Commercial Mortgage Pass- | ||||||||
4.982%, 05/10/2043 r | 550 | 580 | ||||||
Greenwich Capital Commercial Funding | ||||||||
Series 2007-GG11, Class A4 | ||||||||
5.736%, 12/10/2049 | 1,470 | 1,446 | ||||||
Series 2007-GG9, Class A4 | ||||||||
5.444%, 03/10/2039 | 1,000 | 1,002 | ||||||
GS Mortgage Securities Trust | ||||||||
5.999%, 08/10/2045 r | 1,970 | 1,937 | ||||||
Morgan Stanley Capital I | ||||||||
Series 2006-IQ12, Class A4 | ||||||||
5.332%, 12/15/2043 | 1,150 | 1,177 | ||||||
Small Business Administration | ||||||||
4.638%, 02/10/2015 | 580 | 612 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 45 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Intermediate Government Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Series 2005-P10B, Class 1 | ||||||||
4.940%, 08/10/2015 | $ | 378 | $ | 403 | ||||
Series 2010-10A, Class 1 | ||||||||
4.108%, 03/10/2020 | 2,000 | 2,032 | ||||||
9,777 | ||||||||
Utilities – 0.6% | ||||||||
Centerpoint Energy Transition | ||||||||
4.192%, 02/01/2020 | 1,007 | 1,086 | ||||||
Total Asset-Backed Securities | ||||||||
(Cost $14,332) | 14,732 | |||||||
Corporate Bonds – 3.9% |
| |||||||
Banking – 1.8% | ||||||||
Bank of America | ||||||||
2.100%, 04/30/2012 | 1,000 | 1,024 | ||||||
Citibank | ||||||||
1.750%, 12/28/2012 | 1,000 | 1,018 | ||||||
JPMorgan Chase | ||||||||
2.200%, 06/15/2012 | 1,000 | 1,027 | ||||||
3,069 | ||||||||
Brokerage – 1.2% | ||||||||
Goldman Sachs | ||||||||
3.250%, 06/15/2012 q | 1,000 | 1,047 | ||||||
Morgan Stanley | ||||||||
2.250%, 03/13/2012 q | 1,000 | 1,026 | ||||||
2,073 | ||||||||
Finance – 0.9% | ||||||||
GMAC | ||||||||
1.750%, 10/30/2012 | 1,070 | 1,089 | ||||||
Private Export Funding | ||||||||
3.050%, 10/15/2014 | 550 | 575 | ||||||
1,664 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $6,715) | 6,806 | |||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities – 3.8% |
| |||||||
Fixed Rate – 3.8% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
Series 2382, Class DA | ||||||||
5.500%, 10/15/2030 | 10 | 11 | ||||||
Series 2629, Class BO | ||||||||
3.250%, 03/15/2018 | 853 | 880 | ||||||
Series 2843, Class BH | ||||||||
4.000%, 01/15/2018 | 797 | 818 | ||||||
Federal National Mortgage Association | ||||||||
Series 2002-W1, Class 2A | ||||||||
7.500%, 02/25/2042 | 585 | 673 | ||||||
Series 2003-92, Class PD | ||||||||
4.500%, 03/25/2017 | 1,492 | 1,551 | ||||||
Series 2009-M1, Class A1 | ||||||||
3.400%, 07/25/2019 | 960 | 994 | ||||||
Series 2010-M1, Class A1 | ||||||||
3.305%, 06/25/2019 | 1,577 | 1,623 | ||||||
Total Collateralized Mortgage Obligation — U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $6,418) | 6,550 | |||||||
Intermediate Government Bond Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities – 3.3% |
| |||||||
Fixed Rate – 3.3% | ||||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
3.250%, 04/25/2038 n | $ | 1,314 | $ | 1,334 | ||||
GSMPS Mortgage Loan Trust | ||||||||
6.848%, 03/25/2043 ¥ | 868 | 601 | ||||||
GSR Mortgage Loan Trust | ||||||||
5.737%, 05/25/2035 ¥ | 1,297 | 752 | ||||||
Impac Secured Assets | ||||||||
8.000%, 10/25/2030 ¥ | 392 | 347 | ||||||
Lehman Mortgage Trust | ||||||||
6.420%, 07/25/2047 | 604 | 568 | ||||||
Master Alternative Loans Trust | ||||||||
6.500%, 03/25/2035 | 520 | 458 | ||||||
Residential Accredit Loans | ||||||||
5.000%, 06/25/2018 ¥ | 651 | 510 | ||||||
Residential Asset Mortgage Products | ||||||||
6.500%, 07/25/2032 | 858 | 886 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
5.500%, 07/25/2037 | 600 | 252 | ||||||
Total Collateralized Mortgage Obligation — Private Mortgage-Backed Securities | ||||||||
(Cost $6,865) | 5,708 | |||||||
Short-Term Investments – 1.3% |
| |||||||
Money Market Funds – 1.2% | ||||||||
First American Government Obligations Fund, Class Z, 0.015% Å W | 1,598,060 | 1,598 | ||||||
First American U.S. Treasury Money Market Fund, Class Z, 0.000% Å W | 619,655 | 620 | ||||||
2,218 | ||||||||
U.S. Treasury Obligations – 0.1% | ||||||||
U.S. Treasury Bills ¨ | ||||||||
0.080%, 07/15/2010 | $ | 25 | 25 | |||||
0.205%, 12/16/2010 | 125 | 125 | ||||||
150 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $2,368) | 2,368 | |||||||
Investment Purchased with Proceeds from Securities Lending – 13.6% |
| |||||||
Mount Vernon Securities Lending Prime Portfolio | ||||||||
0.282% W † | ||||||||
(Cost $23,635) | 23,634,965 | $ | 23,635 | |||||
Total Investments p – 113.1% | ||||||||
(Cost $191,845) | 196,526 | |||||||
Other Assets and Liabilities, Net – (13.1)% | (22,843 | ) | ||||||
Total Net Assets – 100.0% | $ | 173,683 | ||||||
> | Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements. |
q | This security or a portion of this security is out on loan at June 30, 2010. Total loaned securities had a fair value of $23,146 at June 30, 2010. See note 2 in Notes to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
46 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Government Bond Fund (concluded) | ||||
t | U.S. Treasury inflation-protection securities (TIPS) are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. |
« | Security purchased on a when-issued basis. On June 30, 2010, the total cost of investments purchased on a when-issued basis was $583 or 0.3% of total net assets. See note 2 in Notes to Financial Statements. |
r | Variable Rate Security – The rate shown is the rate in effect as of June 30, 2010. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of June 30, 2010, the fair value of these investments was $2,261 or 1.3% of total net assets. See note 2 in Notes to Financial Statements. |
¥ | Security considered illiquid. As of June 30, 2010, the fair value of the fund’s investments considered to be illiquid was $2,247 or 1.3% of total net assets. See note 2 in Notes to Financial Statements. |
Å | Investment in affiliated security. This money market fund is advised by FAF Advisors, Inc., which also serves as advisor for this fund. See note 3 in Notes to Financial Statements. |
W | The rate shown is the annualized seven-day effective yield as of June 30, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts. Yield shown is annualized effective yield as of June 30, 2010. See note 2 in Notes to Financial Statements. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. See note 2 in Notes to Financial Statements. |
p | On June 30, 2010, the cost of investments for federal income tax purposes was $192,220. The approximate gross unrealized appreciation and depreciation of investments, based on this cost, were as follows: |
Gross unrealized appreciation | $ | 5,994 | ||
Gross unrealized depreciation | (1,688 | ) | ||
Net unrealized appreciation | $ | 4,306 | ||
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Purchased (Sold) | Notional Contract Value | Unrealized Appreciation (Depreciation) | ||||||||||||
U.S. Treasury | September 2010 | 55 | $ | 12,036 | $ | 48 | ||||||||||
U.S. Treasury | September 2010 | (37 | ) | (4,379 | ) | (22 | ) | |||||||||
U.S. Treasury | September 2010 | 44 | 5,392 | 94 | ||||||||||||
U.S. Treasury | September 2010 | (21 | ) | (2,678 | ) | (62 | ) | |||||||||
$ | 58 | |||||||||||||||
Intermediate Term Bond Fund | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Corporate Bonds – 52.2% | ||||||||
Banking – 9.1% | ||||||||
Bank of America | ||||||||
5.650%, 05/01/2018 | $ | 3,120 | $ | 3,197 | ||||
5.625%, 07/01/2020 | 4,080 | 4,112 | ||||||
8.000%, 12/29/2049 r | 4,310 | 4,163 | ||||||
Barclays Bank | ||||||||
5.125%, 01/08/2020 ¬ | 3,630 | 3,611 | ||||||
Citigroup | ||||||||
6.125%, 11/21/2017 | 4,590 | 4,794 | ||||||
Citigroup Capital XXI | ||||||||
8.300%, 12/21/2077 r | 1,475 | 1,437 | ||||||
Comerica Bank | ||||||||
5.750%, 11/21/2016 | 3,245 | 3,461 | ||||||
Deutsche Bank | ||||||||
3.875%, 08/18/2014 ¬ | 3,205 | 3,311 | ||||||
Fifth Third Bancorp | ||||||||
6.250%, 05/01/2013 q | 1,495 | 1,627 | ||||||
JPMorgan Chase | ||||||||
5.150%, 10/01/2015 | 3,290 | 3,520 | ||||||
Series 1 | ||||||||
7.900%, 04/29/2049 r | 4,085 | 4,212 | ||||||
JPMorgan Chase Capital XXII | ||||||||
6.450%, 02/02/2037 | 1,750 | 1,651 | ||||||
Keycorp | ||||||||
6.500%, 05/14/2013 q | 1,000 | 1,094 | ||||||
Lloyds TSB Bank | ||||||||
4.375%, 01/12/2015 ¬ n | 8,000 | 7,709 | ||||||
North Fork Bancorp | ||||||||
5.875%, 08/15/2012 | 3,130 | 3,247 | ||||||
PNC Funding | ||||||||
3.625%, 02/08/2015 | 3,300 | 3,397 | ||||||
Royal Bank of Scotland | ||||||||
6.400%, 10/21/2019 ¬ | 1,000 | 1,014 | ||||||
Sovereign Bank | ||||||||
8.750%, 05/30/2018 | 2,040 | 2,338 | ||||||
UBS Preferred Funding Trust V | ||||||||
6.243%, 05/29/2049 r | 1,170 | 1,003 | ||||||
Wachovia | ||||||||
5.750%, 06/15/2017 | 1,450 | 1,584 | ||||||
Wells Fargo | ||||||||
4.375%, 01/31/2013 | 1,840 | 1,945 | ||||||
Series K | ||||||||
7.980%, 03/29/2049 r | 3,365 | 3,465 | ||||||
Wells Fargo Capital XIII | ||||||||
Series GMTN | ||||||||
7.700%, 12/29/2049 r | 3,545 | 3,580 | ||||||
69,472 | ||||||||
Basic Industry – 3.1% | ||||||||
Arcelormittal | ||||||||
5.375%, 06/01/2013 ¬ q | 7,835 | 8,239 | ||||||
Celulosa Arauco Constitucion | ||||||||
5.625%, 04/20/2015 ¬ q | 2,000 | 2,149 | ||||||
Incitec Pivot Finance | ||||||||
6.000%, 12/10/2019 n | 2,255 | 2,310 | ||||||
Newmont Mining | ||||||||
5.125%, 10/01/2019 q | 3,720 | 3,986 | ||||||
Rio Tinto Financial | ||||||||
5.875%, 07/15/2013 ¬ | 3,300 | 3,616 | ||||||
Southern Copper | ||||||||
5.375%, 04/16/2020 | 2,000 | 2,005 | ||||||
Vale Overseas | ||||||||
6.250%, 01/11/2016 ¬ | 1,415 | 1,549 | ||||||
23,854 | ||||||||
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 47 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Brokerage – 2.1% | ||||||||
Goldman Sachs Capital II | ||||||||
5.793%, 12/29/2049 r q | $ | 1,165 | $ | 880 | ||||
Goldman Sachs Group | ||||||||
6.150%, 04/01/2018 | 3,845 | 4,028 | ||||||
Merrill Lynch | ||||||||
6.050%, 05/16/2016 | 4,625 | 4,779 | ||||||
Morgan Stanley | ||||||||
5.375%, 10/15/2015 | 4,760 | 4,820 | ||||||
7.300%, 05/13/2019 | 1,480 | 1,592 | ||||||
16,099 | ||||||||
Capital Goods – 1.4% | ||||||||
Boeing | ||||||||
4.875%, 02/15/2020 | 1,850 | 2,037 | ||||||
John Deere Capital | ||||||||
4.500%, 04/03/2013 | 1,990 | 2,143 | ||||||
L-3 Communications | ||||||||
4.750%, 07/15/2020 | 1,885 | 1,899 | ||||||
Tyco International | ||||||||
3.375%, 10/15/2015 ¬ | 4,405 | 4,548 | ||||||
10,627 | ||||||||
Communications – 7.2% | ||||||||
AT&T | ||||||||
5.800%, 02/15/2019 q | 3,350 | 3,772 | ||||||
British Sky Broadcasting | ||||||||
6.100%, 02/15/2018 ¬ n q | 1,845 | 2,071 | ||||||
British Telecom | ||||||||
5.950%, 01/15/2018 ¬ | 2,415 | 2,518 | ||||||
CBS | ||||||||
5.750%, 04/15/2020 q | 1,355 | 1,454 | ||||||
Comcast | ||||||||
5.150%, 03/01/2020 | 1,930 | 2,021 | ||||||
Deutsche Telekom | ||||||||
5.875%, 08/20/2013 ¬ | 6,560 | 7,182 | ||||||
DirecTV Holdings | ||||||||
3.550%, 03/15/2015 | 2,850 | 2,869 | ||||||
5.200%, 03/15/2020 | 2,800 | 2,918 | ||||||
Discovery Communications | ||||||||
5.050%, 06/01/2020 q | 3,200 | 3,326 | ||||||
Embarq | ||||||||
7.082%, 06/01/2016 | 1,170 | 1,247 | ||||||
NBC Universal | ||||||||
5.150%, 04/30/2020 n | 3,895 | 4,062 | ||||||
News America | ||||||||
5.650%, 08/15/2020 q | 2,000 | 2,209 | ||||||
Rogers Communications | ||||||||
6.800%, 08/15/2018 ¬ | 1,390 | 1,643 | ||||||
Telecom Italia Capital | ||||||||
7.175%, 06/18/2019 ¬ | 2,570 | 2,767 | ||||||
Time Warner Cable | ||||||||
8.250%, 02/14/2014 | 2,000 | 2,364 | ||||||
6.750%, 07/01/2018 | 2,025 | 2,324 | ||||||
Verizon Communications | ||||||||
5.250%, 04/15/2013 | 5,053 | 5,540 | ||||||
8.750%, 11/01/2018 | 3,270 | 4,251 | ||||||
54,538 | ||||||||
Consumer Cyclical – 2.8% | ||||||||
American Honda Finance | ||||||||
4.625%, 04/02/2013 n | 3,660 | 3,920 | ||||||
Home Depot | ||||||||
5.875%, 12/16/2036 | 1,775 | 1,820 | ||||||
McDonald’s | ||||||||
5.350%, 03/01/2018 q | 1,740 | 1,993 |
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
R.R. Donnelley & Sons | ||||||||
7.625%, 06/15/2020 | $ | 1,195 | $ | 1,185 | ||||
Target | ||||||||
5.125%, 01/15/2013 | 3,580 | 3,906 | ||||||
Viacom | ||||||||
5.625%, 09/15/2019 q | 2,000 | 2,191 | ||||||
Whirlpool | ||||||||
5.500%, 03/01/2013 | 3,165 | 3,390 | ||||||
Yum! Brands | ||||||||
8.875%, 04/15/2011 | 2,740 | 2,894 | ||||||
21,299 | ||||||||
Consumer Non Cyclical – 5.5% | ||||||||
Altria Group | ||||||||
9.700%, 11/10/2018 | 3,000 | 3,799 | ||||||
Anheuser-Busch InBev Worldwide | ||||||||
7.750%, 01/15/2019 n | 3,450 | 4,187 | ||||||
Baxter International | ||||||||
4.500%, 08/15/2019 | 1,500 | 1,604 | ||||||
Bunge Limited Finance | ||||||||
8.500%, 06/15/2019 | 1,135 | 1,355 | ||||||
ConAgra Foods | ||||||||
5.875%, 04/15/2014 | 2,595 | 2,934 | ||||||
Covidien International | ||||||||
5.450%, 10/15/2012 ¬ | 2,240 | 2,443 | ||||||
Genentech | ||||||||
4.750%, 07/15/2015 | 1,650 | 1,826 | ||||||
Kellogg | ||||||||
4.450%, 05/30/2016 | 2,620 | 2,862 | ||||||
Kraft Foods | ||||||||
6.500%, 08/11/2017 | 1,225 | 1,423 | ||||||
5.375%, 02/10/2020 | 3,500 | 3,751 | ||||||
Lorillard Tobacco | ||||||||
8.125%, 06/23/2019 | 1,815 | 2,013 | ||||||
Reynolds American | ||||||||
6.750%, 06/15/2017 | 3,000 | 3,250 | ||||||
Roche Holdings | ||||||||
6.000%, 03/01/2019 n | 2,100 | 2,446 | ||||||
Schering-Plough | ||||||||
5.550%, 12/01/2013 | 4,595 | 5,155 | ||||||
UnitedHealth Group | ||||||||
4.875%, 02/15/2013 | 2,965 | 3,186 | ||||||
42,234 | ||||||||
Electric – 2.3% | ||||||||
FirstEnergy Solutions | ||||||||
6.050%, 08/15/2021 | 500 | 510 | ||||||
MidAmerican Energy Holdings | ||||||||
5.875%, 10/01/2012 | 3,445 | 3,730 | ||||||
National Rural Utilities | ||||||||
10.375%, 11/01/2018 | 3,100 | 4,299 | ||||||
Ohio Power | ||||||||
6.000%, 06/01/2016 | 2,100 | 2,378 | ||||||
PPL Energy Supply | ||||||||
6.300%, 07/15/2013 | 2,000 | 2,218 | ||||||
Virginia Electric Power | ||||||||
5.950%, 09/15/2017 | 3,780 | 4,350 | ||||||
17,485 | ||||||||
Energy – 4.1% | ||||||||
Anadarko Petroleum | ||||||||
5.950%, 09/15/2016 q | 1,515 | 1,304 | ||||||
Cenovus Energy | ||||||||
5.700%, 10/15/2019 ¬ n | 2,870 | 3,135 | ||||||
ConocoPhillips | ||||||||
6.000%, 01/15/2020 q | 3,280 | 3,844 |
The accompanying notes are an integral part of the financial statements.
48 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Hess | ||||||||
8.125%, 02/15/2019 | $ | 2,750 | $ | 3,428 | ||||
Marathon Oil | ||||||||
7.500%, 02/15/2019 | 1,635 | 1,961 | ||||||
Nexen | ||||||||
5.650%, 05/15/2017 ¬ | 4,180 | 4,536 | ||||||
Petroleos Mexicanos | ||||||||
4.875%, 03/15/2015 ¬ n q | 1,000 | 1,035 | ||||||
Suncor Energy | ||||||||
6.100%, 06/01/2018 ¬ | 1,275 | 1,436 | ||||||
Talisman Energy | ||||||||
7.750%, 06/01/2019 ¬ | 2,500 | 3,069 | ||||||
Valero Energy | ||||||||
4.500%, 02/01/2015 q | 1,315 | 1,351 | ||||||
Weatherford International | ||||||||
5.950%, 06/15/2012 | 3,890 | 4,167 | ||||||
Woodside Finance | ||||||||
4.500%, 11/10/2014 ¬ n | 1,880 | 1,917 | ||||||
31,183 | ||||||||
Finance – 5.5% | ||||||||
American Express | ||||||||
7.250%, 05/20/2014 | 1,725 | 1,961 | ||||||
American Express Centurion | ||||||||
5.550%, 10/17/2012 | 2,035 | 2,187 | ||||||
American Express Credit | ||||||||
7.300%, 08/20/2013 | 2,405 | 2,723 | ||||||
Ameriprise Financial | ||||||||
5.300%, 03/15/2020 | 3,330 | 3,479 | ||||||
Capital One Bank | ||||||||
8.800%, 07/15/2019 | 3,140 | 3,920 | ||||||
Capital One Financial | ||||||||
6.150%, 09/01/2016 | 1,775 | 1,878 | ||||||
Countrywide Financial | ||||||||
6.250%, 05/15/2016 | 2,395 | 2,497 | ||||||
Credit Agricole | ||||||||
6.637%, 05/29/2049 r ¬ n | 1,330 | 978 | ||||||
Discover Financial Services | ||||||||
10.250%, 07/15/2019 | 2,245 | 2,672 | ||||||
General Electric Capital | ||||||||
4.800%, 05/01/2013 q | 6,235 | 6,646 | ||||||
Series A | ||||||||
3.750%, 11/14/2014 | 2,500 | 2,557 | ||||||
Series MTN | ||||||||
5.625%, 09/15/2017 q | 3,955 | 4,228 | ||||||
International Lease Finance | ||||||||
6.375%, 03/25/2013 | 2,635 | 2,470 | ||||||
Private Export Funding | ||||||||
3.050%, 10/15/2014 | 575 | 601 | ||||||
Transcapitalinvest | ||||||||
5.670%, 03/05/2014 ¬ n | 2,990 | 3,048 | ||||||
41,845 | ||||||||
Industrial Other – 0.8% | ||||||||
Johnson Controls | ||||||||
5.250%, 01/15/2011 q | 4,720 | 4,795 | ||||||
Thermo Fisher Scientific | ||||||||
3.200%, 05/01/2015 | 1,265 | 1,305 | ||||||
6,100 | ||||||||
Insurance – 3.8% | ||||||||
Aflac | ||||||||
8.500%, 05/15/2019 q | 3,000 | 3,609 | ||||||
Allied World Assurance | ||||||||
7.500%, 08/01/2016 ¬ | 2,860 | 3,150 | ||||||
American International Group | ||||||||
8.250%, 08/15/2018 | 3,000 | 3,038 |
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Hartford Financial Services Group | ||||||||
6.000%, 01/15/2019 | $ | 3,055 | $ | 3,082 | ||||
Lincoln National | ||||||||
8.750%, 07/01/2019 q | 2,720 | 3,334 | ||||||
Met Life Global Funding I | ||||||||
5.125%, 04/10/2013 n | 3,730 | 4,034 | ||||||
MetLife | ||||||||
7.717%, 02/15/2019 | 430 | 512 | ||||||
Pacific Life Global Funding | ||||||||
5.150%, 04/15/2013 n | 2,205 | 2,312 | ||||||
Pacific Life Insurance | ||||||||
6.000%, 02/10/2020 n q | 965 | 1,024 | ||||||
Prudential Financial | ||||||||
5.100%, 09/20/2014 | 3,235 | 3,440 | ||||||
ZFS Finance USA Trust V | ||||||||
6.500%, 05/09/2067 n r | 1,530 | 1,369 | ||||||
28,904 | ||||||||
Natural Gas – 0.4% | ||||||||
Kinder Morgan Energy Partners | ||||||||
5.000%, 12/15/2013 | 1,135 | 1,208 | ||||||
Transocean | ||||||||
6.000%, 03/15/2018 ¬ q | 1,820 | 1,675 | ||||||
2,883 | ||||||||
Other Utility – 0.2% | ||||||||
American Water Capital | ||||||||
6.085%, 10/15/2017 | 1,420 | 1,566 | ||||||
Real Estate – 1.7% | ||||||||
Health Care – REIT | ||||||||
5.875%, 05/15/2015 | 1,875 | 2,021 | ||||||
Health Care Properties – REIT | ||||||||
6.300%, 09/15/2016 | 1,960 | 2,028 | ||||||
Prologis – REIT | ||||||||
6.875%, 03/15/2020 q | 3,545 | 3,351 | ||||||
Simon Property Group – REIT | ||||||||
5.650%, 02/01/2020 | 2,000 | 2,118 | ||||||
Vornado Realty – REIT | ||||||||
4.250%, 04/01/2015 | 3,315 | 3,296 | ||||||
12,814 | ||||||||
Sovereign – 0.2% | ||||||||
United Mexican States | ||||||||
5.625%, 01/15/2017 ¬ | 1,400 | 1,537 | ||||||
Transportation – 2.0% | ||||||||
AEP Texas Central | ||||||||
4.980%, 07/01/2013 | 9,095 | 9,595 | ||||||
Erac USA Finance | ||||||||
6.375%, 10/15/2017 n | 1,445 | 1,627 | ||||||
Union Pacific | ||||||||
5.750%, 11/15/2017 q | 3,320 | 3,748 | ||||||
14,970 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $368,317) | 397,410 | |||||||
Asset-Backed Securities – 19.9% |
| |||||||
Automotive – 5.4% | ||||||||
Ally Auto Receivables Trust | ||||||||
2.330%, 06/17/2013 n | 3,000 | 3,052 | ||||||
Bank of America Auto Trust | ||||||||
Series 2009-2A, Class A2 | ||||||||
1.160%, 02/15/2012 n | 2,006 | 2,008 | ||||||
Series 2010-2, Class A3 | ||||||||
1.310%, 07/15/2014 | 2,750 | 2,758 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 49 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Capital One Prime Auto Receivables Trust | ||||||||
4.940%, 07/15/2012 | $ | 1,436 | $ | 1,443 | ||||
Series 2007-2, Class A3 | ||||||||
4.890%, 01/15/2012 | 331 | 333 | ||||||
Chrysler Financial Lease Trust | ||||||||
1.780%, 06/15/2011 n | 4,285 | 4,300 | ||||||
Ford Credit Auto Owner Trust | ||||||||
3.960%, 05/15/2013 | 4,000 | 4,100 | ||||||
Harley-Davidson Motorcycle Trust | ||||||||
4.850%, 06/15/2012 | 857 | 858 | ||||||
Hertz Vehicle Financing | ||||||||
4.260%, 03/25/2014 n | 5,000 | 5,210 | ||||||
Huntington Auto Trust | ||||||||
3.480%, 07/15/2011 n | 74 | 74 | ||||||
Nissan Auto Receivables Owner Trust | ||||||||
5.160%, 03/15/2014 | 5,464 | 5,650 | ||||||
Santander Drive Auto Receivables Trust | ||||||||
1.360%, 03/15/2013 | 6,445 | 6,450 | ||||||
USAA Auto Owner Trust | ||||||||
4.900%, 02/15/2012 | 75 | 76 | ||||||
Series 2008-1, Class A3 | ||||||||
4.160%, 04/16/2012 | 531 | 535 | ||||||
Wachovia Auto Loan Owner Trust | ||||||||
5.230%, 03/20/2012 n | 269 | 270 | ||||||
World Omni Auto Receivables Trust | ||||||||
5.280%, 01/17/2012 | 198 | 199 | ||||||
Series 2010-A, Class A2 | ||||||||
0.700%, 06/15/2012 | 3,895 | 3,892 | ||||||
41,208 | ||||||||
Credit Cards – 5.2% | ||||||||
American Express Issuance Trust | ||||||||
0.680%, 08/15/2011 r | 1,930 | 1,926 | ||||||
Bank of America Credit Card | ||||||||
Series 2007-A8, Class A8 | ||||||||
5.590%, 11/17/2014 | 5,855 | 6,346 | ||||||
Series 2008-A1, Class A1 | ||||||||
0.930%, 04/15/2013 r | 2,500 | 2,504 | ||||||
Cabela’s Master Credit Card Trust | ||||||||
1.187%, 12/15/2013 n r | 2,910 | 2,915 | ||||||
Capital One Multi-Asset Execution Trust | ||||||||
5.050%, 02/15/2016 | 4,795 | 5,246 | ||||||
Chase Issuance Trust | ||||||||
4.260%, 05/15/2013 | 3,000 | 3,088 | ||||||
Citibank Credit Card Issuance Trust | ||||||||
5.450%, 05/10/2013 | 11,195 | 11,631 | ||||||
Discover Card Master Trust | ||||||||
5.650%, 03/16/2020 | 3,530 | 4,061 | ||||||
Series 2007-C1, Class C1 | ||||||||
0.670%, 01/15/2013 r | 1,940 | 1,939 | ||||||
39,656 | ||||||||
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Equipment Leases – 0.3% | ||||||||
Caterpillar Financial Asset Trust | ||||||||
5.340%, 06/25/2012 | $ | 1,109 | $ | 1,117 | ||||
GE Equipment Small Ticket | ||||||||
0.382%, 11/15/2010 n | 1,022 | 1,022 | ||||||
2,139 | ||||||||
Home Equity – 2.3% | ||||||||
Amresco Residential Security Mortgage | ||||||||
6.960%, 03/25/2027 ¥ | 25 | 24 | ||||||
Contimortgage Home Equity Loan Trust | ||||||||
7.900%, 04/15/2028 ¥ | 13 | 12 | ||||||
Countrywide Asset-Backed Certificates | ||||||||
5.739%, 02/25/2034 | 3,181 | 2,708 | ||||||
RBSSP Resecuritization Trust | ||||||||
2.095%, 12/26/2037 n r | 1,062 | 1,057 | ||||||
Series 2009-13, Class 5A1 | ||||||||
0.445%, 11/26/2036 n r | 3,780 | 3,643 | ||||||
Series 2009-8, Class 3A1 | ||||||||
0.485%, 03/26/2037 n r | 980 | 956 | ||||||
Series 2009-9, Class 9A1 | ||||||||
0.565%, 09/26/2037 n r | 3,209 | 2,968 | ||||||
Series 2010-4, Class 1A1 | ||||||||
0.455%, 03/26/2036 n r | 4,526 | 3,910 | ||||||
Renaissance Home Equity Loan Trust | ||||||||
5.140%, 11/25/2035 | 2,590 | 1,867 | ||||||
17,145 | ||||||||
Manufactured Housing – 0.2% |
| |||||||
Green Tree Financial | ||||||||
Series 1996-9, Class A5 | ||||||||
7.200%, 01/15/2028 ¥ | 76 | 78 | ||||||
Series 2008-MH1, Class A1 | ||||||||
7.000%, 04/25/2038 n | 1,184 | 1,209 | ||||||
Origen Manufactured Housing | ||||||||
4.490%, 05/15/2018 | 550 | 552 | ||||||
1,839 | ||||||||
Other – 5.6% | ||||||||
Bear Stearns Commercial | ||||||||
Series 2005-PW10, Class A4 | ||||||||
5.405%, 12/11/2040 r | 4,000 | 4,205 | ||||||
Series 2007-PW15, Class A2 | ||||||||
5.205%, 02/11/2044 | 3,605 | 3,723 | ||||||
Series 2007-T28, Class D | ||||||||
6.176%, 09/11/2042 n ¥ r | 1,470 | 512 | ||||||
Citigroup/Deutsche Bank | ||||||||
Series 2005-CD1, Class A4 | ||||||||
5.397%, 07/15/2044 r | 5,800 | 6,213 | ||||||
Series 2007-CD4, Class A2B | ||||||||
5.205%, 12/11/2049 q | 2,340 | 2,408 | ||||||
Commercial Mortgage Pass-Through Certificates | ||||||||
5.449%, 02/05/2019 n | 2,430 | 2,424 | ||||||
Greenwich Capital Commercial Funding | ||||||||
3.285%, 07/05/2035 | 257 | 257 |
The accompanying notes are an integral part of the financial statements.
50 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
GS Mortgage Securities II | ||||||||
Series 2006-GG6, Class A2 | ||||||||
5.506%, 04/10/2038 | $ | 3,466 | $ | 3,519 | ||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
Series 2010-C1, Class A1 | ||||||||
3.853%, 06/15/2043 n | 4,715 | 4,831 | ||||||
Merrill Lynch Mortgage Trust | ||||||||
Series 2005-CIP1, Class C | ||||||||
5.330%, 07/12/2038 ¥ r | 1,455 | 973 | ||||||
Small Business Administration | ||||||||
Series 2006-P10A, Class 1 | ||||||||
5.408%, 02/10/2016 | 3,381 | 3,641 | ||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||
Series 2007-C30, Class A3 | ||||||||
5.246%, 12/15/2043 | 5,940 | 5,938 | ||||||
Series 2007-C34, Class A2 | ||||||||
5.569%, 05/15/2046 | 3,830 | 3,961 | ||||||
42,605 | ||||||||
Utilities – 0.9% | ||||||||
CenterPoint Energy Transition | ||||||||
Series 2008-A, Class A1 | ||||||||
4.192%, 02/01/2020 | 5,229 | 5,642 | ||||||
PG&E Energy Recovery Funding | ||||||||
Series 2005-1, Class A3 | ||||||||
4.140%, 09/25/2012 | 1,066 | 1,075 | ||||||
6,717 | ||||||||
Total Asset-Backed Securities | ||||||||
(Cost $148,096) | 151,309 | |||||||
U.S. Government & Agency Securities – 9.3% |
| |||||||
U.S. Agency Debentures – 1.9% |
| |||||||
Federal Agricultural Mortgage Corporation | ||||||||
5.500%, 07/15/2011 n | 13,900 | 14,606 | ||||||
U.S. Treasuries – 7.4% | ||||||||
U.S. Treasury Notes | ||||||||
0.875%, 05/31/2011 q | 11,300 | 11,353 | ||||||
1.000%, 08/31/2011 | 2,680 | 2,697 | ||||||
1.375%, 10/15/2012 q | 3,950 | 4,009 | ||||||
1.375%, 01/15/2013 q | 2,505 | 2,539 | ||||||
2.625%, 06/30/2014 q | 3,090 | 3,230 | ||||||
2.375%, 08/31/2014 q | 1,905 | 1,969 | ||||||
2.375%, 02/28/2015 q | 6,720 | 6,926 | ||||||
2.500%, 03/31/2015 | 3,835 | 3,974 | ||||||
2.125%, 05/31/2015 q | 2,260 | 2,299 | ||||||
3.625%, 08/15/2019 q | 750 | 793 | ||||||
3.375%, 11/15/2019 q | 2,650 | 2,745 | ||||||
3.625%, 02/15/2020 | 3,555 | 3,756 | ||||||
3.500%, 05/15/2020 q | 9,590 | 10,037 | ||||||
56,327 | ||||||||
Total U.S. Government & Agency Securities | ||||||||
(Cost $68,824) | 70,933 | |||||||
U.S. Government Agency Mortgage-Backed Securities – 7.9% |
| |||||||
Adjustable Rate r – 5.0% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
3.185%, 01/01/2028, #786281 | 719 | 749 | ||||||
2.748%, 04/01/2029, #847190 | 872 | 912 | ||||||
2.724%, 10/01/2030, #847209 | 2,410 | 2,514 | ||||||
2.726%, 05/01/2031, #847161 | 754 | 787 | ||||||
2.761%, 09/01/2033, #847210 | 2,037 | 2,127 | ||||||
2.856%, 01/01/2038, #848282 | 3,661 | 3,805 |
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Federal National Mortgage Association Pool | ||||||||
2.756%, 09/01/2033, #725111 | $ | 1,333 | $ | 1,393 | ||||
3.446%, 10/01/2033, #879906 | 5,043 | 5,263 | ||||||
2.774%, 03/01/2035, #819652 | 4,292 | 4,485 | ||||||
2.301%, 12/01/2035, #848390 | 1,741 | 1,774 | ||||||
2.758%, 07/01/2036, #AE0058 | 3,610 | 3,762 | ||||||
2.935%, 07/01/2036, #886034 | 4,253 | 4,444 | ||||||
2.791%, 09/01/2036, #995949 | 2,836 | 2,961 | ||||||
2.725%, 03/01/2038, #AD0706 | 3,169 | 3,305 | ||||||
38,281 | ||||||||
Fixed Rate – 2.9% | ||||||||
Federal Home Loan Mortgage | ||||||||
5.469%, 01/25/2012 | 1,893 | 1,968 | ||||||
Federal National Mortgage Association Pool | ||||||||
3.131%, 01/01/2015, #464373 | 2,600 | 2,703 | ||||||
4.000%, 07/01/2018, #357414 | 5,554 | 5,873 | ||||||
4.000%, 05/01/2020, #AD0107 | 5,359 | 5,664 | ||||||
4.000%, 03/01/2022, #890134 | 5,383 | 5,689 | ||||||
21,897 | ||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $59,149) | 60,178 | |||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities – 7.5% |
| |||||||
Adjustable Rate r – 1.8% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
Series 2755, Class FO | ||||||||
0.800%, 04/15/2032 | 5,793 | 5,795 | ||||||
Series 2863, Class HF | ||||||||
0.850%, 02/15/2019 | 3,424 | 3,424 | ||||||
Federal National Mortgage | ||||||||
0.747%, 06/25/2023 | 4,318 | 4,292 | ||||||
13,511 | ||||||||
Fixed Rate – 5.7% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
Series 1167, Class E | ||||||||
7.500%, 11/15/2021 | 15 | 17 | ||||||
Series 1286, Class A | ||||||||
6.000%, 05/15/2022 | 40 | 43 | ||||||
Series 2750, Class HE | ||||||||
5.000%, 02/15/2019 | 5,930 | 6,384 | ||||||
Series 2763, Class TA | ||||||||
4.000%, 03/15/2011 | 1,531 | 1,556 | ||||||
Series 2780, Class QC | ||||||||
4.500%, 03/15/2017 | 4,060 | 4,133 | ||||||
Series 2795, Class CL | ||||||||
4.500%, 07/15/2017 | 5,263 | 5,393 | ||||||
Series 3555, Class EA | ||||||||
4.000%, 12/15/2014 | 4,025 | 4,174 | ||||||
Federal National Mortgage Association | ||||||||
Series 1990-89, Class K | ||||||||
6.500%, 07/25/2020 | 12 | 14 | ||||||
Series 2002-83, Class MD | ||||||||
5.000%, 09/25/2016 | 4,695 | 4,818 | ||||||
Series 2003-30, Class AE | ||||||||
3.900%, 10/25/2017 | 5,943 | 6,134 | ||||||
Series 2009-M1, Class A1 | ||||||||
3.400%, 07/25/2019 | 3,838 | 3,975 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 51 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
Series 2010-M1, Class A1 | ||||||||
3.305%, 06/25/2019 | $ | 6,467 | $ | 6,655 | ||||
43,296 | ||||||||
Total Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $55,918) | 56,807 | |||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities – 2.6% | �� | |||||||
Adjustable Rate r – 1.0% |
| |||||||
Arkle Master Issuer | ||||||||
Series 2010-1A, Class 1A | ||||||||
0.480%, 05/17/2011 ¬ n | 4,240 | 4,214 | ||||||
Structured Mortgage Loan Trust | ||||||||
Series 2004-11, Class A | ||||||||
3.128%, 08/25/2034 | 251 | 211 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2003-J, Class 2A5 | ||||||||
4.437%, 10/25/2033 | 3,215 | 3,260 | ||||||
7,685 | ||||||||
Fixed Rate – 1.6% | ||||||||
Countrywide Alternative Loan Trust | ||||||||
Series 2004-2CB, Class 1A1 | ||||||||
4.250%, 03/25/2034 | 629 | 630 | ||||||
Series 2006-19CB, Class A15 | ||||||||
6.000%, 08/25/2036 | 1,237 | 951 | ||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
Series 2010-S1, Class 2A | ||||||||
3.250%, 04/25/2038 n | 4,241 | 4,306 | ||||||
GMAC Mortgage Corporation Loan Trust | ||||||||
Series 2010-1, Class A | ||||||||
4.250%, 07/25/2040 n | 3,455 | 3,446 | ||||||
OBP Depositor Trust | ||||||||
Series 2010-0BP, Class A | ||||||||
4.646%, 07/15/2045 n | 3,200 | 3,214 | ||||||
Westam Mortgage Financial | ||||||||
Series 11, Class A | ||||||||
6.360%, 08/26/2020 ¥ | 16 | 17 | ||||||
12,564 | ||||||||
Total Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | ||||||||
(Cost $20,375) | 20,249 | |||||||
Municipal Bond – 0.2% |
| |||||||
Sullivan County Health, Education & Housing Facilities, Hospital Revenue, Wellmont Health, Class B | ||||||||
6.950% 09/01/2016 | ||||||||
(Cost $1,620) | 1,620 | 1,620 | ||||||
Preferred Stock – 0.0% |
| |||||||
Sovereign – 0.0% | ||||||||
Fannie Mae, Series S | ||||||||
(Cost $2,472) | 104,000 | 35 | ||||||
Short-Term Investments – 0.8% |
| |||||||
Money Market Fund – 0.5% |
| |||||||
First American Prime Obligations Fund, Class Z 0.089% Å W | 3,902,103 | 3,902 | ||||||
U.S. Treasury Obligations – 0.3% |
| |||||||
U.S. Treasury Bills ¨ | ||||||||
0.135%, 07/15/2010 | $ | 240 | 240 | |||||
0.150%, 07/29/2010 | 310 | 310 | ||||||
0.205%, 12/16/2010 | 300 | 300 |
Intermediate Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
0.232%, 04/07/2011 | $ | 875 | $ | 874 | ||||
0.242%, 05/05/2011 | 285 | 284 | ||||||
2,008 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $5,909) | 5,910 | |||||||
Investment Purchased with Proceeds from Securities Lending – 13.0% |
| |||||||
Mount Vernon Securities Lending Prime Portfolio | ||||||||
0.282% W † | ||||||||
(Cost $99,022) | 99,022,298 | 99,022 | ||||||
Total Investments p – 113.4% | ||||||||
(Cost $829,702) | 863,473 | |||||||
Other Assets and Liabilities, Net – (13.4)% |
| (102,208 | ) | |||||
Total Net Assets – 100.0% | $ | 761,265 | ||||||
> | Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements. |
r | Variable Rate Security – The rate shown is the rate in effect as of June 30, 2010. |
¬ | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of June 30, 2010, the fair value of foreign securities was $84,100 or 11.0% of total net assets. |
q | This security or a portion of this security is out on loan at June 30, 2010. Total loaned securities had a fair value of $96,774 at June 30, 2010. See note 2 in Notes to Financial Statements. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of June 30, 2010, the fair value of these investments was $117,331 or 15.4% of total net assets. See note 2 in Notes to Financial Statements. |
¥ | Security considered illiquid. As of June 30, 2010, the fair value of the fund’s investments considered to be illiquid was $1,616 or 0.2% of total net assets. See note 2 in Notes to Financial Statements. |
Å | Investment in affiliated security. This money market fund is advised by FAF Advisors, Inc., which also serves as advisor for this fund. See note 3 in Notes to Financial Statements. |
W | The rate shown is the annualized seven-day effective yield as of June 30, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts and/or swap agreements. Yield shown is the annualized effective yield as of June 30, 2010. See note 2 in Notes to Financial Statements. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. See note 2 in Notes to Financial Statements. |
p | On June 30, 2010, the cost of investments for federal income tax purposes was $832,809. The aggregate gross unrealized appreciation and depreciation of investments, based on this cost, were as follows: |
Gross unrealized appreciation | $ | 40,159 | ||
Gross unrealized depreciation | (9,495 | ) | ||
Net unrealized appreciation | $ | 30,664 | ||
REIT | – Real Estate Investment Trust |
The accompanying notes are an integral part of the financial statements.
52 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Term Bond Fund (concluded) |
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Purchased (Sold) | Notional Contract Value | Unrealized Appreciation (Depreciation) | ||||||||||||
U.S. Treasury 2 Year Note Futures | September 2010 | 257 | $ | 56,239 | $ | 199 | ||||||||||
U.S. Treasury 5 Year Note Futures | September 2010 | (251 | ) | (29,706 | ) | (275 | ) | |||||||||
U.S. Treasury 10 Year Note Futures | September 2010 | 157 | 19,240 | 405 | ||||||||||||
U.S. Treasury Long Bond Futures | September 2010 | (20 | ) | (2,550 | ) | (69 | ) | |||||||||
$ | 260 | |||||||||||||||
Interest Rate Swap Agreements | ||||||||||||||||||||||||
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Depreciation | ||||||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 1.255 | % | 11/03/2011 | $ | 20,000 | $ | (157 | ) | ||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 3.858 | % | 01/19/2020 | 5,000 | (466 | ) | ||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.358 | % | 09/25/2011 | 19,000 | (205 | ) | ||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.133 | % | 03/25/2012 | 19,000 | (140 | ) | ||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.048 | % | 06/25/2012 | 20,000 | (32 | ) | ||||||||||||||||
UBS | 3-Month LIBOR | Receive | 3.001 | % | 08/03/2014 | 8,000 | (492 | ) | ||||||||||||||||
$ | (1,492 | ) | ||||||||||||||||||||||
Short Term Bond Fund | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Corporate Bonds – 40.1% |
| |||||||
Banking – 8.4% | ||||||||
Bank of America | ||||||||
4.875%, 01/15/2013 | $ | 2,000 | $ | 2,090 | ||||
4.750%, 08/15/2013 | 1,500 | 1,540 | ||||||
Series MTN | ||||||||
2.100%, 04/30/2012 | 1,500 | 1,536 | ||||||
Bank One | ||||||||
7.875%, 08/01/2010 | 2,700 | 2,712 | ||||||
BB&T | ||||||||
5.700%, 04/30/2014 q | 1,000 | 1,098 | ||||||
Series MTN | ||||||||
3.850%, 07/27/2012 | 260 | 271 | ||||||
Citigroup | ||||||||
2.125%, 04/30/2012 | 1,500 | 1,537 | ||||||
5.850%, 07/02/2013 | 1,000 | 1,047 | ||||||
6.375%, 08/12/2014 | 4,500 | 4,780 | ||||||
Credit Suisse | ||||||||
4.875%, 08/15/2010 | 1,500 | 1,506 | ||||||
Credit Suisse New York | ||||||||
5.500%, 05/01/2014 q ¬ | 1,000 | 1,093 | ||||||
Deutsche Bank | ||||||||
3.875%, 08/18/2014 ¬ | 2,000 | 2,066 | ||||||
European Investment Bank | ||||||||
1.750%, 09/14/2012 q ¬ | 5,000 | 5,057 | ||||||
Fifth Third Bancorp | ||||||||
6.250%, 05/01/2013 q | 1,755 | 1,910 | ||||||
HSBC Finance | ||||||||
6.750%, 05/15/2011 | 2,345 | 2,441 | ||||||
JPMorgan Chase | ||||||||
2.200%, 06/15/2012 | 1,500 | 1,541 | ||||||
5.125%, 09/15/2014 | 2,000 | 2,134 | ||||||
3.700%, 01/20/2015 | 2,000 | 2,046 | ||||||
Key Bank | ||||||||
3.200%, 06/15/2012 q | 1,500 | 1,569 | ||||||
KeyCorp | ||||||||
6.500%, 05/14/2013 q | 1,000 | 1,094 | ||||||
KFW | ||||||||
4.750%, 05/15/2012 ¬ | 5,000 | 5,339 | ||||||
Lloyds TSB Bank | ||||||||
4.375%, 01/12/2015 ¬ n | 3,000 | 2,890 | ||||||
National City | ||||||||
4.000%, 02/01/2011 | 1,000 | 1,008 | ||||||
PNC Funding | ||||||||
3.625%, 02/08/2015 | 1,500 | 1,544 | ||||||
Rabobank Nederland | ||||||||
3.200%, 03/11/2015 ¬ n | 1,400 | 1,415 | ||||||
Royal Bank of Scotland | ||||||||
4.875%, 08/25/2014 ¬ n | 1,900 | 1,906 | ||||||
Santander | ||||||||
2.485%, 01/18/2013 ¬ n | 2,000 | 1,938 | ||||||
UBS | ||||||||
3.875%, 01/15/2015 ¬ | 1,000 | 995 | ||||||
Wells Fargo | ||||||||
4.750%, 02/09/2015 | 2,000 | 2,093 | ||||||
Series I | ||||||||
3.750%, 10/01/2014 | 2,000 | 2,048 | ||||||
60,244 | ||||||||
Basic Industry – 2.3% | ||||||||
Arcelormittal | ||||||||
5.375%, 06/01/2013 q ¬ | 1,900 | 1,998 | ||||||
BHP Billiton Finance | ||||||||
5.500%, 04/01/2014 ¬ | 1,000 | 1,115 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 53 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Codelco | ||||||||
5.500%, 10/15/2013 n ¬ | $ | 2,400 | $ | 2,630 | ||||
Dow Chemical | ||||||||
4.850%, 08/15/2012 | 1,000 | 1,055 | ||||||
E. I. du Pont de Nemours | ||||||||
3.250%, 01/15/2015 | 2,600 | 2,712 | ||||||
Georgia-Pacific | ||||||||
8.125%, 05/15/2011 q | 500 | 521 | ||||||
Noranda | ||||||||
7.250%, 07/15/2012 ¬ | 2,000 | 2,166 | ||||||
Potash Corporation of Saskatchewan | ||||||||
3.750%, 09/30/2015 ¬ | 1,500 | 1,562 | ||||||
Rio Tinto Financial | ||||||||
8.950%, 05/01/2014 q ¬ | 1,000 | 1,213 | ||||||
United States Steel | ||||||||
5.650%, 06/01/2013 | 1,000 | 1,010 | ||||||
Vedanta Resources | ||||||||
9.500%, 07/18/2018 ¬ n | 420 | 446 | ||||||
16,428 | ||||||||
Brokerage – 1.8% | ||||||||
Goldman Sachs Group | ||||||||
6.875%, 01/15/2011 q | 3,000 | 3,076 | ||||||
1.625%, 07/15/2011 | 1,580 | 1,599 | ||||||
3.625%, 08/01/2012 q | 1,625 | 1,655 | ||||||
Merrill Lynch | ||||||||
5.450%, 02/05/2013 | 1,250 | 1,311 | ||||||
Morgan Stanley | ||||||||
2.250%, 03/13/2012 q | 1,525 | 1,565 | ||||||
4.200%, 11/20/2014 | 2,000 | 1,975 | ||||||
Series GMTN | ||||||||
4.100%, 01/26/2015 q | 1,645 | 1,603 | ||||||
12,784 | ||||||||
Capital Goods – 1.0% | ||||||||
Case New Holland | ||||||||
7.750%, 09/01/2013 | 1,000 | 1,023 | ||||||
Caterpillar Financial Services | ||||||||
4.900%, 08/15/2013 | 2,490 | 2,725 | ||||||
ITT | ||||||||
4.900%, 05/01/2014 | 1,779 | 1,939 | ||||||
Northrop Grumman | ||||||||
3.700%, 08/01/2014 | 1,707 | 1,790 | ||||||
7,477 | ||||||||
Communications – 4.6% | ||||||||
American Tower | ||||||||
4.625%, 04/01/2015 | 2,000 | 2,080 | ||||||
AT&T | ||||||||
7.300%, 11/15/2011 | 1,500 | 1,621 | ||||||
6.700%, 11/15/2013 | 2,000 | 2,308 | ||||||
British Telecom | ||||||||
5.150%, 01/15/2013 ¬ | 1,000 | 1,049 | ||||||
Comcast | ||||||||
5.300%, 01/15/2014 | 1,000 | 1,098 | ||||||
Deutsche Telekom | ||||||||
5.875%, 08/20/2013 ¬ | 2,000 | 2,190 | ||||||
DirecTV Holdings | ||||||||
3.550%, 03/15/2015 | 1,700 | 1,711 | ||||||
7.625%, 05/15/2016 | 2,000 | 2,173 | ||||||
NBC Universal | ||||||||
3.650%, 04/30/2015 q n | 2,000 | 2,045 | ||||||
News America | ||||||||
5.300%, 12/15/2014 q | 1,000 | 1,111 | ||||||
Sprint Capital | ||||||||
8.375%, 03/15/2012 | 2,000 | 2,098 | ||||||
TCM Sub | ||||||||
3.550%, 01/15/2015 n | 1,000 | 1,022 |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Telecom Italia Capital | ||||||||
4.950%, 09/30/2014 ¬ | $ | 1,540 | $ | 1,543 | ||||
Telefonica Emisiones | ||||||||
2.582%, 04/26/2013 q ¬ | 1,450 | 1,440 | ||||||
Time Warner Cable | ||||||||
5.400%, 07/02/2012 | 1,250 | 1,335 | ||||||
8.250%, 02/14/2014 | 1,025 | 1,212 | ||||||
Verizon Communications | ||||||||
5.250%, 04/15/2013 | 900 | 987 | ||||||
Verizon New England | ||||||||
6.500%, 09/15/2011 | 1,500 | 1,584 | ||||||
Verizon Wireless | ||||||||
5.550%, 02/01/2014 | 2,000 | 2,242 | ||||||
Vodafone Group | ||||||||
5.000%, 09/15/2015 ¬ | 2,500 | 2,702 | ||||||
33,551 | ||||||||
Consumer Cyclical – 1.5% | ||||||||
Best Buy | ||||||||
6.750%, 07/15/2013 | 1,000 | 1,119 | ||||||
Home Depot | ||||||||
5.250%, 12/16/2013 | 2,000 | 2,199 | ||||||
Macy’s Retail Holdings | ||||||||
5.350%, 03/15/2012 | 1,700 | 1,738 | ||||||
Staples | ||||||||
9.750%, 01/15/2014 | 1,000 | 1,227 | ||||||
Target | ||||||||
4.000%, 06/15/2013 | 1,000 | 1,068 | ||||||
Viacom | ||||||||
4.375%, 09/15/2014 | 1,000 | 1,063 | ||||||
Whirlpool | ||||||||
8.000%, 05/01/2012 | 1,000 | 1,094 | ||||||
Yum! Brands | ||||||||
8.875%, 04/15/2011 | 1,260 | 1,331 | ||||||
10,839 | ||||||||
Consumer Non Cyclical – 7.2% | ||||||||
Altria Group | ||||||||
8.500%, 11/10/2013 | 2,000 | 2,335 | ||||||
Anheuser-Busch InBev Worldwide | ||||||||
3.000%, 10/15/2012 q | 1,750 | 1,796 | ||||||
7.200%, 01/15/2014 n | 1,000 | 1,150 | ||||||
Boston Scientific | ||||||||
4.500%, 01/15/2015 | 1,000 | 982 | ||||||
Bunge Limited Finance | ||||||||
5.875%, 05/15/2013 | 895 | 961 | ||||||
Cardinal Health | ||||||||
5.500%, 06/15/2013 | 915 | 999 | ||||||
Carefusion | ||||||||
4.125%, 08/01/2012 | 600 | 627 | ||||||
Cargill | ||||||||
4.375%, 06/01/2013 n | 2,000 | 2,132 | ||||||
ConAgra Foods | ||||||||
5.875%, 04/15/2014 | 1,950 | 2,205 | ||||||
Covidien International | ||||||||
1.875%, 06/15/2013 ¬ | 3,750 | 3,773 | ||||||
Dr. Pepper Snapple Group | ||||||||
2.350%, 12/21/2012 | 2,000 | 2,023 | ||||||
Eli Lilly & Co. | ||||||||
3.550%, 03/06/2012 q | 1,000 | 1,043 | ||||||
Express Scripts | ||||||||
5.250%, 06/15/2012 | 2,500 | 2,671 | ||||||
Genentech | ||||||||
4.750%, 07/15/2015 | 2,000 | 2,213 | ||||||
Kraft Foods | ||||||||
5.625%, 11/01/2011 | 1,500 | 1,578 | ||||||
6.000%, 02/11/2013 | 1,500 | 1,654 | ||||||
Kroger | ||||||||
5.500%, 02/01/2013 | 2,000 | 2,178 |
The accompanying notes are an integral part of the financial statements.
54 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Life Technologies | ||||||||
3.375%, 03/01/2013 | $ | 1,000 | $ | 1,022 | ||||
McKesson | ||||||||
6.500%, 02/15/2014 | 2,105 | 2,405 | ||||||
MedcoHealth Solutions | ||||||||
6.125%, 03/15/2013 | 1,845 | 2,042 | ||||||
Miller Brewing | ||||||||
5.500%, 08/15/2013 ¬ n | 2,000 | 2,188 | ||||||
Novartis Capital | ||||||||
2.900%, 04/24/2015 | 1,000 | 1,029 | ||||||
Pfizer | ||||||||
4.450%, 03/15/2012 | 1,000 | 1,055 | ||||||
Reynolds American | ||||||||
7.250%, 06/01/2013 | 2,000 | 2,200 | ||||||
Smithfield Foods | ||||||||
7.000%, 08/01/2011 q | 320 | 325 | ||||||
St. Jude Medical | ||||||||
2.200%, 09/15/2013 | 2,000 | 2,025 | ||||||
3.750%, 07/15/2014 | 690 | 729 | ||||||
Teva Pharmaceutical | ||||||||
1.500%, 06/15/2012 q | 2,500 | 2,509 | ||||||
UnitedHealth Group | ||||||||
4.875%, 02/15/2013 | 1,500 | 1,612 | ||||||
Watson Pharmaceuticals | ||||||||
5.000%, 08/15/2014 | 2,000 | 2,142 | ||||||
51,603 | ||||||||
Electric – 1.0% | ||||||||
Arizona Public Service | ||||||||
6.375%, 10/15/2011 | 2,000 | 2,117 | ||||||
MidAmerican Energy Holdings | ||||||||
5.875%, 10/01/2012 | 1,555 | 1,684 | ||||||
National Rural Utilities Cooperative Finance | ||||||||
2.625%, 09/16/2012 | 950 | 975 | ||||||
4.750%, 03/01/2014 | 1,000 | 1,096 | ||||||
Nevada Power | ||||||||
6.500%, 04/15/2012 | 1,000 | 1,079 | ||||||
6,951 | ||||||||
Energy – 2.5% | ||||||||
Anadarko Petroleum | ||||||||
5.950%, 09/15/2016 q | 755 | 650 | ||||||
ConocoPhillips | ||||||||
4.750%, 02/01/2014 | 900 | 990 | ||||||
Husky Energy | ||||||||
5.900%, 06/15/2014 ¬ | 1,000 | 1,113 | ||||||
Marathon Global Funding | ||||||||
6.000%, 07/01/2012 ¬ | 1,000 | 1,075 | ||||||
Marathon Oil | ||||||||
6.125%, 03/15/2012 | 500 | 536 | ||||||
8.375%, 05/01/2012 ¬ | 1,000 | 1,111 | ||||||
Nabors Industries | ||||||||
5.375%, 08/15/2012 | 1,850 | 1,966 | ||||||
Petroleos Mexicanos | ||||||||
4.875%, 03/15/2015 q ¬ n | 2,000 | 2,070 | ||||||
Pride International | ||||||||
7.375%, 07/15/2014 | 1,000 | 996 | ||||||
Shell International Finance | ||||||||
3.250%, 09/22/2015 q ¬ | 1,180 | 1,206 | ||||||
Smith International | ||||||||
8.625%, 03/15/2014 | 1,000 | 1,188 | ||||||
Valero Energy | ||||||||
6.875%, 04/15/2012 | 1,000 | 1,076 | ||||||
Weatherford International | ||||||||
5.150%, 03/15/2013 ¬ | 1,500 | 1,572 | ||||||
Woodside Finance | ||||||||
4.500%, 11/10/2014 ¬ n | 1,250 | 1,275 |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
XTO Energy | ||||||||
5.300%, 06/30/2015 | $ | 1,000 | $ | 1,132 | ||||
17,956 | ||||||||
Finance – 3.3% | ||||||||
American Express Travel | ||||||||
5.250%, 11/21/2011 n | 2,450 | 2,546 | ||||||
Ameriprise Financial | ||||||||
5.350%, 11/15/2010 | 29 | 29 | ||||||
Capital One Bank | ||||||||
6.500%, 06/13/2013 | 1,500 | 1,645 | ||||||
General Electric Capital | ||||||||
3.500%, 08/13/2012 | 1,565 | 1,615 | ||||||
4.800%, 05/01/2013 q | 1,000 | 1,066 | ||||||
Series A | ||||||||
3.750%, 11/14/2014 | 3,000 | 3,069 | ||||||
Series GMTN | ||||||||
5.250%, 10/19/2012 | 3,000 | 3,206 | ||||||
Series MTN | ||||||||
2.200%, 06/08/2012 | 1,510 | 1,550 | ||||||
GMAC | ||||||||
1.750%, 10/30/2012 | 3,680 | 3,744 | ||||||
2.200%, 12/19/2012 | 1,750 | 1,798 | ||||||
Household Finance | ||||||||
4.750%, 07/15/2013 | 2,000 | 2,095 | ||||||
ILFC E-Capital Trust I | ||||||||
5.900%, 12/21/2065 n r | 1,000 | 641 | ||||||
Nissan Motor Acceptance | ||||||||
3.250%, 01/30/2013 n | 1,000 | 1,021 | ||||||
24,025 | ||||||||
Industrial Other – 1.2% | ||||||||
Arrow Electronics | ||||||||
6.875%, 07/01/2013 | 1,990 | 2,196 | ||||||
Briggs & Stratton | ||||||||
8.875%, 03/15/2011 q | 870 | 896 | ||||||
Thermo Fisher Scientific | ||||||||
3.250%, 11/20/2014 | 1,625 | 1,678 | ||||||
3.200%, 05/01/2015 | 1,250 | 1,290 | ||||||
Tyco Electronics | ||||||||
6.000%, 10/01/2012 ¬ | 2,430 | 2,624 | ||||||
8,684 | ||||||||
Insurance – 2.1% | ||||||||
Allstate Life Global Funding Trust | ||||||||
5.375%, 04/30/2013 q | 1,500 | 1,645 | ||||||
Berkshire Hathaway | ||||||||
2.125%, 02/11/2013 | 2,355 | 2,404 | ||||||
Hartford Financial Services Group | ||||||||
5.250%, 10/15/2011 | 1,000 | 1,035 | ||||||
4.000%, 03/30/2015 | 1,000 | 982 | ||||||
Lincoln National | ||||||||
4.300%, 06/15/2015 | 1,000 | 1,017 | ||||||
Metropolitan Life Global Funding I | ||||||||
2.875%, 09/17/2012 n | 1,900 | 1,945 | ||||||
2.500%, 01/11/2013 n | 1,000 | 1,012 | ||||||
Prudential Financial | ||||||||
3.625%, 09/17/2012 | 2,600 | 2,678 | ||||||
2.750%, 01/14/2013 | 1,600 | 1,608 | ||||||
Series MTNB | ||||||||
4.500%, 07/15/2013 | 1,000 | 1,038 | ||||||
15,364 | ||||||||
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 55 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Natural Gas – 0.7% | ||||||||
Consolidated Natural Gas | ||||||||
6.250%, 11/01/2011 | $ | 1,575 | $ | 1,670 | ||||
Duke Energy | ||||||||
3.950%, 09/15/2014 | 1,500 | 1,577 | ||||||
Kinder Morgan | ||||||||
6.500%, 09/01/2012 | 1,000 | 1,032 | ||||||
Ras Laffan | ||||||||
4.500%, 09/30/2012 ¬ n | 500 | 519 | ||||||
4,798 | ||||||||
Real Estate – 1.1% | ||||||||
Boston Properties – REIT | ||||||||
6.250%, 01/15/2013 | 1,000 | 1,089 | ||||||
HCP – REIT | ||||||||
5.625%, 02/28/2013 | 1,000 | 1,049 | ||||||
Nationwide Health Properties – REIT | ||||||||
6.250%, 02/01/2013 | 2,000 | 2,148 | ||||||
Simon Property Group – REIT | ||||||||
4.200%, 02/01/2015 | 2,000 | 2,055 | ||||||
Vornado Realty – REIT | ||||||||
4.250%, 04/01/2015 | 1,500 | 1,491 | ||||||
7,832 | ||||||||
Technology – 0.5% | ||||||||
Analog Devices | ||||||||
5.000%, 07/01/2014 | 1,000 | 1,081 | ||||||
Motorola | ||||||||
8.000%, 11/01/2011 | 1,200 | 1,288 | ||||||
National Semiconductor | ||||||||
3.950%, 04/15/2015 | 1,000 | 1,013 | ||||||
3,382 | ||||||||
Transportation – 0.9% | ||||||||
CSX | ||||||||
5.750%, 03/15/2013 | 1,500 | 1,640 | ||||||
Delta Airlines | ||||||||
7.711%, 03/18/2013 | 900 | 891 | ||||||
FedEx | ||||||||
7.375%, 01/15/2014 | 1,000 | 1,168 | ||||||
GATX | ||||||||
4.750%, 05/15/2015 | 1,000 | 1,043 | ||||||
United Airlines | ||||||||
10.400%, 11/01/2016 q | 975 | 1,048 | ||||||
United Parcel Service | ||||||||
3.875%, 04/01/2014 | 1,000 | 1,076 | ||||||
6,866 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $280,616) | 288,784 | |||||||
Asset-Backed Securities – 25.1% |
| |||||||
Automotive – 7.2% | ||||||||
Ally Auto Receivables Trust | ||||||||
2.330%, 06/17/2013 n | 2,500 | 2,543 | ||||||
Bank of America Auto Trust | ||||||||
4.970%, 09/20/2012 n | 4,463 | 4,569 | ||||||
Series 2010-2, Class A3 | ||||||||
1.310%, 07/15/2014 | 2,525 | 2,532 | ||||||
Capital Auto Receivables Asset Trust | ||||||||
Series 2007-3, Class A4 | ||||||||
5.210%, 03/17/2014 | 2,500 | 2,588 | ||||||
Series 2008-1, Class A3A | ||||||||
3.860%, 08/15/2012 | 571 | 579 |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Capital One Prime Auto Receivables Trust Series 2006-2, Class A4 | ||||||||
4.940%, 07/15/2012 | $ | 898 | $ | 902 | ||||
Series 2007-2, Class A3 | ||||||||
4.890%, 01/15/2012 | 265 | 266 | ||||||
Series 2007-2, Class A4 | ||||||||
5.060%, 06/15/2014 | 2,500 | 2,579 | ||||||
Chase Manhattan Auto Owner Trust | ||||||||
5.110%, 04/15/2014 | 871 | 880 | ||||||
Chrysler Financial Lease Trust | ||||||||
1.780%, 06/15/2011 n | 3,315 | 3,326 | ||||||
DaimlerChrysler Auto Trust | ||||||||
4.980%, 11/08/2011 | 280 | 280 | ||||||
Series 2008-A, Class A3A | ||||||||
3.700%, 06/08/2012 | 743 | 750 | ||||||
Ford Credit Auto Owner Trust | ||||||||
3.960%, 05/15/2013 | 1,750 | 1,794 | ||||||
Harley-Davidson Motorcycle Trust | ||||||||
5.040%, 10/15/2012 n | 698 | 709 | ||||||
Hertz Vehicle Financing | ||||||||
4.260%, 03/25/2014 n | 3,000 | 3,126 | ||||||
Honda Auto Receivables Owner Trust | ||||||||
0.820%, 06/18/2012 | 2,000 | 2,000 | ||||||
Huntington Auto Trust | ||||||||
3.480%, 07/15/2011 n | 35 | 35 | ||||||
JPMorgan Auto Receivables Trust | ||||||||
5.140%, 12/15/2014 n | 1,218 | 1,240 | ||||||
Nissan Auto Lease Trust | ||||||||
2.070%, 01/15/2015 | 1,585 | 1,602 | ||||||
Nissan Auto Receivables Owner Trust | ||||||||
4.460%, 04/15/2012 | 1,009 | 1,026 | ||||||
Series 2009-A, Class A2 | ||||||||
2.940%, 07/15/2011 | 1,064 | 1,068 | ||||||
Santander Drive Auto Receivables Trust | ||||||||
1.360%, 03/15/2013 | 5,755 | 5,759 | ||||||
USAA Auto Owner Trust | ||||||||
0.630%, 06/15/2012 | 5,000 | 4,997 | ||||||
Volkswagen Auto Lease Trust | ||||||||
3.410%, 04/16/2012 | 3,000 | 3,062 | ||||||
Wachovia Auto Loan Owner Trust | ||||||||
5.230%, 03/20/2012 n | 149 | 150 | ||||||
World Omni Auto Receivables Trust | ||||||||
5.280%, 01/17/2012 | 271 | 272 | ||||||
Series 2010-A, Class A2 | ||||||||
0.700%, 05/15/2011 | 2,925 | 2,923 | ||||||
51,557 | ||||||||
Credit Cards – 4.7% | ||||||||
American Express Issuance Trust | ||||||||
0.680%, 08/15/2011 r | 905 | 903 |
The accompanying notes are an integral part of the financial statements.
56 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Bank of America Credit Card Trust | ||||||||
0.930%, 04/15/2013 r | $ | 5,231 | $ | 5,239 | ||||
Cabela’s Master Credit Card Trust | ||||||||
1.187%, 12/15/2013 n r | 1,415 | 1,417 | ||||||
Capital One Multi-Asset Execution Trust | ||||||||
5.050%, 02/15/2016 | 2,750 | 3,009 | ||||||
Series 2008-A5, Class A5 | ||||||||
4.850%, 02/15/2014 | 2,400 | 2,474 | ||||||
Chase Issuance Trust | ||||||||
4.260%, 05/15/2013 | 2,000 | 2,059 | ||||||
Citibank Credit Card Issuance Trust | ||||||||
5.450%, 05/10/2013 | 5,245 | 5,449 | ||||||
Discover Card Master Trust | ||||||||
0.670%, 01/15/2013 r | 885 | 885 | ||||||
Series 2008-A3, Class A3 | ||||||||
5.100%, 10/15/2013 | 7,535 | 7,785 | ||||||
Discover Card Master Trust I | ||||||||
0.780%, 05/15/2013 r | 185 | 185 | ||||||
Series 2005-4, Class B1 | ||||||||
0.600%, 06/18/2013 r | 380 | 379 | ||||||
MBNA Credit Card Master Note Trust | ||||||||
4.500%, 01/15/2013 | 1,165 | 1,171 | ||||||
Washington Mutual Master Note Trust | ||||||||
5.200%, 10/15/2014 n | 3,000 | 3,036 | ||||||
33,991 | ||||||||
Equipment Leases – 0.6% | ||||||||
Caterpillar Financial Asset Trust | ||||||||
5.340%, 06/25/2012 | 519 | 522 | ||||||
CNH Equipment Trust | ||||||||
4.930%, 08/15/2014 | 2,496 | 2,588 | ||||||
GE Equipment Small Ticket | ||||||||
0.382%, 11/15/2010 n | 852 | 852 | ||||||
MBNA Practice Solutions Owner Trust | ||||||||
4.470%, 06/15/2013 n | 47 | 47 | ||||||
4,009 | ||||||||
Home Equity – 3.3% | ||||||||
Countrywide Asset-Backed Certificates | ||||||||
5.739%, 02/25/2034 | 1,804 | 1,536 | ||||||
Series 2007-1, Class 2A1 | ||||||||
0.397%, 07/25/2037 r | 3,716 | 3,611 | ||||||
Equivantage Home Equity Loan Trust | ||||||||
6.550%, 10/25/2025 ¥ | 10 | 10 | ||||||
Series 1996-4, Class A | ||||||||
7.250%, 01/25/2028 ¥ | 168 | 149 | ||||||
IMC Home Equity Loan Trust | ||||||||
7.220%, 08/20/2029 r ¥ | 1,227 | 1,170 | ||||||
Novastar Home Equity Loan Trust | ||||||||
0.447%, 03/25/2037 r | 3,576 | 3,272 |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
RBSSP Resecuritization Trust | ||||||||
0.495%, 05/26/2036 n r | $ | 1,532 | $ | 1,449 | ||||
Series 2009-11, Class 4A1 | ||||||||
2.095%, 12/26/2037 n r | 641 | 638 | ||||||
Series 2009-13, Class 5A1 | ||||||||
0.445%, 11/26/2036 n r | 2,603 | 2,509 | ||||||
Series 2009-8, Class 3A1 | ||||||||
0.485%, 03/26/2037 n r | 510 | 498 | ||||||
Series 2009-9, Class 9A1 | ||||||||
0.565%, 09/26/2037 n r | 1,740 | 1,609 | ||||||
Series 2010-4, Class 1A1 | ||||||||
0.455%, 03/26/2036 n r | 4,049 | 3,497 | ||||||
Series 2010-4, Class 5A1 | ||||||||
0.505%, 02/26/2037 n r | 2,705 | 2,473 | ||||||
Renaissance Home Equity Loan Trust | ||||||||
5.140%, 11/25/2035 | 2,425 | 1,748 | ||||||
24,169 | ||||||||
Manufactured Housing – 0.8% | ||||||||
Green Tree Financial | ||||||||
7.000%, 04/25/2038 n | 508 | 519 | ||||||
Newcastle Investment Trust | ||||||||
4.500%, 07/10/2035 n | 3,821 | 3,938 | ||||||
Origen Manufactured Housing | ||||||||
4.490%, 05/15/2018 | 164 | 164 | ||||||
Series 2005-B, Class A2 | ||||||||
5.247%, 12/15/2018 | 1,087 | 1,100 | ||||||
5,721 | ||||||||
Other – 7.6% | ||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||
5.920%, 10/15/2036 | 476 | 478 | ||||||
Series 2005-PW10, Class A4 | ||||||||
5.405%, 12/11/2040 | 5,000 | 5,256 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||
5.397%, 07/15/2044 | 4,000 | 4,285 | ||||||
Series 2007-CD4, Class A2B | ||||||||
5.205%, 12/11/2049 q | 1,385 | 1,425 | ||||||
Commercial Mortgage Pass-Through Certificates | ||||||||
4.982%, 05/10/2043 r | 2,500 | 2,638 | ||||||
Crown Castle Towers | ||||||||
4.523%, 01/15/2035 n r | 2,000 | 2,087 | ||||||
GE Capital Commercial Mortgage Corporation | ||||||||
6.070%, 06/10/2038 | 3,250 | 3,389 | ||||||
GMAC Commercial Mortgage Securities | ||||||||
5.659%, 05/10/2040 | 3,500 | 3,791 | ||||||
Series 2004-C1, Class A2 | ||||||||
4.100%, 03/10/2038 | 655 | 657 | ||||||
Greenwich Capital Commercial Funding | ||||||||
5.117%, 04/10/2037 | 4,260 | 4,308 | ||||||
GS Commercial Mortgage | ||||||||
5.690%, 08/10/2045 | 977 | 1,007 | ||||||
GS Mortgage Securities II | ||||||||
5.999%, 08/10/2045 r | 750 | 737 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 57 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
6.429%, 04/15/2035 | $ | 7,779 | $ | 8,020 | ||||
Series 2010-C1, Class A1 | ||||||||
3.853%, 06/15/2043 n | 4,305 | 4,411 | ||||||
Morgan Stanley Capital I | ||||||||
4.970%, 12/15/2041 | 1,090 | 1,158 | ||||||
Morgan Stanley Dean Witter Capital I | ||||||||
5.980%, 01/15/2039 | 4,555 | 4,804 | ||||||
Small Business Administration | ||||||||
4.638%, 02/10/2015 | 2,650 | 2,795 | ||||||
Series 2006-P10A, Class 1 | ||||||||
5.408%, 02/10/2016 | 1,645 | 1,771 | ||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||
5.246%, 12/15/2043 | 1,739 | 1,738 | ||||||
54,755 | ||||||||
Utilities – 0.9% | ||||||||
CenterPoint Energy | ||||||||
4.970%, 08/01/2014 | 2,922 | 3,044 | ||||||
Peco Energy Transition Trust | ||||||||
6.520%, 12/31/2010 | 1,123 | 1,134 | ||||||
PG&E Energy Recovery Funding | ||||||||
5.030%, 03/25/2014 | 1,190 | 1,237 | ||||||
PSE&G Transition Funding | ||||||||
6.610%, 06/15/2015 | 1,190 | 1,316 | ||||||
6,731 | ||||||||
Total Asset-Backed Securities | ||||||||
(Cost $175,392) | 180,933 | |||||||
U.S. Government Agency Mortgage-Backed |
| |||||||
Adjustable Rate r – 8.1% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
3.011%, 12/01/2026, #786591 | 411 | 431 | ||||||
2.741%, 01/01/2029, #846946 | 368 | 385 | ||||||
3.097%, 10/01/2029, #786853 | 253 | 262 | ||||||
4.341%, 04/01/2030, #972055 | 282 | 300 | ||||||
2.175%, 05/01/2030, #847014 | 222 | 229 | ||||||
2.706%, 06/01/2031, #847367 | 166 | 173 | ||||||
2.677%, 08/01/2032, #847331 | 2,207 | 2,299 | ||||||
2.743%, 09/01/2032, #847652 | 1,183 | 1,234 | ||||||
2.961%, 10/01/2032, #847063 | 201 | 209 | ||||||
2.597%, 05/01/2033, #780456 | 806 | 839 | ||||||
2.719%, 10/01/2033, #780911 | 1,453 | 1,507 | ||||||
2.607%, 03/01/2034, #781296 | 1,675 | 1,741 | ||||||
3.850%, 03/01/2036, #848193 | 3,370 | 3,471 | ||||||
2.641%, 08/01/2036, #1L1462 | 1,037 | 1,076 | ||||||
2.856%, 01/01/2038, #848282 | 3,329 | 3,460 | ||||||
Federal National Mortgage Association Pool | ||||||||
2.628%, 11/01/2025, #433988 | 503 | 519 | ||||||
2.726%, 10/01/2030, #847241 | 1,491 | 1,555 | ||||||
4.104%, 06/01/2031, #625338 | 214 | 221 | ||||||
5.056%, 12/01/2031, #535363 | 1,299 | 1,391 | ||||||
3.129%, 03/01/2032, #545791 | 33 | 34 | ||||||
2.518%, 05/01/2032, #545717 | 187 | 196 | ||||||
2.665%, 05/01/2032, #634948 | 139 | 144 | ||||||
3.071%, 10/01/2032, #661645 | 81 | 84 | ||||||
2.879%, 12/01/2032, #671884 | 192 | 200 |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
2.376%, 04/01/2034, #775389 | $ | 149 | $ | 154 | ||||
2.683%, 04/01/2034, #AD0486 | 3,009 | 3,136 | ||||||
2.692%, 06/01/2034, #725721 | 3,081 | 3,200 | ||||||
2.064%, 07/01/2034, #795242 | 2,038 | 2,107 | ||||||
2.688%, 11/01/2034, #797182 | 1,920 | 1,998 | ||||||
2.817%, 11/01/2034, #841068 | 1,992 | 2,081 | ||||||
2.774%, 03/01/2035, #819652 | 2,902 | 3,033 | ||||||
2.872%, 07/01/2035, #745922 | 1,960 | 2,035 | ||||||
4.862%, 08/01/2035, #838958 | 1,754 | 1,821 | ||||||
2.301%, 12/01/2035, #848390 | 1,741 | 1,774 | ||||||
2.758%, 07/01/2036, #AE0058 | 3,542 | 3,690 | ||||||
2.934%, 07/01/2036, #886034 | 2,457 | 2,567 | ||||||
2.624%, 08/01/2036, #555369 | 229 | 238 | ||||||
2.791%, 09/01/2036, #995949 | 1,858 | 1,940 | ||||||
3.044%, 08/01/2037, #AD0550 | 3,114 | 3,258 | ||||||
2.725%, 03/01/2038, #AD0706 | 2,258 | 2,356 | ||||||
Government National Mortgage Association Pool | ||||||||
3.625%, 08/20/2021, #008824 | 129 | 132 | ||||||
3.625%, 07/20/2022, #008006 | 183 | 188 | ||||||
3.625%, 09/20/2025, #008699 | 96 | 99 | ||||||
4.375%, 04/20/2026, #008847 | 80 | 83 | ||||||
3.625%, 08/20/2027, #080106 | 27 | 28 | ||||||
3.375%, 01/20/2028, #080154 | 42 | 43 | ||||||
4.375%, 05/20/2029, #080283 | 116 | 119 | ||||||
2.875%, 11/20/2030, #080469 | 206 | 210 | ||||||
4.375%, 04/20/2031, #080507 | 76 | 78 | ||||||
3.625%, 08/20/2031, #080535 | 248 | 255 | ||||||
3.500%, 02/20/2032, #080580 | 64 | 65 | ||||||
58,648 | ||||||||
Fixed Rate – 3.6% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
5.469%, 01/25/2012 | 1,052 | 1,093 | ||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
4.500%, 05/01/2018, #G11618 | 3,337 | 3,560 | ||||||
4.500%, 05/01/2019, #B14728 | 4,584 | 4,885 | ||||||
4.500%, 04/01/2022, #M30035 | 1,814 | 1,921 | ||||||
Federal National Mortgage Association Pool | ||||||||
5.500%, 05/01/2012, #254340 | 211 | 218 | ||||||
5.000%, 03/01/2013, #254682 | 173 | 178 | ||||||
4.000%, 12/01/2013, #255039 | 1,436 | 1,470 | ||||||
4.000%, 12/01/2019, #AA5298 | 1,721 | 1,820 | ||||||
4.000%, 05/01/2020, #AD0107 | 2,814 | 2,974 | ||||||
4.000%, 03/01/2022, #890134 | 2,869 | 3,032 | ||||||
4.500%, 04/01/2024, #AA4312 | 4,380 | 4,630 | ||||||
25,781 | ||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $83,087) | 84,429 | |||||||
U.S. Government & Agency |
| |||||||
U.S. Agency Debentures – 4.2% | ||||||||
Federal Home Loan Bank | ||||||||
1.625%, 07/27/2011 | 5,550 | 5,616 | ||||||
2.250%, 04/13/2012 q | 6,000 | 6,165 | ||||||
1.500%, 01/16/2013 | 5,400 | 5,468 | ||||||
1.875%, 06/21/2013 q | 3,385 | 3,452 | ||||||
Federal Home Loan Mortgage Corporation | ||||||||
1.625%, 04/15/2013 | 2,000 | 2,030 | ||||||
Federal National Mortgage Association | ||||||||
1.000%, 04/04/2012 | 7,500 | 7,541 | ||||||
30,272 | ||||||||
U.S. Treasuries – 3.8% | ||||||||
U.S. Treasury Notes | ||||||||
4.625%, 10/31/2011 q | 6,235 | 6,583 |
The accompanying notes are an integral part of the financial statements.
58 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
0.750%, 11/30/2011 | $ | 3,000 | $ | 3,011 | ||||
1.125%, 12/15/2011 q | 6,340 | 6,400 | ||||||
0.875%, 02/29/2012 q | 7,500 | 7,540 | ||||||
4.125%, 08/31/2012 q | 3,760 | 4,044 | ||||||
27,578 | ||||||||
Total U.S. Government & Agency Securities | ||||||||
(Cost $57,098) | 57,850 | |||||||
Collateralized Mortgage Obligation – |
| |||||||
Adjustable Rate r – 1.7% | ||||||||
Federal National Mortgage Association | ||||||||
0.797%, 04/25/2018 | 4,384 | 4,373 | ||||||
Series 2004-90, Class GF | ||||||||
0.647%, 11/25/2034 | 3,179 | 3,166 | ||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
0.896%, 02/25/2048 n | 4,643 | 4,660 | ||||||
12,199 | ||||||||
Fixed Rate – 6.2% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
6.000%, 12/15/2020 | 25 | 27 | ||||||
Series 2629, Class BO | ||||||||
3.250%, 03/15/2018 | 3,262 | 3,368 | ||||||
Series 2763, Class TA | ||||||||
4.000%, 03/15/2011 | 1,119 | 1,137 | ||||||
Series 2780, Class QC | ||||||||
4.500%, 03/15/2017 | 1,990 | 2,025 | ||||||
Series 2795, Class CL | ||||||||
4.500%, 07/15/2017 | 3,674 | 3,765 | ||||||
Series 2843, Class BH | ||||||||
4.000%, 01/15/2018 | 3,190 | 3,272 | ||||||
Series 3555, Class EA | ||||||||
4.000%, 12/15/2014 | 1,282 | 1,329 | ||||||
Series 3591, Class NA | ||||||||
1.250%, 10/15/2012 | 2,833 | 2,797 | ||||||
Federal National Mortgage Association | ||||||||
5.500%, 09/25/2022 | 64 | 71 | ||||||
Series 2002-83, Class MD | ||||||||
5.000%, 09/25/2016 | 1,734 | 1,780 | ||||||
Series 2003-122, Class AJ | ||||||||
4.500%, 02/25/2028 | 4,975 | 5,138 | ||||||
Series 2003-68, Class QP | ||||||||
3.000%, 07/25/2022 | 3,267 | 3,338 | ||||||
Series 2003-92, Class PD | ||||||||
4.500%, 03/25/2017 | 3,481 | 3,620 | ||||||
Series 2004-90, Class GA | ||||||||
4.350%, 03/25/2034 | 2,028 | 2,132 | ||||||
Series 2010-M1, Class A1 | ||||||||
3.305%, 06/25/2019 | 2,207 | 2,272 | ||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
0.9317%, 10/25/2011 n € | 2,000 | 1,975 | ||||||
Series 2010-S1, Class 2A | ||||||||
3.250%, 04/25/2038 n | 2,834 | 2,877 |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Government National Mortgage Association | ||||||||
5.500%, 06/20/2028 | $ | 3,365 | $ | 3,488 | ||||
44,411 | ||||||||
Total Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $56,398) | 56,610 | |||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities – 2.4% |
| |||||||
Adjustable Rate r – 1.0% | ||||||||
Arkle Master Issuer | ||||||||
0.480%, 05/17/2011 n ¬ | 3,640 | 3,617 | ||||||
Countrywide Home Loans | ||||||||
5.281%, 02/25/2034 | 313 | 314 | ||||||
GSR Mortgage Loan Trust | ||||||||
4.246%, 01/25/2035 ¥ | 1,952 | 295 | ||||||
Indymac Index Mortgage Loan Trust | ||||||||
2.820%, 03/25/2035 | 523 | 364 | ||||||
JPMorgan Mortgage Trust | ||||||||
5.935%, 01/25/2037 | 513 | 115 | ||||||
Sequoia Mortgage Trust | ||||||||
5.510%, 02/20/2047 | 725 | 566 | ||||||
Structured Mortgage Loan Trust | ||||||||
3.128%, 08/25/2034 | 198 | 167 | ||||||
Washington Mutual | ||||||||
5.796%, 09/25/2036 | 694 | 120 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
5.884%, 10/25/2036 | 2,092 | 1,686 | ||||||
7,244 | ||||||||
Fixed Rate – 1.4% | ||||||||
Countrywide Alternative Loan Trust | ||||||||
6.000%, 08/25/2036 | 1,481 | 1,139 | ||||||
GMAC Mortgage Corporation Loan Trust | ||||||||
5.750%, 04/25/2036 | 1,264 | 1,121 | ||||||
Series 2010-1, Class A | ||||||||
4.250%, 07/25/2040 n | 3,255 | 3,247 | ||||||
Master Alternative Loans Trust | ||||||||
8.000%, 01/25/2035 | 502 | 446 | ||||||
Thornburg Mortgage Securities Trust | ||||||||
6.201%, 09/25/2037 | 1,767 | 1,714 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
5.500%, 03/25/2036 | 652 | 599 | ||||||
Series 2007-2, Class 1A8 | ||||||||
5.750%, 03/25/2037 | 1,686 | 1,478 | ||||||
9,744 | ||||||||
Total Collateralized Mortgage Obligation-Private Mortgage-Backed Securities | ||||||||
(Cost $19,798) | 16,988 | |||||||
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 59 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | SHARES/PAR | FAIR VALUE > | ||||||
Short-Term Investments – 4.2% |
| |||||||
Money Market Fund – 3.9% |
| |||||||
First American Prime Obligations Fund, Class Z 0.089% Å W | 27,795,935 | $ | 27,796 | |||||
U.S. Treasury Obligations – 0.3% |
| |||||||
U.S. Treasury Bills ¨ | ||||||||
0.130%, 07/15/2010 | $ | 90 | 90 | |||||
0.166%, 07/29/2010 q | 675 | 675 | ||||||
0.205%, 12/16/2010 | 850 | 849 | ||||||
0.232%, 04/07/2011 | 535 | 534 | ||||||
2,148 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $29,944) | 29,944 | |||||||
Investment Purchased with Proceeds |
| |||||||
Mount Vernon Securities Lending Prime Portfolio 0.282% W † | ||||||||
(Cost $64,562) | 64,561,594 | 64,562 | ||||||
Total Investments p – 108.4% |
| |||||||
(Cost $766,895) | 780,100 | |||||||
Other Assets and Liabilities, Net – (8.4)% |
| (60,207 | ) | |||||
Total Net Assets – 100.0% |
| $ | 719,893 | |||||
> | Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements. |
q | This security or a portion of this security is out on loan at June 30, 2010. Total loaned securities had a fair value of $63,181 at June 30, 2010. See note 2 in Notes to Financial Statements. |
¬ | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of June 30, 2010, the fair value of foreign securities was $64,896 or 9.0% of total net assets. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of June 30, 2010, the fair value of these investments was $91,845 or 12.8% of total net assets. See note 2 in Notes to Financial Statements. |
r | Variable Rate Security – The rate shown is the rate in effect as of June 30, 2010. |
¥ | Security considered illiquid. As of June 30, 2010, the fair value of the fund’s investments considered to be illiquid was $1,624 or 0.2% of total net assets. See note 2 in Notes to Financial Statements. |
( | Zero coupon bonds make no periodic interest payments, but are issued at deep discounts from par value. The rate shown is the effective yield as of June 30, 2010. |
Å | Investment in affiliated security. This money market fund is advised by FAF Advisors, Inc., which also serves as advisor for this fund. See note 3 in Notes to Financial Statements. |
W | The rate shown is the annualized seven-day effective yield as of June 30, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts and/or swap agreements. Yield shown is effective yield as of June 30, 2010. See note 2 in Notes to Financial Statements. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. See note 2 in Notes to Financial Statements. |
Short Term Bond Fund (concluded) | ||||
p | On June 30, 2010, the cost of investments for federal income tax purposes was $770,664. The aggregate gross unrealized appreciation and depreciation of investments, based on this cost, were as follows: | |||||
Gross unrealized appreciation | $ | 18,182 | ||||
Gross unrealized depreciation | (8,746 | ) | ||||
Net unrealized appreciation | $ | 9,436 | ||||
REIT | – Real Estate Investment Trust |
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Purchased (Sold) | Notional Contract Value | Unrealized Appreciation (Depreciation) | ||||||||||||
U.S. Treasury 2 Year Note Futures | September 2010 | (44 | ) | $ | (9,628 | ) | $ | (39 | ) | |||||||
U.S. Treasury 5 Year Note Futures | September 2010 | (916 | ) | (108,410 | ) | (1,295 | ) | |||||||||
U.S. Treasury 10 Year Note Futures | September 2010 | 35 | 4,289 | 57 | ||||||||||||
U.S. Treasury Long Bond Futures | September 2010 | (12 | ) | (1,530 | ) | (43 | ) | |||||||||
$ | (1,320 | ) | ||||||||||||||
Interest Rate Swap Agreements | ||||||||||||||||||||||||
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Depreciation | ||||||||||||||||||
JPMorgan Chase | | 3-Month LIBOR | | Receive | 1.255 | % | 11/03/2011 | $ | 24,000 | $ (188) | ||||||||||||||
JPMorgan Chase | | 3-Month LIBOR | | Receive | 3.858 | % | 01/19/2020 | 4,000 | (372) | |||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.358 | % | 09/25/2011 | 11,000 | (119) | |||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.133 | % | 03/25/2012 | 16,000 | (118) | |||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 1.048 | % | 06/25/2012 | 18,000 | (29) | |||||||||||||||
UBS | | 3-Month LIBOR | | Receive | 3.001 | % | 08/03/2014 | 4,000 | (246) | |||||||||||||||
$(1,072) | ||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
60 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return Bond Fund | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Corporate Bonds – 61.0% |
| |||||||
Banking – 9.4% | ||||||||
Bank of America | ||||||||
5.625%, 07/01/2020 | $ | 3,675 | $ | 3,704 | ||||
8.000%, 01/30/2018 r | 4,275 | 4,129 | ||||||
Citigroup | ||||||||
6.125%, 08/25/2036 | 2,765 | 2,513 | ||||||
6.875%, 03/05/2038 | 2,550 | 2,675 | ||||||
Citigroup Capital XXI | ||||||||
8.300%, 12/21/2077 r | 5,835 | 5,683 | ||||||
Fifth Third Bancorp | ||||||||
6.250%, 05/01/2013 | 2,010 | 2,187 | ||||||
HSBC Holdings | ||||||||
6.800%, 06/01/2038 ¬ | 3,020 | 3,254 | ||||||
JPMorgan Chase | ||||||||
6.300%, 04/23/2019 | 5,205 | 5,879 | ||||||
Series 1 | ||||||||
7.900%, 04/29/2049 r | 3,730 | 3,845 | ||||||
JPMorgan Chase Capital XX | ||||||||
6.550%, 09/29/2066 | 6,825 | 6,525 | ||||||
Key Bank | ||||||||
7.413%, 05/06/2015 | 1,485 | 1,639 | ||||||
Keycorp | ||||||||
6.500%, 05/14/2013 | 450 | 492 | ||||||
Lloyds TSB Bank | ||||||||
4.375%, 01/12/2015 ¬ n | 1,145 | 1,103 | ||||||
5.800%, 01/13/2020 ¬ n | 3,490 | 3,294 | ||||||
Royal Bank of Scotland | ||||||||
6.400%, 10/21/2019 ¬ | 2,100 | 2,129 | ||||||
Sovereign Bank | ||||||||
8.750%, 05/30/2018 | 2,350 | 2,694 | ||||||
UBS Preferred Funding Trust V | ||||||||
6.243%, 05/29/2049 r | 1,615 | 1,385 | ||||||
Wells Fargo | ||||||||
3.750%, 10/01/2014 | 2,000 | 2,048 | ||||||
Series K | ||||||||
7.980%, 03/29/2049 r | 3,270 | 3,368 | ||||||
Wells Fargo Bank | ||||||||
5.950%, 08/26/2036 | 710 | 723 | ||||||
Wells Fargo Capital X | ||||||||
5.950%, 12/15/2086 | 1,230 | 1,091 | ||||||
Wells Fargo Capital XIII | ||||||||
7.700%, 12/29/2049 r | 4,760 | 4,808 | ||||||
65,168 | ||||||||
Basic Industry – 6.3% | ||||||||
Arcelormittal | ||||||||
5.375%, 06/01/2013 ¬ | 3,145 | 3,307 | ||||||
6.125%, 06/01/2018 ¬ | 3,155 | 3,300 | ||||||
Boise Cascade | ||||||||
7.125%, 10/15/2014 | 1,300 | 1,224 | ||||||
Braskem Finance | ||||||||
7.250%, 06/05/2018 ¬ n q | 1,470 | 1,507 | ||||||
CF Industries | ||||||||
7.125%, 05/01/2020 | 1,390 | 1,425 | ||||||
FMG Finance | ||||||||
10.000%, 09/01/2013 ¬ n | 1,130 | 1,186 | ||||||
Freeport-McMoran Copper & Gold | ||||||||
8.375%, 04/01/2017 | 1,595 | 1,754 | ||||||
Georgia-Pacific | ||||||||
7.125%, 01/15/2017 n | 1,055 | 1,076 | ||||||
Hexion Financial/Hexion Escrow | ||||||||
8.875%, 02/01/2018 | 1,300 | 1,173 |
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Incitec Pivot Finance | ||||||||
6.000%, 12/10/2019 n | $ | 1,915 | $ | 1,962 | ||||
International Paper | ||||||||
7.500%, 08/15/2021 | 1,580 | 1,850 | ||||||
8.700%, 06/15/2038 | 1,545 | 1,971 | ||||||
Inversiones CMPC | ||||||||
6.125%, 11/05/2019 ¬ n | 1,280 | 1,356 | ||||||
Newmont Mining | ||||||||
6.250%, 10/01/2039 | 6,325 | 6,903 | ||||||
Nova Chemicals | ||||||||
8.375%, 11/01/2016 ¬ | 1,050 | 1,045 | ||||||
Rio Tinto Finance U.S.A. | ||||||||
6.500%, 07/15/2018 ¬ | 2,325 | 2,650 | ||||||
Southern Copper | ||||||||
7.500%, 07/27/2035 | 1,265 | 1,365 | ||||||
Teck Cominco Limited | ||||||||
6.125%, 10/01/2035 ¬ | 1,575 | 1,567 | ||||||
U.S. Steel | ||||||||
7.000%, 02/01/2018 q | 2,250 | 2,225 | ||||||
USG | ||||||||
9.500%, 01/15/2018 | 950 | 941 | ||||||
Vale Overseas | ||||||||
6.875%, 11/10/2039 ¬ | 1,990 | 2,079 | ||||||
Vedanta Resources | ||||||||
9.500%, 07/18/2018 ¬ n | 1,575 | 1,673 | ||||||
43,539 | ||||||||
Brokerage – 3.1% | ||||||||
Goldman Sachs Capital II | ||||||||
5.793%, 12/29/2049 r q | 8,975 | 6,776 | ||||||
Merrill Lynch | ||||||||
6.050%, 05/16/2016 | 5,235 | 5,410 | ||||||
Series MTN | ||||||||
6.400%, 08/28/2017 | 1,265 | 1,319 | ||||||
Morgan Stanley | ||||||||
7.300%, 05/13/2019 | 2,640 | 2,839 | ||||||
5.625%, 09/23/2019 | 2,400 | 2,322 | ||||||
Series MTN | ||||||||
6.625%, 04/01/2018 | 2,685 | 2,814 | ||||||
21,480 | ||||||||
Capital Goods – 1.3% | ||||||||
Boeing | ||||||||
6.875%, 03/15/2039 q | 1,665 | 2,093 | ||||||
Bombardier | ||||||||
7.500%, 03/15/2018 ¬ n | 1,460 | 1,504 | ||||||
Case New Holland | ||||||||
7.875%, 12/01/2017 n | 1,390 | 1,400 | ||||||
L-3 Communications | ||||||||
4.750%, 07/15/2020 | 1,665 | 1,678 | ||||||
Martin Marietta Material | ||||||||
6.600%, 04/15/2018 | 850 | 922 | ||||||
United Rentals | ||||||||
9.250%, 12/15/2019 q | 1,455 | 1,466 | ||||||
9,063 | ||||||||
Communications – 4.5% | ||||||||
American Tower | ||||||||
4.625%, 04/01/2015 | 1,885 | 1,961 | ||||||
AT&T | ||||||||
6.550%, 02/15/2039 | 1,510 | 1,691 | ||||||
British Sky Broadcasting | ||||||||
6.100%, 02/15/2018 ¬ n | 1,975 | 2,217 | ||||||
British Telecom | ||||||||
5.950%, 01/15/2018 ¬ | 2,050 | 2,138 | ||||||
CBS | ||||||||
5.750%, 04/15/2020 | 1,190 | 1,277 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 61 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Total Return Bond Fund (continued)
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Comcast | ||||||||
6.300%, 11/15/2017 | $ | 735 | $ | 839 | ||||
6.400%, 05/15/2038 | 1,630 | 1,756 | ||||||
DirecTV Holdings | ||||||||
5.200%, 03/15/2020 | 4,195 | 4,372 | ||||||
Embarq | ||||||||
7.082%, 06/01/2016 | 1,545 | 1,647 | ||||||
Frontier Communications | ||||||||
8.125%, 10/01/2018 q | 1,200 | 1,192 | ||||||
McClatchy | ||||||||
11.500%, 02/15/2017 n q | 750 | 761 | ||||||
MTS International Funding | ||||||||
8.625%, 06/22/2020 ¬ n | 1,500 | 1,552 | ||||||
News America | ||||||||
6.650%, 11/15/2037 | 1,600 | 1,796 | ||||||
NII Capital | ||||||||
10.000%, 08/15/2016 | 700 | 737 | ||||||
Sprint Nextel | ||||||||
6.000%, 12/01/2016 q | 1,200 | 1,077 | ||||||
TCM Sub | ||||||||
3.550%, 01/15/2015 n | 870 | 890 | ||||||
Telecom Italia Capital | ||||||||
7.175%, 06/18/2019 ¬ | 2,250 | 2,422 | ||||||
Time Warner Cable | ||||||||
6.750%, 06/15/2039 q | 1,515 | 1,674 | ||||||
Verizon Communications | ||||||||
6.900%, 04/15/2038 | 915 | 1,069 | ||||||
31,068 | ||||||||
Consumer Cyclical – 2.3% |
| |||||||
Giti Tire | ||||||||
12.250%, 01/26/2012 ¬ | 500 | 482 | ||||||
J.C. Penney | ||||||||
5.650%, 06/01/2020 | 1,425 | 1,393 | ||||||
Lear | ||||||||
8.125%, 03/15/2020 q | 1,175 | 1,178 | ||||||
Navistar International | ||||||||
8.250%, 11/01/2021 | 1,150 | 1,167 | ||||||
R.R. Donnelley & Sons | ||||||||
7.625%, 06/15/2020 | 1,070 | 1,061 | ||||||
Target | ||||||||
7.000%, 01/15/2038 q | 2,280 | 2,912 | ||||||
Toys R Us Property II | ||||||||
8.500%, 12/01/2017 n q | 1,080 | 1,107 | ||||||
Viacom | ||||||||
6.875%, 04/30/2036 | 1,975 | 2,236 | ||||||
Whirlpool | ||||||||
5.500%, 03/01/2013 | 2,360 | 2,528 | ||||||
Wyndham Worldwide | ||||||||
9.875%, 05/01/2014 | 1,565 | 1,748 | ||||||
15,812 | ||||||||
Consumer Non Cyclical – 3.3% |
| |||||||
Altria Group | ||||||||
9.950%, 11/10/2038 q | 3,960 | 5,202 | ||||||
Anheuser-Busch InBev Worldwide | ||||||||
8.200%, 01/15/2039 n | 2,135 | 2,809 | ||||||
Apria Healthcare Group I | ||||||||
11.250%, 11/01/2014 n | 950 | 1,012 | ||||||
Boston Scientific | ||||||||
4.500%, 01/15/2015 | 1,975 | 1,940 | ||||||
CVS Caremark | ||||||||
6.302%, 06/01/2062 r | 1,810 | 1,620 | ||||||
Davita | ||||||||
7.250%, 03/15/2015 | 1,275 | 1,275 |
Total Return Bond Fund (continued)
DESCRIPTION | PAR | FAIR VALUE > | ||||||
HCA | ||||||||
6.750%, 07/15/2013 | $ | 650 | $ | 637 | ||||
Kraft Foods | ||||||||
6.500%, 08/11/2017 | 1,235 | 1,435 | ||||||
6.500%, 02/09/2040 | 2,485 | 2,779 | ||||||
Lorillard Tobacco | ||||||||
8.125%, 06/23/2019 | 1,590 | 1,763 | ||||||
Mylan | ||||||||
7.875%, 07/15/2020 n q | 1,025 | 1,045 | ||||||
UnitedHealth Group | ||||||||
6.875%, 02/15/2038 | 1,395 | 1,577 | ||||||
23,094 | ||||||||
Electric – 2.1% | ||||||||
AES | ||||||||
8.000%, 10/15/2017 q | 1,175 | 1,187 | ||||||
Dynegy Holdings | ||||||||
7.750%, 06/01/2019 | 500 | 346 | ||||||
Energy Future Holdings | ||||||||
10.000%, 01/15/2020 n q | 900 | 895 | ||||||
Majapahit Holding | ||||||||
7.750%, 10/17/2016 ¬ n | 1,850 | 2,030 | ||||||
MidAmerican Energy Holdings | ||||||||
6.125%, 04/01/2036 | 2,630 | 2,896 | ||||||
NRG Energy | ||||||||
7.375%, 02/01/2016 q | 650 | 647 | ||||||
Ohio Power | ||||||||
6.000%, 06/01/2016 | 1,685 | 1,908 | ||||||
Transalta | ||||||||
6.650%, 05/15/2018 ¬ | 2,305 | 2,568 | ||||||
Virginia Electric Power | ||||||||
5.950%, 09/15/2017 | 1,550 | 1,784 | ||||||
14,261 | ||||||||
Energy – 6.1% | ||||||||
Amerada Hess | ||||||||
7.125%, 03/15/2033 | 1,950 | 2,265 | ||||||
Anadarko Petroleum | ||||||||
6.200%, 03/15/2040 | 1,675 | 1,325 | ||||||
Atlas Energy | ||||||||
10.750%, 02/01/2018 | 1,585 | 1,690 | ||||||
Canadian Oil Sands | ||||||||
7.750%, 05/15/2019 ¬ n | 2,170 | 2,618 | ||||||
Cenovus Energy | ||||||||
6.750%, 11/15/2039 ¬ n | 2,230 | 2,560 | ||||||
Cloud Peak Energy Resources | ||||||||
8.250%, 12/15/2017 n | 1,270 | 1,257 | ||||||
ConocoPhillips | ||||||||
6.500%, 02/01/2039 | 3,475 | 4,197 | ||||||
Gaz Capital | ||||||||
6.510%, 03/07/2022 ¬ n q | 1,410 | 1,359 | ||||||
Headwaters | ||||||||
11.375%, 11/01/2014 q | 1,295 | 1,308 | ||||||
Indo Integrated Energy II | ||||||||
9.750%, 11/05/2016 ¬ n | 1,100 | 1,144 | ||||||
Linn Energy | ||||||||
8.625%, 04/15/2020 n | 1,310 | 1,341 | ||||||
Lukoil International Finance | ||||||||
6.356%, 06/07/2017 ¬ n | 670 | 680 | ||||||
6.656%, 06/07/2022 ¬ n | 2,585 | 2,530 | ||||||
Nexen | ||||||||
6.400%, 05/15/2037 ¬ q | 2,240 | 2,336 | ||||||
Petrobras International Finance | ||||||||
6.875%, 01/20/2040 ¬ | 1,770 | 1,785 | ||||||
Petro-Canada | ||||||||
6.800%, 05/15/2038 ¬ | 1,570 | 1,801 |
The accompanying notes are an integral part of the financial statements.
62 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Petroplus Finance | ||||||||
9.375%, 09/15/2019 ¬ n | $ | 1,465 | $ | 1,260 | ||||
Pioneer Natural Resource | ||||||||
6.650%, 03/15/2017 | 1,000 | 1,005 | ||||||
Pride International | ||||||||
7.375%, 07/15/2014 | 1,610 | 1,604 | ||||||
8.500%, 06/15/2019 q | 725 | 752 | ||||||
Smith International | ||||||||
9.750%, 03/15/2019 | 1,645 | 2,239 | ||||||
Suncor Energy | ||||||||
6.100%, 06/01/2018 ¬ | 1,175 | 1,324 | ||||||
Valero Energy | ||||||||
6.125%, 02/01/2020 | 2,200 | 2,261 | ||||||
Weatherford International | ||||||||
7.000%, 03/15/2038 ¬ | 1,950 | 1,845 | ||||||
42,486 | ||||||||
Finance – 6.4% | ||||||||
American Express Credit | ||||||||
7.300%, 08/20/2013 | 2,470 | 2,796 | ||||||
Anglogold Holdings | ||||||||
6.500%, 04/15/2040 ¬ | 2,275 | 2,347 | ||||||
Capital One Bank | ||||||||
8.800%, 07/15/2019 | 2,810 | 3,508 | ||||||
Capital One Capital III | ||||||||
7.686%, 08/15/2036 | 1,485 | 1,396 | ||||||
Capital One Financial | ||||||||
6.150%, 09/01/2016 | 2,265 | 2,397 | ||||||
CIT Group | ||||||||
7.000%, 05/01/2016 q | 1,350 | 1,232 | ||||||
Country Garden Holding | ||||||||
11.750%, 09/10/2014 ¬ n q | 1,710 | 1,766 | ||||||
Countrywide Financial | ||||||||
6.250%, 05/15/2016 | 2,885 | 3,008 | ||||||
Credit Acceptance | ||||||||
9.125%, 02/01/2017 n | 1,225 | 1,231 | ||||||
Credit Agricole | ||||||||
6.637%, 05/29/2049 ¬ r n | 2,190 | 1,610 | ||||||
Discover Financial Services | ||||||||
10.250%, 07/15/2019 | 1,975 | 2,350 | ||||||
General Electric Capital | ||||||||
6.000%, 08/07/2019 | 1,000 | 1,082 | ||||||
Series MTN | ||||||||
6.875%, 01/10/2039 | 4,705 | 5,195 | ||||||
GMAC | ||||||||
8.000%, 11/01/2031 | 1,300 | 1,199 | ||||||
ILFC E-Capital Trust I | ||||||||
5.900%, 12/21/2065 n r | 2,815 | 1,805 | ||||||
International Lease Finance | ||||||||
6.375%, 03/25/2013 | 2,615 | 2,451 | ||||||
Janus Capital Group | ||||||||
6.700%, 06/15/2017 | 1,700 | 1,707 | ||||||
National Money Mart | ||||||||
10.375%, 12/15/2016 ¬ n | 850 | 863 | ||||||
Rockies Express Pipeline | ||||||||
5.625%, 04/15/2020 n | 1,625 | 1,546 | ||||||
RSHB Capital | ||||||||
7.750%, 05/29/2018 ¬ n | 2,120 | 2,209 | ||||||
Transcapitalinvest | ||||||||
5.670%, 03/05/2014 ¬ n | 2,670 | 2,721 | ||||||
44,419 | ||||||||
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Industrial Other – 0.2% | ||||||||
RBS Global & Rexnord | ||||||||
8.500%, 05/01/2018 n | $ | 1,425 | $ | 1,382 | ||||
Insurance – 4.7% | ||||||||
Allied World Assurance | ||||||||
7.500%, 08/01/2016 ¬ | 2,510 | 2,764 | ||||||
American International Group | ||||||||
8.175%, 05/15/2068 r | 1,620 | 1,280 | ||||||
Genworth Financial | ||||||||
6.515%, 05/22/2018 | 2,640 | 2,542 | ||||||
Hartford Financial Services Group | ||||||||
6.625%, 03/30/2040 | 1,225 | 1,138 | ||||||
Series MTN | ||||||||
6.000%, 01/15/2019 | 3,535 | 3,566 | ||||||
Liberty Mutual Group | ||||||||
7.000%, 03/15/2037 r n | 1,705 | 1,338 | ||||||
Lincoln National | ||||||||
8.750%, 07/01/2019 q | 2,395 | 2,935 | ||||||
6.050%, 04/20/2067 r | 1,620 | 1,215 | ||||||
MetLife | ||||||||
6.750%, 06/01/2016 | 1,600 | 1,810 | ||||||
7.717%, 02/15/2019 | 490 | 583 | ||||||
MetLife Capital Trust IV | ||||||||
7.875%, 12/15/2067 | 2,220 | 2,131 | ||||||
Pacific Life Insurance | ||||||||
6.000%, 02/10/2020 n q | 840 | 892 | ||||||
9.250%, 06/15/2039 n | 2,700 | 3,346 | ||||||
Prudential Financial | ||||||||
5.500%, 03/15/2016 | 1,650 | 1,738 | ||||||
7.375%, 06/15/2019 | 2,100 | 2,432 | ||||||
5.900%, 03/17/2036 | 1,555 | 1,474 | ||||||
ZFS Finance USA Trust V | ||||||||
6.500%, 05/09/2067 r n | 1,860 | 1,665 | ||||||
32,849 | ||||||||
Natural Gas – 1.1% | ||||||||
El Paso | ||||||||
6.875%, 06/15/2014 | 1,925 | 1,960 | ||||||
Kinder Morgan Energy Partners | ||||||||
6.950%, 01/15/2038 | 1,920 | 2,040 | ||||||
NGPL Pipeco | ||||||||
7.119%, 12/15/2017 n | 1,585 | 1,512 | ||||||
Southern Union | ||||||||
7.200%, 11/01/2066 r | 545 | 483 | ||||||
Transocean | ||||||||
6.000%, 03/15/2018 q ¬ | 1,595 | 1,468 | ||||||
7,463 | ||||||||
Other Utility – 0.3% | ||||||||
American Water Capital | ||||||||
6.085%, 10/15/2017 | 1,730 | 1,908 | ||||||
Real Estate – 1.8% | ||||||||
Health Care Properties – REIT | ||||||||
6.300%, 09/15/2016 | 1,725 | 1,785 | ||||||
Prologis – REIT | ||||||||
6.875%, 03/15/2020 | 3,080 | 2,911 | ||||||
Shimao Property Holdings | ||||||||
8.000%, 12/01/2016 ¬ n | 620 | 557 | ||||||
Sigma Capital | ||||||||
9.000%, 04/30/2015 ¬ | 1,029 | 1,004 | ||||||
Simon Property Group – REIT | ||||||||
10.350%, 04/01/2019 | 760 | 1,011 | ||||||
5.650%, 02/01/2020 | 1,825 | 1,933 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 63 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Vornado Realty – REIT | ||||||||
4.250%, 04/01/2015 | $ | 2,975 | $ | 2,958 | ||||
12,159 | ||||||||
Sovereign – 4.9% | ||||||||
Australian Government | ||||||||
5.750%, 04/15/2012 ¬ | AUD 7,300 | 6,280 | ||||||
Canadian Government | ||||||||
1.500%, 03/01/2012 ¬ | CAD 7,200 | 6,788 | ||||||
3.750%, 06/01/2019 ¬ | CAD 7,000 | 6,956 | ||||||
3.500%, 06/01/2020 ¬ | CAD 6,200 | 6,030 | ||||||
Norwegian Government | ||||||||
6.000%, 05/16/2011 ¬ | NOK 21,000 | 3,331 | ||||||
6.500%, 05/15/2013 ¬ | NOK 14,500 | 2,484 | ||||||
Republic of Indonesia | ||||||||
5.875%, 03/13/2020 ¬ n q | $ | 1,730 | 1,825 | |||||
33,694 | ||||||||
Technology – 0.3% | ||||||||
Avnet | ||||||||
5.875%, 06/15/2020 | 845 | 856 | ||||||
Seagate | ||||||||
6.875%, 05/01/2020 ¬ n q | 1,360 | 1,292 | ||||||
2,148 | ||||||||
Transportation – 2.9% | ||||||||
Avis Budget Car Rental | ||||||||
7.750%, 05/15/2016 | 1,450 | 1,354 | ||||||
Canadian Pacific Railroad | ||||||||
6.500%, 05/15/2018 ¬ | 1,840 | 2,094 | ||||||
Continental Airlines | ||||||||
7.339%, 04/19/2014 | 2,407 | 2,275 | ||||||
Delta Airlines | ||||||||
11.750%, 03/15/2015 n | 1,300 | 1,388 | ||||||
Series 2002-1, Class G-1 | ||||||||
6.718%, 07/02/2024 | 1,296 | 1,218 | ||||||
Erac USA Finance | ||||||||
6.375%, 10/15/2017 n | 1,915 | 2,156 | ||||||
Hertz | ||||||||
8.875%, 01/01/2014 | 1,750 | 1,772 | ||||||
Northwest Airlines | ||||||||
7.027%, 11/01/2019 q | 1,094 | 1,039 | ||||||
Union Pacific | ||||||||
6.125%, 02/15/2020 q | 3,175 | 3,684 | ||||||
United Airlines | ||||||||
6.636%, 07/02/2022 | 1,334 | 1,227 | ||||||
Series 2009-1 | ||||||||
10.400%, 11/01/2016 q | 1,676 | 1,802 | ||||||
20,009 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $398,949) | 422,002 | |||||||
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Asset-Backed Securities – 14.0% |
| |||||||
Automotive – 1.2% | ||||||||
Fifth Third Auto Trust | ||||||||
4.810%, 01/15/2013 | $ | 2,740 | $ | 2,821 | ||||
Santander Drive Auto Receivables Trust | ||||||||
1.360%, 03/15/2013 | 5,650 | 5,654 | ||||||
8,475 | ||||||||
Credit Cards – 3.4% | ||||||||
American Express Issuance Trust | ||||||||
0.680%, 08/15/2011 r | 2,250 | 2,246 | ||||||
Bank of America Credit Card Trust | ||||||||
4.720%, 05/15/2013 | 2,470 | 2,516 | ||||||
Capital One Multi-Asset Execution Trust | ||||||||
4.850%, 02/18/2014 | 4,515 | 4,655 | ||||||
Chase Issuance Trust | ||||||||
1.900%, 04/15/2014 r | 3,195 | 3,267 | ||||||
Citibank Credit Card Issuance Trust | ||||||||
2.100%, 03/15/2014 r | 3,270 | 3,352 | ||||||
Discover Card Master Trust I | ||||||||
0.780%, 05/15/2013 r | 380 | 379 | ||||||
Series 2005-4, Class B1 | ||||||||
0.600%, 06/18/2013 r | 790 | 788 | ||||||
Series 2007-A1, Class A1 | ||||||||
5.650%, 03/16/2020 | 3,655 | 4,204 | ||||||
Series 2007-C1, Class C1 | ||||||||
0.670%, 01/15/2013 r | 2,370 | 2,369 | ||||||
23,776 | ||||||||
Home Equity – 0.8% | ||||||||
GRMT Mortgage Loan Trust | ||||||||
8.272%, 07/20/2031 n ¥ | 122 | 111 | ||||||
RBSSP Resecuritization Trust | ||||||||
0.455%, 03/26/2036 n r | 4,002 | 3,457 | ||||||
Renaissance Home Equity Loan Trust | ||||||||
5.140%, 11/25/2035 | 2,495 | 1,799 | ||||||
5,367 | ||||||||
Manufactured Housing – 0.3% | ||||||||
Green Tree Financial | ||||||||
8.050%, 10/15/2027 r | 147 | 152 | ||||||
Series 2008-MH1, Class A1 | ||||||||
7.000%, 04/25/2038 n | 1,572 | 1,606 | ||||||
Origen Manufactured Housing | ||||||||
4.490%, 05/15/2018 | 128 | 129 | ||||||
1,887 | ||||||||
Other – 8.3% | ||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||
5.405%, 12/11/2040 | 3,325 | 3,495 | ||||||
Series 2007-T28, Class D | ||||||||
6.176%, 09/11/2042 r n ¥ | 1,780 | 620 | ||||||
Citigroup Commercial Mortgage Trust | ||||||||
6.297%, 12/10/2049 r | 845 | 525 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||
5.397%, 07/15/2044 r | 2,440 | 2,614 | ||||||
Series 2007-CD4, Class A2B | ||||||||
5.205%, 12/11/2049 q | 1,360 | 1,400 | ||||||
Series 2007-CD5, Class A4 | ||||||||
5.886%, 11/15/2044 r | 5,650 | 5,728 |
The accompanying notes are an integral part of the financial statements.
64 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Commercial Mortgage Pass-Through Certificates | ||||||||
5.449%, 02/05/2019 n | $ | 1,805 | $ | 1,801 | ||||
GE Capital Commercial Mortgage Corporation | ||||||||
4.853%, 07/10/2045 | 1,257 | 1,256 | ||||||
Greenwich Capital Commercial Funding | ||||||||
3.285%, 07/05/2035 | 77 | 77 | ||||||
Series 2005-GG5, Class A2 | ||||||||
5.117%, 04/10/2037 | 3,731 | 3,772 | ||||||
GS Mortgage Securities II | ||||||||
5.506%, 04/10/2038 | 2,979 | 3,025 | ||||||
Series 2006-GG8, Class A4 | ||||||||
5.560%, 11/10/2039 | 3,135 | 3,181 | ||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
3.853%, 06/15/2043 n | 4,165 | 4,268 | ||||||
LB-UBS Commercial Mortgage Trust | ||||||||
4.367%, 03/15/2036 | 4,000 | 4,052 | ||||||
Series 2005-C7, Class A2 | ||||||||
5.103%, 11/15/2030 | 2,495 | 2,507 | ||||||
Series 2007-C7, Class AM | ||||||||
6.374%, 09/15/2045 r | 3,160 | 2,570 | ||||||
Merrill Lynch Mortgage Trust | ||||||||
5.330%, 07/12/2038 r ¥ | 1,730 | 1,157 | ||||||
Series 2008-C1, Class A4 | ||||||||
5.690%, 02/12/2051 | 5,540 | 5,582 | ||||||
Morgan Stanley Capital I | ||||||||
4.970%, 12/15/2041 | 5,112 | 5,431 | ||||||
Series 2006-IQ12, Class A4 | ||||||||
5.332%, 12/15/2043 | 4,025 | 4,120 | ||||||
57,181 | ||||||||
Total Asset-Backed Securities | ||||||||
(Cost $94,945) | 96,686 | |||||||
U.S. Government Agency Mortgage-Backed Securities – 11.8% |
| |||||||
Adjustable Rate r – 1.2% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
3.192%, 10/01/2029, #1L0117 | 682 | 708 | ||||||
2.598%, 07/01/2030, #847240 | 692 | 722 | ||||||
2.519%, 05/01/2033, #847411 | 479 | 501 | ||||||
5.811%, 07/01/2036, #1K1238 | 1,648 | 1,754 | ||||||
2.956%, 05/01/2038, #848289 | 3,293 | 3,425 | ||||||
Federal National Mortgage Association Pool | ||||||||
2.638%, 09/01/2033, #725553 | 279 | 291 | ||||||
2.729%, 01/01/2035, #745548 | 723 | 752 | ||||||
8,153 | ||||||||
Fixed Rate – 10.6% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
6.500%, 07/01/2031, #A17212 | 1,320 | 1,469 | ||||||
7.000%, 08/01/2037, #H09059 | 923 | 1,021 | ||||||
Federal National Mortgage Association Pool | ||||||||
5.500%, 02/01/2025, #255628 | 1,583 | 1,711 | ||||||
5.500%, 10/01/2025, #255956 | 5,745 | 6,205 | ||||||
6.000%, 04/01/2032, #745101 | 481 | 519 | ||||||
5.500%, 06/01/2033, #843435 | 702 | 757 | ||||||
5.000%, 03/01/2034, #725205 | 821 | 873 |
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
5.000%, 03/01/2034, #725250 | $ | 720 | $ | 766 | ||||
6.000%, 03/01/2034, #745324 | 1,002 | 1,106 | ||||||
5.500%, 09/01/2034, #725773 | 1,158 | 1,247 | ||||||
6.500%, 04/01/2036, #831377 | 833 | 914 | ||||||
6.500%, 04/01/2036, #852909 | 429 | 471 | ||||||
6.500%, 08/01/2036, #893318 | 1,114 | 1,233 | ||||||
6.500%, 09/01/2036, #897129 | 2,316 | 2,544 | ||||||
5.500%, 04/01/2037, #918883 | 1,152 | 1,238 | ||||||
6.000%, 06/01/2037, #944340 | 1,276 | 1,387 | ||||||
6.000%, 09/01/2037, #256890 | 1,424 | 1,536 | ||||||
5.000%, 05/01/2038, #963258 | 5,870 | 6,220 | ||||||
5.500%, 05/01/2038, #889618 | 3,944 | 4,239 | ||||||
5.500%, 07/01/2038, #985344 | 5,388 | 5,792 | ||||||
6.000%, 08/01/2038, #257307 | 1,708 | 1,854 | ||||||
5.500%, 11/01/2038, #AA0005 | 4,925 | 5,294 | ||||||
5.500%, 12/01/2038, #AA0889 | 4,981 | 5,354 | ||||||
6.000%, 09/01/2039, #AD0205 | 5,295 | 5,753 | ||||||
4.500%, 12/01/2039, #932323 | 6,598 | 6,850 | ||||||
4.500%, 07/15/2040 « | 6,835 | 7,084 | ||||||
73,437 | ||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $78,023) | 81,590 | |||||||
Collateralized Mortgage Obligation-Private Mortgage-Backed Securities – 4.4% |
| |||||||
Adjustable Rate r – 1.2% | ||||||||
Countrywide Home Loans | ||||||||
5.281%, 02/25/2034 | 857 | 862 | ||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
0.896%, 02/25/2048 n | 4,565 | 4,582 | ||||||
GSR Mortgage Loan Trust | ||||||||
4.245%, 01/25/2035 ¥ | 1,997 | 302 | ||||||
Indymac Index Mortgage Loan Trust | ||||||||
2.820%, 03/25/2035 | 602 | 418 | ||||||
JPMorgan Alternative Loan Trust | ||||||||
0.627%, 04/25/2047 | 2,175 | 1,217 | ||||||
JPMorgan Mortgage Trust | ||||||||
5.935%, 01/25/2037 | 1,831 | 410 | ||||||
Wachovia Mortgage Loan Trust | ||||||||
3.522%, 10/20/2035 | 861 | 660 | ||||||
8,451 | ||||||||
Fixed Rate – 3.2% | ||||||||
Bank of America Alternative Loan Trust | ||||||||
6.009%, 04/25/2037 ¥ | 2,138 | 607 | ||||||
Countrywide Alternative Loan Trust | ||||||||
5.000%, 11/25/2019 | 1,001 | 1,005 | ||||||
Series 2006-19CB, Class A15 | ||||||||
6.000%, 08/25/2036 | 1,383 | 1,063 | ||||||
GMAC Mortgage Corporation Loan Trust | ||||||||
4.250%, 07/25/2040 n | 3,135 | 3,127 | ||||||
GSMPS Mortgage Loan Trust | ||||||||
6.848%, 03/25/2043 ¥ | 2,619 | 1,815 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 65 |
Schedule of Investments June 30, 2010, all dollars are rounded to thousands (000)
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
GSR Mortgage Loan Trust | ||||||||
5.737%, 05/25/2035 ¥ | $ | 2,161 | $ | 1,253 | ||||
Impac Secured Assets | ||||||||
8.000%, 10/25/2030 ¥ | 2,278 | 2,020 | ||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
5.440%, 06/12/2047 q | 3,215 | 3,211 | ||||||
Lehman Mortgage Trust | ||||||||
6.420%, 07/25/2047 | 2,648 | 2,493 | ||||||
OBP Depositor Trust | ||||||||
4.646%, 07/15/2045 n « | 2,880 | 2,893 | ||||||
Residential Accredit Loans | ||||||||
5.500%, 08/25/2035 | 1,565 | 1,369 | ||||||
Washington Mutual Mortgage Pass-Through Certificates | ||||||||
6.367%, 08/25/2038 | 1,291 | 1,322 | ||||||
22,178 | ||||||||
Total Collateralized Mortgage Obligation-Private Mortgage-Backed Securities | ||||||||
(Cost $37,977) | 30,629 | |||||||
U.S. Government & Agency Securities – 3.4% |
| |||||||
U.S. Treasuries – 3.4% |
| |||||||
U.S. Treasury Bond | ||||||||
4.625%, 02/15/2040 q | 1,520 | 1,709 | ||||||
U.S. Treasury Notes | ||||||||
1.000%, 04/30/2012 q | 13,655 | 13,757 | ||||||
2.250%, 05/31/2014 q | 615 | 635 | ||||||
2.375%, 02/28/2015 q | 3,915 | 4,035 | ||||||
3.625%, 08/15/2019 q | 1,570 | 1,660 | ||||||
3.625%, 02/15/2020 | 375 | 396 | ||||||
3.500%, 05/15/2020 | 1,285 | 1,345 | ||||||
Total U.S. Government & Agency Securities |
| |||||||
(Cost $23,234) | 23,537 | |||||||
Preferred Stocks – 0.4% |
| |||||||
Banking – 0.1% | ||||||||
Goldman Sachs Group | 40,000 | 718 | ||||||
Insurance – 0.3% | ||||||||
Aspen Insurance Holdings | 84,500 | 1,907 | ||||||
Sovereign – 0.0% | ||||||||
Fannie Mae | 217,000 | 74 | ||||||
Total Preferred Stocks | ||||||||
(Cost $7,984) | 2,699 | |||||||
Municipal Bond – 0.2% |
| |||||||
Sullivan County Health, Education & Housing Facilities, Hospital Revenue, Wellmont Health, Class B | ||||||||
(Cost $1,530) | $ | 1,530 | 1,530 | |||||
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
Closed-End Funds – 0.1% |
| |||||||
Highland Credit Strategies Fund | 23,000 | $ | 164 | |||||
ING Clarion Global Real Estate Income Fund | 36,000 | 232 | ||||||
Pioneer Diversified High Income Trust | 16,000 | 316 | ||||||
Total Closed-End Funds | ||||||||
(Cost $703) | 712 | |||||||
Short-Term Investments – 5.2% |
| |||||||
Money Market Fund – 4.5% |
| |||||||
First American Prime Obligations Fund, Class Z | 31,062,795 | 31,063 | ||||||
U.S. Treasury Obligations – 0.7% |
| |||||||
U.S. Treasury Bills ¨ | ||||||||
0.129%, 07/29/2010 q | $ | 1,170 | 1,170 | |||||
0.205%, 12/16/2010 | 3,000 | 2,997 | ||||||
0.232%, 04/07/2011 | 695 | 694 | ||||||
4,861 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $35,924) | 35,924 | |||||||
Investment Purchased with Proceeds from Securities Lending – 10.1% |
| |||||||
Mount Vernon Securities Lending Prime Portfolio 0.282% W † | ||||||||
(Cost $70,391) | 70,390,543 | 70,391 | ||||||
Total Investments p – 110.6% |
| |||||||
(Cost $749,660) | 765,700 | |||||||
Other Assets and Liabilities, Net – (10.6)% |
| (73,472 | ) | |||||
Total Net Assets – 100.0% |
| $ | 692,228 | |||||
> | Securities are valued in accordance with procedures described in note 2 in Notes to Financial Statements. |
r | Variable Rate Security – The rate shown is the rate in effect as of June 30, 2010. |
¬ | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of June 30, 2010, the fair value of foreign securities was $121,901 or 17.6% of total net assets. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” As of June 30, 2010, the fair value of these investments was $98,697 or 14.3% of total net assets. See note 2 in Notes to Financial Statements. |
q | This security or a portion of this security is out on loan at June 30, 2010. Total loaned securities had a fair value of $68,679 at June 30, 2010. See note 2 in Notes to Financial Statements. |
¥ | Security considered illiquid. As of June 30, 2010, the fair value of the fund’s investments considered to be illiquid was $7,885 or 1.1% of total net assets. See note 2 in notes to Financial Statements. |
« | Security purchased on a when-issued basis. On June 30, 2010, the total cost of investments purchased on a when-issued basis was $9,897 or 1.4% of total net assets. |
Å | Investment in affiliated security. This money market fund is advised by FAF Advisors, Inc., which also serves as advisor for this fund. See note 3 in Notes to Financial Statements. |
W | The rate shown is the annualized seven-day effective yield as of June 30, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts. Yield shown is the annualized effective yield as of June 30, 2010. See note 2 in Notes to Financial Statements. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the |
The accompanying notes are an integral part of the financial statements.
66 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return Bond Fund (concluded) |
fund is invested in this affiliated money market fund. See note 2 in Notes to Financial Statements. |
p | On June 30, 2010, the cost of investments for federal income tax purposes was approximately $756,437. The approximate aggregate gross unrealized appreciation and depreciation of investments, based on this cost, were as follows: |
Gross unrealized appreciation | $ | 37,926 | ||
Gross unrealized depreciation | (28,663 | ) | ||
Net unrealized appreciation | $ | 9,263 | ||
REIT – Real Estate Investment Trust
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Purchased (Sold) | Notional Contract Value | Unrealized Appreciation (Depreciation) | ||||||||||||
Australian Dollar Currency Futures | September 2010 | 88 | $ | 7,369 | $ | 2 | ||||||||||
U.S. Treasury 5 Year Note Futures | September 2010 | (423 | ) | (50,063 | ) | (695 | ) | |||||||||
U.S. Treasury 10 Year Note Futures | September 2010 | (713 | ) | (87,376 | ) | (1,515 | ) | |||||||||
$ | (2,208 | ) | ||||||||||||||
Credit Default Swaps on Credit Indices Sell Protection1 | ||||||||||||||||||||
Counterparty | Reference Index | Receive Fixed Rate | Expiration Date | Notional Amount2 | Unrealized Depreciation | |||||||||||||||
JPMorgan Chase | | Markit iTraxx CDX NA HY 14 | | 5.000 | % | 06/20/2015 | $ | 20,300 | $ | (296 | ) | |||||||||
UBS | | Markit iTraxx CDX NA HY 14 | | 5.000 | % | 06/20/2015 | 8,500 | (26 | ) | |||||||||||
$ | (322 | ) | ||||||||||||||||||
1 | If the fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the reference entity or underlying securities comprising the reference index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference entity or underlying securities comprising the reference index. |
2 | The maximum potential amount the fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
Interest Rate Swap Agreements | ||||||||||||||||||||||||
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Appreciation | ||||||||||||||||||
UBS | 3-Month LIBOR | Receive | 2.056 | % | 07/01/2015 | $ | 71,000 | $ | 2 | |||||||||||||||
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 67 |
Statements of Assets and Liabilities June 30, 2010, all dollars and shares are rounded to thousands (000), except for per share data
Core Bond Fund | High Income Bond Fund | |||||||
Unaffiliated investments, at cost | $ | 1,213,444 | $ | 385,102 | ||||
Affiliated money market fund, at cost | 25,359 | 10,100 | ||||||
Affiliated investment purchased with proceeds from securities lending, at cost (note 2) | 81,712 | 77,333 | ||||||
ASSETS: | ||||||||
Unaffiliated investments, at fair value* (note 2) | $ | 1,265,718 | $ | 377,469 | ||||
Affiliated money market fund, at fair value (note 2) | 25,359 | 10,100 | ||||||
Affiliated investment purchased with proceeds from securities lending, at fair value (note 2) | 81,712 | 77,333 | ||||||
Cash | — | 65 | ||||||
Receivable for dividends and interest | 11,810 | 7,668 | ||||||
Receivable for investments sold | 17,023 | 2,306 | ||||||
Receivable for capital shares sold | 3,661 | 518 | ||||||
Receivable for variation margin (note 2) | 14 | 1 | ||||||
Receivable for swap agreements | — | — | ||||||
Unrealized appreciation of swap agreements | — | — | ||||||
Prepaid expenses and other assets | 12 | 11 | ||||||
Total assets | 1,405,309 | 475,471 | ||||||
LIABILITIES: | ||||||||
Bank overdraft | — | — | ||||||
Dividends payable | 2,645 | 2,308 | ||||||
Payable upon return of securities loaned (note 2) | 81,712 | 77,333 | ||||||
Payable for investments purchased | 15,546 | 6,847 | ||||||
Payable for investments purchased on a when-issued basis | 18,834 | — | ||||||
Payable for capital shares redeemed | 2,643 | 149 | ||||||
Payable for variation margin (note 2) | — | — | ||||||
Payable for swap agreements | — | — | ||||||
Unrealized depreciation of swap agreements | 2,539 | — | ||||||
Payable to affiliates (note 3) | 723 | 254 | ||||||
Payable for distribution and shareholder servicing fees | 25 | 13 | ||||||
Accrued expenses and other liabilities | 33 | 29 | ||||||
Total liabilities | 124,700 | 86,933 | ||||||
Net assets | $ | 1,280,609 | $ | 388,538 | ||||
COMPOSITION OF NET ASSETS: | ||||||||
Portfolio capital | 1,291,921 | 419,997 | ||||||
Undistributed (distributions in excess of) net investment income | 1,184 | 21 | ||||||
Accumulated net realized gain (loss) on investments, future contracts, foreign currency transactions, options written, and swap agreements (note 2) | (60,114 | ) | (24,026 | ) | ||||
Net unrealized appreciation (depreciation) of: | ||||||||
Investments | 52,274 | (7,633 | ) | |||||
Futures contracts | (2,117 | ) | 179 | |||||
Swap agreements | (2,539 | ) | — | |||||
Forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency (note 2) | — | — | ||||||
Net assets | $ | 1,280,609 | $ | 388,538 | ||||
* Including securities loaned, at fair value | $ | 79,807 | $ | 75,028 |
The accompanying notes are an integral part of the financial statements.
68 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | ||||||||||||||
$ | 164,366 | $ | 165,992 | $ | 726,778 | $ | 674,537 | $ | 648,206 | |||||||||
3,533 | 2,218 | 3,902 | 27,796 | 31,063 | ||||||||||||||
7,192 | 23,635 | 99,022 | 64,562 | 70,391 | ||||||||||||||
$ | 169,580 | $ | 170,673 | $ | 760,549 | $ | 687,742 | $ | 664,246 | |||||||||
3,533 | 2,218 | 3,902 | 27,796 | 31,063 | ||||||||||||||
7,192 | 23,635 | 99,022 | 64,562 | 70,391 | ||||||||||||||
— | 4 | — | — | — | ||||||||||||||
1,388 | 1,166 | 7,407 | 5,094 | 7,459 | ||||||||||||||
— | 1,225 | 5,032 | 251 | 6,800 | ||||||||||||||
860 | 409 | 1,330 | 2,294 | 647 | ||||||||||||||
— | — | 2 | 70 | — | ||||||||||||||
— | — | — | — | 25 | ||||||||||||||
— | — | — | — | 2 | ||||||||||||||
12 | — | 2 | 4 | 16 | ||||||||||||||
182,565 | 199,330 | 877,246 | 787,813 | 780,649 | ||||||||||||||
— | — | — | 293 | — | ||||||||||||||
716 | 167 | 1,539 | 1,003 | 2,034 | ||||||||||||||
7,192 | 23,635 | 99,022 | 64,562 | 70,391 | ||||||||||||||
1,003 | 898 | 7,427 | — | 3,178 | ||||||||||||||
— | 583 | — | — | 9,897 | ||||||||||||||
343 | 258 | 6,025 | 618 | 848 | ||||||||||||||
5 | 7 | — | — | 62 | ||||||||||||||
— | — | — | — | 1,241 | ||||||||||||||
312 | — | 1,492 | 1,072 | 322 | ||||||||||||||
77 | 65 | 442 | 332 | 409 | ||||||||||||||
7 | 4 | 3 | 13 | 10 | ||||||||||||||
28 | 30 | 31 | 27 | 29 | ||||||||||||||
9,683 | 25,647 | 115,981 | 67,920 | 88,421 | ||||||||||||||
$ | 172,882 | $ | 173,683 | $ | 761,265 | $ | 719,893 | $ | 692,228 | |||||||||
183,078 | 182,672 | 752,466 | 735,211 | 767,469 | ||||||||||||||
614 | (185 | ) | 45 | (640 | ) | 1,957 | ||||||||||||
| (15,577 | ) | (13,543 | ) | (23,785 | ) | (25,491 | ) | (90,704 | ) | ||||||||
5,214 | 4,681 | 33,771 | 13,205 | 16,040 | ||||||||||||||
(134 | ) | 58 | 260 | (1,320 | ) | (2,208 | ) | |||||||||||
(312 | ) | — | (1,492 | ) | (1,072 | ) | (320 | ) | ||||||||||
(1 | ) | — | — | — | (6 | ) | ||||||||||||
$ | 172,882 | $ | 173,683 | $ | 761,265 | $ | 719,893 | $ | 692,228 | |||||||||
$ | 7,033 | $ | 23,146 | $ | 96,774 | $ | 63,181 | $ | 68,679 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 69 |
Statements of Assets and Liabilities continued, June 30, 2010, all dollars and shares are rounded to thousands (000), except for per share data
Core Bond Fund | High Income Bond Fund | |||||||
Class A: | ||||||||
Net assets | $ | 93,374 | $ | 29,532 | ||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 8,323 | 3,565 | ||||||
Net asset value and redemption price per share | $ | 11.22 | $ | 8.28 | ||||
Maximum offering price per share1 | $ | 11.72 | $ | 8.65 | ||||
Class B2: | ||||||||
Net assets | $ | 3,607 | $ | 1,628 | ||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 324 | 198 | ||||||
Net asset value, offering price, and redemption price per share3 | $ | 11.12 | $ | 8.23 | ||||
Class C: | ||||||||
Net assets | $ | 3,796 | $ | 6,969 | ||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 340 | 845 | ||||||
Net asset value per share3 | $ | 11.18 | $ | 8.25 | ||||
Class R: | ||||||||
Net assets | $ | 379 | $ | 343 | ||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 34 | 41 | ||||||
Net asset value, offering price, and redemption price per share | $ | 11.27 | $ | 8.44 | ||||
Class Y: | ||||||||
Net assets | $ | 1,179,453 | $ | 350,066 | ||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 105,175 | 42,246 | ||||||
Net asset value, offering price, and redemption price per share | $ | 11.21 | $ | 8.29 |
1 | The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge. For a description of front-end sales charges, see note 1 in Notes to Financial Statements. |
2 | No new or additional investments are allowed in Class B shares. See note 1 in Notes to Financial Statements. |
3 | Class B and Class C have a contingent deferred sales charge. For a description of this sales charge, see notes 1 and 3 in Notes to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
70 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | ||||||||||||||
$ | 7,894 | $ | 19,003 | $ | 26,341 | $ | 87,631 | $ | 28,165 | |||||||||
765 | 2,166 | 2,549 | 8,780 | 2,742 | ||||||||||||||
$ | 10.33 | $ | 8.77 | $ | 10.33 | $ | 9.98 | $ | 10.27 | |||||||||
$ | 10.79 | $ | 8.97 | $ | 10.57 | $ | 10.21 | $ | 10.73 | |||||||||
— | — | — | — | $ | 1,413 | |||||||||||||
— | — | — | — | 138 | ||||||||||||||
— | — | — | — | $ | 10.22 | |||||||||||||
$ | 6,673 | $ | 1,940 | — | $ | 3,111 | $ | 6,748 | ||||||||||
651 | 221 | — | 311 | 662 | ||||||||||||||
$ | 10.24 | $ | 8.77 | — | $ | 10.00 | $ | 10.20 | ||||||||||
$ | 1,332 | $ | 652 | — | — | $ | 601 | |||||||||||
129 | 74 | — | — | 58 | ||||||||||||||
$ | 10.31 | $ | 8.77 | — | — | $ | 10.31 | |||||||||||
$ | 156,983 | $ | 152,088 | $ | 734,924 | $ | 629,151 | $ | 655,301 | |||||||||
15,181 | 17,339 | 71,409 | 63,005 | 63,853 | ||||||||||||||
$ | 10.34 | $ | 8.77 | $ | 10.29 | $ | 9.99 | $ | 10.26 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 71 |
Statements of Operations For the year ended June 30, 2010, all dollars are rounded to thousands (000)
Core Bond Fund | High Income Bond Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest from unaffiliated investments | $ | 74,981 | $ | 28,162 | ||||
Dividends from unaffiliated investments | 85 | 2,009 | ||||||
Dividends from affiliated money market fund | 51 | 11 | ||||||
Less: Foreign taxes withheld | — | (11 | ) | |||||
Securities lending income | 131 | 251 | ||||||
Total investment income | 75,248 | 30,422 | ||||||
EXPENSES (note 3): | ||||||||
Investment advisory fees | 6,694 | 2,307 | ||||||
Administration fees | 3,000 | 766 | ||||||
Transfer agent fees | 210 | 130 | ||||||
Custodian fees | 67 | 17 | ||||||
Legal fees | 17 | 16 | ||||||
Audit fees | 40 | 39 | ||||||
Registration fees | 56 | 56 | ||||||
Postage and printing fees | 57 | 14 | ||||||
Directors’ fees | 31 | 31 | ||||||
Other expenses | 27 | 23 | ||||||
Distribution and shareholder servicing fees: | ||||||||
Class A | 227 | 81 | ||||||
Class B | 49 | 20 | ||||||
Class C | 38 | 61 | ||||||
Class R | 2 | 2 | ||||||
Total expenses | 10,515 | 3,563 | ||||||
Less: Fee waivers (note 3) | (885 | ) | (609 | ) | ||||
Total net expenses | 9,630 | 2,954 | ||||||
Investment income – net | 65,618 | 27,468 | ||||||
REALIZED AND UNREALIZED GAINS (LOSSES) – NET (note 5): | ||||||||
Net realized gain (loss) on: | ||||||||
Investments | (1,794 | ) | 23,740 | |||||
Futures contracts | (2,773 | ) | 52 | |||||
Swap agreements | 5,671 | — | ||||||
Options written | — | — | ||||||
Forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency (note 2) | (3 | ) | — | |||||
Net change in unrealized appreciation or depreciation of: | ||||||||
Investments | 157,451 | 13,991 | ||||||
Futures contracts | (967 | ) | 187 | |||||
Swap agreements | (3,764 | ) | — | |||||
Options written | — | — | ||||||
Forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency (note 2) | — | — | ||||||
Net gain on investments, futures contracts, swap agreements, options written, and foreign currency transactions | 153,821 | 37,970 | ||||||
Net increase in net assets resulting from operations | $ | 219,439 | $ | 65,438 |
The accompanying notes are an integral part of the financial statements.
72 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | ||||||||||||||
$ | 5,868 | $ | 4,022 | $ | 38,474 | $ | 21,332 | $ | 41,647 | |||||||||
31 | — | 37 | — | 280 | ||||||||||||||
9 | 1 | 32 | 23 | 37 | ||||||||||||||
— | — | — | — | — | ||||||||||||||
50 | 23 | 98 | 64 | 61 | ||||||||||||||
5,958 | 4,046 | 38,641 | 21,419 | 42,025 | ||||||||||||||
775 | 676 | 3,885 | 2,769 | 4,077 | ||||||||||||||
355 | 320 | 1,758 | 1,271 | 1,536 | ||||||||||||||
101 | 89 | 60 | 118 | 121 | ||||||||||||||
8 | 7 | 39 | 28 | 34 | ||||||||||||||
16 | 17 | 17 | 17 | 16 | ||||||||||||||
41 | 38 | 40 | 39 | 41 | ||||||||||||||
45 | 59 | 30 | 46 | 54 | ||||||||||||||
6 | 9 | 32 | 28 | 22 | ||||||||||||||
30 | 30 | 31 | 31 | 31 | ||||||||||||||
22 | 25 | 23 | 23 | 24 | ||||||||||||||
17 | 33 | 67 | 202 | 48 | ||||||||||||||
— | — | — | — | 16 | ||||||||||||||
40 | 8 | — | 11 | 44 | ||||||||||||||
7 | 2 | — | — | 2 | ||||||||||||||
1,463 | 1,313 | 5,982 | 4,583 | 6,066 | ||||||||||||||
(477 | ) | (476 | ) | (526 | ) | (1,149 | ) | (910 | ) | |||||||||
986 | 837 | 5,456 | 3,434 | 5,156 | ||||||||||||||
4,972 | 3,209 | 33,185 | 17,985 | 36,869 | ||||||||||||||
(418 | ) | 336 | (736 | ) | (4,660 | ) | (3,645 | ) | ||||||||||
811 | 321 | 2,078 | (2,779 | ) | (9,664 | ) | ||||||||||||
15 | — | 402 | 514 | 6,235 | ||||||||||||||
— | — | — | — | 1,331 | ||||||||||||||
| 3 | | — | — | (1 | ) | (503 | ) | ||||||||||
11,283 | 4,070 | 65,457 | 22,925 | 95,390 | ||||||||||||||
(138 | ) | 58 | 1,416 | (1,139 | ) | (529 | ) | |||||||||||
(169 | ) | — | (1,311 | ) | (866 | ) | (677 | ) | ||||||||||
— | — | — | — | (88 | ) | |||||||||||||
| (1) | | — | — | — | (7 | ) | |||||||||||
| 11,386 | | 4,785 | 67,306 | 13,994 | 87,843 | ||||||||||||
$ | 16,358 | $ | 7,994 | $ | 100,491 | $ | 31,979 | $ | 124,712 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 73 |
Statements of Changes in Net Assets all dollars are rounded to thousands (000)
Core Bond Fund | High Income Bond Fund | |||||||||||||||
Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | |||||||||||||
OPERATIONS: | ||||||||||||||||
Investment income – net | $ | 65,618 | $ | 84,630 | $ | 27,468 | $ | 19,353 | ||||||||
Net realized gain (loss) on: | ||||||||||||||||
Investments | (1,794 | ) | (44,797 | ) | 23,740 | (41,280 | ) | |||||||||
Futures contracts | (2,773 | ) | (8,565 | ) | 52 | 1,291 | ||||||||||
Swap agreements | 5,671 | (3,086 | ) | — | 1,530 | |||||||||||
Options written | — | (56 | ) | — | — | |||||||||||
Forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency (note 2) | (3 | ) | (80 | ) | — | — | ||||||||||
Net change in unrealized appreciation or depreciation of: | ||||||||||||||||
Investments | 157,451 | (53,547 | ) | 13,991 | (2,227 | ) | ||||||||||
Futures contracts | (967 | ) | (1,120 | ) | 187 | 121 | ||||||||||
Swap agreements | (3,764 | ) | 2,856 | — | (242 | ) | ||||||||||
Options written | — | — | — | — | ||||||||||||
Forward foreign currency contracts, foreign currency, and translation of other assets and liabilities denominated in foreign currency (note 2) | — | (2 | ) | — | — | |||||||||||
Net increase (decrease) in net assets resulting from operations | 219,439 | (23,767 | ) | 65,438 | (21,454 | ) | ||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||
Investment income – net: | ||||||||||||||||
Class A | (4,290 | ) | (5,156 | ) | (2,599 | ) | (2,415 | ) | ||||||||
Class B | (201 | ) | (363 | ) | (146 | ) | (245 | ) | ||||||||
Class C | (150 | ) | (213 | ) | (447 | ) | (512 | ) | ||||||||
Class R | (19 | ) | (20 | ) | (24 | ) | (23 | ) | ||||||||
Class Y | (61,718 | ) | (80,122 | ) | (24,028 | ) | (16,979 | ) | ||||||||
Realized gain on investments – net: | ||||||||||||||||
Class A | — | — | — | — | ||||||||||||
Class B | — | — | — | — | ||||||||||||
Class C | — | — | — | — | ||||||||||||
Class R | — | — | — | — | ||||||||||||
Class Y | — | — | — | — | ||||||||||||
Return of capital: | ||||||||||||||||
Class A | — | — | — | — | ||||||||||||
Class B | — | — | — | — | ||||||||||||
Class C | — | — | — | — | ||||||||||||
Class R | — | — | — | — | ||||||||||||
Class Y | — | — | — | — | ||||||||||||
Total distributions | (66,378 | ) | (85,874 | ) | (27,244 | ) | (20,174 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS (note 4): | ||||||||||||||||
Class A: | ||||||||||||||||
Proceeds from sales | 11,630 | 10,085 | 27,146 | 16,377 | ||||||||||||
Fund merger (note 9) | — | — | — | — | ||||||||||||
Reinvestment of distributions | 3,320 | 3,991 | 1,743 | 1,572 | ||||||||||||
Payments for redemptions | (13,714 | ) | (19,007 | ) | (29,443 | ) | (13,646 | ) | ||||||||
Increase (decrease) in net assets from Class A transactions | 1,236 | (4,931 | ) | (554 | ) | 4,303 | ||||||||||
Class B: | ||||||||||||||||
Proceeds from sales | 110 | 381 | 193 | 123 | ||||||||||||
Reinvestment of distributions | 186 | 335 | 105 | 159 | ||||||||||||
Payments for redemptions | (3,073 | ) | (2,011 | ) | (1,157 | ) | (1,022 | ) | ||||||||
Decrease in net assets from Class B transactions | (2,777 | ) | (1,295 | ) | (859 | ) | (740 | ) | ||||||||
Class C: | ||||||||||||||||
Proceeds from sales | 874 | 963 | 2,167 | 491 | ||||||||||||
Fund merger (note 9) | — | — | — | — | ||||||||||||
Reinvestment of distributions | 125 | 176 | 226 | 267 | ||||||||||||
Payments for redemptions | (1,307 | ) | (1,459 | ) | (1,236 | ) | (1,062 | ) | ||||||||
Increase (decrease) in net assets from Class C transactions | (308 | ) | (320 | ) | 1,157 | (304 | ) | |||||||||
Class R: | ||||||||||||||||
Proceeds from sales | 108 | 151 | 97 | 105 | ||||||||||||
Fund merger (note 9) | — | — | — | — | ||||||||||||
Reinvestment of distributions | 19 | 20 | 10 | 8 | ||||||||||||
Payments for redemptions | (201 | ) | (36 | ) | (72 | ) | (3 | ) | ||||||||
Increase (decrease) in net assets from Class R transactions | (74 | ) | 135 | 35 | 110 | |||||||||||
Class Y: | ||||||||||||||||
Proceeds from sales | 224,539 | 475,310 | 187,427 | 62,943 | ||||||||||||
Fund merger (note 9) | — | — | — | — | ||||||||||||
Reinvestment of distributions | 18,523 | 23,742 | 1,804 | 1,716 | ||||||||||||
Payments for redemptions | (485,332 | ) | (586,834 | ) | (53,873 | ) | (49,948 | ) | ||||||||
Increase (decrease) in net assets from Class Y transactions | (242,270 | ) | (87,782 | ) | 135,358 | 14,711 | ||||||||||
Increase (decrease) in net assets from capital share transactions | (244,193 | ) | (94,193 | ) | 135,137 | 18,080 | ||||||||||
Total increase (decrease) in net assets | (91,132 | ) | (203,834 | ) | 173,331 | (23,548 | ) | |||||||||
Net assets at beginning of period | 1,371,741 | 1,575,575 | 215,207 | 238,755 | ||||||||||||
Net assets at end of period | $ | 1,280,609 | $ | 1,371,741 | $ | 388,538 | $ | 215,207 | ||||||||
Undistributed (distributions in excess of) net investment income | $ | 1,184 | $ | (389 | ) | $ | 21 | $ | (167 | ) |
1 | The fund began offering Class C and Class R on October 28, 2009. |
2 | The fund began offering Class C on October 28, 2009. |
The accompanying notes are an integral part of the financial statements.
74 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Inflation Protected Securities Fund | Intermediate Government Bond Fund1 | Intermediate Term Bond Fund | Short Term Bond Fund2 | Total Return Bond Fund | ||||||||||||||||||||||||||||||||||
Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | |||||||||||||||||||||||||||||
$ | 4,972 | $ | 5,307 | $ | 3,209 | $ | 2,827 | $ | 33,185 | $ | 38,187 | $ | 17,985 | $ | 16,150 | $ | 36,869 | $ | 59,524 | |||||||||||||||||||
(418 | ) | (6,928 | ) | 336 | 2,409 | (736 | ) | (15,230 | ) | (4,660 | ) | (5,134 | ) | (3,645 | ) | (61,203 | ) | |||||||||||||||||||||
811 | 568 | 321 | — | 2,078 | (4,487 | ) | (2,779 | ) | 987 | (9,664 | ) | (9,842 | ) | |||||||||||||||||||||||||
15 | 667 | — | — | 402 | 2,045 | 514 | 1,358 | 6,235 | (14,144 | ) | ||||||||||||||||||||||||||||
— | (11 | ) | — | — | — | — | — | (11 | ) | 1,331 | 915 | |||||||||||||||||||||||||||
| 3 | | 7 | — | — | — | — | (1 | ) | (15 | ) | (503 | ) | 264 | ||||||||||||||||||||||||
11,283 | (11,535 | ) | 4,070 | 768 | 65,457 | (14,219 | ) | 22,925 | (3,864 | ) | 95,390 | (41,674 | ) | |||||||||||||||||||||||||
(138 | ) | (183 | ) | 58 | — | 1,416 | (789 | ) | (1,139 | ) | (55 | ) | (529 | ) | 1,035 | |||||||||||||||||||||||
(169 | ) | (157 | ) | — | — | (1,311 | ) | 1,031 | (866 | ) | (227 | ) | (677 | ) | 1,386 | |||||||||||||||||||||||
— | — | — | — | — | — | — | — | (88 | ) | (408 | ) | |||||||||||||||||||||||||||
| (1) | | 7 | — | — | — | — | — | — | (7 | ) | 19 | ||||||||||||||||||||||||||
16,358 | (12,258 | ) | 7,994 | 6,004 | 100,491 | 6,538 | 31,979 | 9,189 | 124,712 | (64,128 | ) | |||||||||||||||||||||||||||
(192 | ) | (91 | ) | (305 | ) | (257 | ) | (1,095 | ) | (1,326 | ) | (2,624 | ) | (2,560 | ) | (1,012 | ) | (946 | ) | |||||||||||||||||||
— | — | — | — | — | — | — | — | (75 | ) | (125 | ) | |||||||||||||||||||||||||||
(107 | ) | (6 | ) | (11 | ) | — | — | — | (21 | ) | — | (194 | ) | (182 | ) | |||||||||||||||||||||||
(33 | ) | (28 | ) | (5 | ) | — | — | — | — | — | (22 | ) | (24 | ) | ||||||||||||||||||||||||
(3,966 | ) | (7,681 | ) | (2,949 | ) | (2,457 | ) | (32,180 | ) | (39,603 | ) | (15,745 | ) | (12,651 | ) | (36,239 | ) | (57,528 | ) | |||||||||||||||||||
— | — | (149 | ) | — | — | — | — | — | — | (234 | ) | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | (37 | ) | ||||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | (45 | ) | ||||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | (4 | ) | ||||||||||||||||||||||||||||
— | — | (1,675 | ) | — | — | — | — | — | — | (14,120 | ) | |||||||||||||||||||||||||||
— | (53 | ) | (2 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
— | (9 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
— | (15 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
— | (2,696 | ) | (16 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
(4,298 | ) | (10,579 | ) | (5,112 | ) | (2,714 | ) | (33,275 | ) | (40,929 | ) | (18,390 | ) | (15,211 | ) | (37,542 | ) | (73,245 | ) | |||||||||||||||||||
4,852 | 3,292 | 3,604 | 15,012 | 5,909 | 3,133 | 32,250 | 16,921 | 16,522 | 3,930 | |||||||||||||||||||||||||||||
— | — | 13,225 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
155 | 110 | 407 | 206 | 890 | 1,092 | 2,045 | 1,947 | 774 | 924 | |||||||||||||||||||||||||||||
(3,026 | ) | (1,048 | ) | (9,067 | ) | (11,591 | ) | (6,593 | ) | (7,402 | ) | (14,685 | ) | (11,765 | ) | (5,066 | ) | (5,068 | ) | |||||||||||||||||||
1,981 | 2,354 | 8,169 | 3,627 | 206 | (3,177 | ) | 19,610 | 7,103 | 12,230 | (214 | ) | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | 138 | 230 | |||||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | 63 | 131 | |||||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | (735 | ) | (758 | ) | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | (534 | ) | (397 | ) | |||||||||||||||||||||||||||
5,477 | 1,321 | 90 | — | — | — | 3,455 | — | 4,120 | 1,198 | |||||||||||||||||||||||||||||
— | — | 2,023 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
94 | 9 | 8 | — | — | — | 17 | — | 139 | 166 | |||||||||||||||||||||||||||||
(556 | ) | (287 | ) | (219 | ) | — | — | — | (359 | ) | — | (710 | ) | (1,819 | ) | |||||||||||||||||||||||
5,015 | 1,043 | 1,902 | — | — | — | 3,113 | — | 3,549 | (455 | ) | ||||||||||||||||||||||||||||
137 | 317 | 134 | — | — | — | — | — | 337 | 442 | |||||||||||||||||||||||||||||
— | — | 874 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
33 | 43 | 5 | — | — | — | — | — | 22 | 28 | |||||||||||||||||||||||||||||
(197 | ) | (204 | ) | (375 | ) | — | — | — | — | — | (484 | ) | (130 | ) | ||||||||||||||||||||||||
(27 | ) | 156 | 638 | — | — | — | — | — | (125 | ) | 340 | |||||||||||||||||||||||||||
58,004 | 46,823 | 32,634 | 109,739 | 199,377 | 197,327 | 533,108 | 134,155 | 151,764 | 299,711 | |||||||||||||||||||||||||||||
— | — | 81,335 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
592 | 2,129 | 2,492 | 1,341 | 8,060 | 10,867 | 3,684 | 3,778 | 9,613 | 22,461 | |||||||||||||||||||||||||||||
(80,351 | ) | (137,643 | ) | (68,118 | ) | (76,536 | ) | (262,030 | ) | (217,486 | ) | (233,939 | ) | (75,622 | ) | (223,673 | ) | (622,967 | ) | |||||||||||||||||||
(21,755 | ) | (88,691 | ) | 48,343 | 34,544 | (54,593 | ) | (9,292 | ) | 302,853 | 62,311 | (62,296 | ) | (300,795 | ) | |||||||||||||||||||||||
(14,786 | ) | (85,138 | ) | 59,052 | 38,171 | (54,387 | ) | (12,469 | ) | 325,576 | 69,414 | (47,176 | ) | (301,521 | ) | |||||||||||||||||||||||
(2,726 | ) | (107,975 | ) | 61,934 | 41,461 | 12,829 | (46,860 | ) | 339,165 | 63,392 | 39,994 | (438,894 | ) | |||||||||||||||||||||||||
175,608 | 283,583 | 111,749 | 70,288 | 748,436 | 795,296 | 380,728 | 317,336 | 652,234 | 1,091,128 | |||||||||||||||||||||||||||||
$ | 172,882 | $ | 175,608 | $ | 173,683 | $ | 111,749 | $ | 761,265 | $ | 748,436 | $ | 719,893 | $ | 380,728 | $ | 692,228 | $ | 652,234 | |||||||||||||||||||
$ | 614 | $ | (9 | ) | $ | (185 | ) | $ | 45 | $ | 45 | $ | (36 | ) | $ | (640 | ) | $ | (76 | ) | $ | 1,957 | $ | 534 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 75 |
Financial Highlights For a share outstanding throughout the indicated periods.
Net Asset Value Beginning of Period | Net Investment Income | Realized and Unrealized Gains (Losses) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Distributions from Net Realized Gains | Total Distributions | Net Asset Value End of Period | |||||||||||||||||||||||||
Core Bond Fund1 | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
20102 | $ | 10.04 | $ | 0.51 | $ | 1.18 | $ | 1.69 | $ | (0.51 | ) | $ | — | $ | (0.51 | ) | $ | 11.22 | ||||||||||||||
20092 | 10.86 | 0.61 | (0.81 | ) | (0.20 | ) | (0.62 | ) | — | (0.62 | ) | 10.04 | ||||||||||||||||||||
20082 | 10.79 | 0.51 | 0.05 | 0.56 | (0.49 | ) | — | (0.49 | ) | 10.86 | ||||||||||||||||||||||
20072 | 10.71 | 0.47 | 0.09 | 0.56 | (0.48 | ) | — | (0.48 | ) | 10.79 | ||||||||||||||||||||||
20063 | 11.15 | 0.33 | (0.37 | ) | (0.04 | ) | (0.33 | ) | (0.07 | ) | (0.40 | ) | 10.71 | |||||||||||||||||||
20054 | 11.27 | 0.40 | (0.09 | ) | 0.31 | (0.42 | ) | (0.01 | ) | (0.43 | ) | 11.15 | ||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
20102 | $ | 9.95 | $ | 0.43 | $ | 1.17 | $ | 1.60 | $ | (0.43 | ) | $ | — | $ | (0.43 | ) | $ | 11.12 | ||||||||||||||
20092 | 10.77 | 0.54 | (0.81 | ) | (0.27 | ) | (0.55 | ) | — | (0.55 | ) | 9.95 | ||||||||||||||||||||
20082 | 10.70 | 0.42 | 0.06 | 0.48 | (0.41 | ) | — | (0.41 | ) | 10.77 | ||||||||||||||||||||||
20072 | 10.63 | 0.38 | 0.09 | 0.47 | (0.40 | ) | — | (0.40 | ) | 10.70 | ||||||||||||||||||||||
20063 | 11.07 | 0.26 | (0.36 | ) | (0.10 | ) | (0.27 | ) | (0.07 | ) | (0.34 | ) | 10.63 | |||||||||||||||||||
20054 | 11.19 | 0.31 | (0.09 | ) | 0.22 | (0.33 | ) | (0.01 | ) | (0.34 | ) | 11.07 | ||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||
20102 | $ | 10.00 | $ | 0.42 | $ | 1.19 | $ | 1.61 | $ | (0.43 | ) | $ | — | $ | (0.43 | ) | $ | 11.18 | ||||||||||||||
20092 | 10.83 | 0.54 | (0.82 | ) | (0.28 | ) | (0.55 | ) | — | (0.55 | ) | 10.00 | ||||||||||||||||||||
20082 | 10.75 | 0.43 | 0.06 | 0.49 | (0.41 | ) | — | (0.41 | ) | 10.83 | ||||||||||||||||||||||
20072 | 10.67 | 0.38 | 0.10 | 0.48 | (0.40 | ) | — | (0.40 | ) | 10.75 | ||||||||||||||||||||||
20063 | 11.12 | 0.26 | (0.37 | ) | (0.11 | ) | (0.27 | ) | (0.07 | ) | (0.34 | ) | 10.67 | |||||||||||||||||||
20054 | 11.24 | 0.31 | (0.09 | ) | 0.22 | (0.33 | ) | (0.01 | ) | (0.34 | ) | 11.12 | ||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||
20102 | $ | 10.09 | $ | 0.48 | $ | 1.19 | $ | 1.67 | $ | (0.49 | ) | $ | — | $ | (0.49 | ) | $ | 11.27 | ||||||||||||||
20092 | 10.89 | 0.59 | (0.79 | ) | (0.20 | ) | (0.60 | ) | — | (0.60 | ) | 10.09 | ||||||||||||||||||||
20082 | 10.81 | 0.49 | 0.05 | 0.54 | (0.46 | ) | — | (0.46 | ) | 10.89 | ||||||||||||||||||||||
20072 | 10.73 | 0.44 | 0.09 | 0.53 | (0.45 | ) | — | (0.45 | ) | 10.81 | ||||||||||||||||||||||
20063 | 11.17 | 0.31 | (0.36 | ) | (0.05 | ) | (0.32 | ) | (0.07 | ) | (0.39 | ) | 10.73 | |||||||||||||||||||
20054 | 11.30 | 0.38 | (0.10 | ) | 0.28 | (0.40 | ) | (0.01 | ) | (0.41 | ) | 11.17 | ||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||
20102 | $ | 10.03 | $ | 0.54 | $ | 1.18 | $ | 1.72 | $ | (0.54 | ) | $ | — | $ | (0.54 | ) | $ | 11.21 | ||||||||||||||
20092 | 10.86 | 0.64 | (0.82 | ) | (0.18 | ) | (0.65 | ) | — | (0.65 | ) | 10.03 | ||||||||||||||||||||
20082 | 10.78 | 0.54 | 0.06 | 0.60 | (0.52 | ) | — | (0.52 | ) | 10.86 | ||||||||||||||||||||||
20072 | 10.70 | 0.49 | 0.10 | 0.59 | (0.51 | ) | — | (0.51 | ) | 10.78 | ||||||||||||||||||||||
20063 | 11.15 | 0.35 | (0.38 | ) | (0.03 | ) | (0.35 | ) | (0.07 | ) | (0.42 | ) | 10.70 | |||||||||||||||||||
20054 | 11.27 | 0.42 | (0.08 | ) | 0.34 | (0.45 | ) | (0.01 | ) | (0.46 | ) | 11.15 |
1 | Per share data calculated using average shares outstanding method. |
2 | For the period July 1 to June 30 in the fiscal year indicated. |
3 | For the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
4 | For the period October 1 to September 30 in the fiscal year indicated. |
5 | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
The accompanying notes are an integral part of the financial statements.
76 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return5 | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||
17.11 | % | $ | 93,374 | 0.95 | % | 4.65 | % | 1.02 | % | 4.58 | % | 83 | % | |||||||||||||
(1.37 | ) | 82,373 | 0.95 | 6.34 | 1.02 | 6.27 | 160 | |||||||||||||||||||
5.24 | 94,571 | 0.95 | 4.63 | 1.01 | 4.57 | 131 | ||||||||||||||||||||
5.26 | 102,723 | 0.95 | 4.25 | 1.01 | 4.19 | 137 | ||||||||||||||||||||
(0.34 | ) | 134,845 | �� | 0.95 | 3.98 | 1.03 | 3.90 | 139 | ||||||||||||||||||
2.75 | 161,410 | 0.95 | 3.51 | 1.05 | 3.41 | 208 | ||||||||||||||||||||
16.31 | % | $ | 3,607 | 1.70 | % | 3.97 | % | 1.77 | % | 3.90 | % | 83 | % | |||||||||||||
(2.12 | ) | 5,780 | 1.70 | 5.59 | 1.77 | 5.52 | 160 | |||||||||||||||||||
4.50 | 7,733 | 1.70 | 3.87 | 1.76 | 3.81 | 131 | ||||||||||||||||||||
4.41 | 9,634 | 1.70 | 3.50 | 1.76 | 3.44 | 137 | ||||||||||||||||||||
(0.91 | ) | 13,819 | 1.70 | 3.23 | 1.78 | 3.15 | 139 | |||||||||||||||||||
2.00 | 17,078 | 1.70 | 2.76 | 1.80 | 2.66 | 208 | ||||||||||||||||||||
16.32 | % | $ | 3,796 | 1.70 | % | 3.91 | % | 1.77 | % | 3.84 | % | 83 | % | |||||||||||||
(2.21 | ) | 3,693 | 1.70 | 5.59 | 1.77 | 5.52 | 160 | |||||||||||||||||||
4.57 | 4,383 | 1.70 | 3.89 | 1.76 | 3.83 | 131 | ||||||||||||||||||||
4.48 | 4,567 | 1.70 | 3.50 | 1.76 | 3.44 | 137 | ||||||||||||||||||||
(1.01 | ) | 5,183 | 1.70 | 3.22 | 1.78 | 3.14 | 139 | |||||||||||||||||||
1.99 | 7,266 | 1.70 | 2.76 | 1.80 | 2.66 | 208 | ||||||||||||||||||||
16.74 | % | $ | 379 | 1.20 | % | 4.42 | % | 1.27 | % | 4.35 | % | 83 | % | |||||||||||||
(1.43 | ) | 406 | 1.20 | 6.11 | 1.27 | 6.04 | 160 | |||||||||||||||||||
5.06 | 289 | 1.20 | 4.42 | 1.26 | 4.36 | 131 | ||||||||||||||||||||
4.99 | 65 | 1.20 | 4.01 | 1.29 | 3.92 | 137 | ||||||||||||||||||||
(0.51 | ) | 34 | 1.20 | 3.77 | 1.43 | 3.54 | 139 | |||||||||||||||||||
2.51 | 16 | 1.20 | 3.37 | 1.45 | 3.12 | 208 | ||||||||||||||||||||
17.42 | % | $ | 1,179,453 | 0.70 | % | 4.93 | % | 0.77 | % | 4.86 | % | 83 | % | |||||||||||||
(1.22 | ) | 1,279,489 | 0.70 | 6.57 | 0.77 | 6.50 | 160 | |||||||||||||||||||
5.60 | 1,468,599 | 0.70 | 4.88 | 0.76 | 4.82 | 131 | ||||||||||||||||||||
5.53 | 1,530,750 | 0.70 | 4.50 | 0.76 | 4.44 | 137 | ||||||||||||||||||||
(0.24 | ) | 1,680,105 | 0.70 | 4.24 | 0.78 | 4.16 | 139 | |||||||||||||||||||
3.01 | 1,725,850 | 0.70 | 3.77 | 0.80 | 3.67 | 208 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 77 |
Financial Highlights For a share outstanding throughout the indicated periods.
Net Asset Value Beginning of Period | Net Investment Income | Realized and Unrealized Gains (Losses) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Total Distributions | Net Asset Value End of Period | ||||||||||||||||||||||
High Income Bond Fund1 | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
20102 | $ | 7.15 | $ | 0.67 | $ | 1.12 | $ | 1.79 | $ | (0.66 | ) | $ | (0.66 | ) | $ | 8.28 | ||||||||||||
20092 | 8.65 | 0.73 | (1.47 | ) | (0.74 | ) | (0.76 | ) | (0.76 | ) | 7.15 | |||||||||||||||||
20082 | 9.61 | 0.71 | (0.97 | ) | (0.26 | ) | (0.70 | ) | (0.70 | ) | 8.65 | |||||||||||||||||
20072 | 9.22 | 0.65 | 0.38 | 1.03 | (0.64 | ) | (0.64 | ) | 9.61 | |||||||||||||||||||
20063 | 9.41 | 0.49 | (0.20 | ) | 0.29 | (0.48 | ) | (0.48 | ) | 9.22 | ||||||||||||||||||
20054 | 9.45 | 0.66 | (0.04 | ) | 0.62 | (0.66 | ) | (0.66 | ) | 9.41 | ||||||||||||||||||
Class B | ||||||||||||||||||||||||||||
20102 | $ | 7.11 | $ | 0.60 | $ | 1.12 | $ | 1.72 | $ | (0.60 | ) | $ | (0.60 | ) | $ | 8.23 | ||||||||||||
20092 | 8.61 | 0.68 | (1.47 | ) | (0.79 | ) | (0.71 | ) | (0.71 | ) | 7.11 | |||||||||||||||||
20082 | 9.57 | 0.63 | (0.96 | ) | (0.33 | ) | (0.63 | ) | (0.63 | ) | 8.61 | |||||||||||||||||
20072 | 9.18 | 0.57 | 0.39 | 0.96 | (0.57 | ) | (0.57 | ) | 9.57 | |||||||||||||||||||
20063 | 9.37 | 0.43 | (0.19 | ) | 0.24 | (0.43 | ) | (0.43 | ) | 9.18 | ||||||||||||||||||
20054 | 9.41 | 0.58 | (0.03 | ) | 0.55 | (0.59 | ) | (0.59 | ) | 9.37 | ||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
20102 | $ | 7.12 | $ | 0.60 | $ | 1.13 | $ | 1.73 | $ | (0.60 | ) | $ | (0.60 | ) | $ | 8.25 | ||||||||||||
20092 | 8.62 | 0.68 | (1.47 | ) | (0.79 | ) | (0.71 | ) | (0.71 | ) | 7.12 | |||||||||||||||||
20082 | 9.58 | 0.63 | (0.96 | ) | (0.33 | ) | (0.63 | ) | (0.63 | ) | 8.62 | |||||||||||||||||
20072 | 9.19 | 0.57 | 0.39 | 0.96 | (0.57 | ) | (0.57 | ) | 9.58 | |||||||||||||||||||
20063 | 9.38 | 0.43 | (0.19 | ) | 0.24 | (0.43 | ) | (0.43 | ) | 9.19 | ||||||||||||||||||
20054 | 9.42 | 0.58 | (0.03 | ) | 0.55 | (0.59 | ) | (0.59 | ) | 9.38 | ||||||||||||||||||
Class R | ||||||||||||||||||||||||||||
20102 | $ | 7.28 | $ | 0.66 | $ | 1.14 | $ | 1.80 | $ | (0.64 | ) | $ | (0.64 | ) | $ | 8.44 | ||||||||||||
20092 | 8.79 | 0.73 | (1.49 | ) | (0.76 | ) | (0.75 | ) | (0.75 | ) | 7.28 | |||||||||||||||||
20082 | 9.75 | 0.69 | (0.98 | ) | (0.29 | ) | (0.67 | ) | (0.67 | ) | 8.79 | |||||||||||||||||
20072 | 9.35 | 0.62 | 0.40 | 1.02 | (0.62 | ) | (0.62 | ) | 9.75 | |||||||||||||||||||
20063 | 9.53 | 0.49 | (0.20 | ) | 0.29 | (0.47 | ) | (0.47 | ) | 9.35 | ||||||||||||||||||
20054 | 9.60 | 0.62 | (0.04 | ) | 0.58 | (0.65 | ) | (0.65 | ) | 9.53 | ||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||
20102 | $ | 7.16 | $ | 0.69 | $ | 1.12 | $ | 1.81 | $ | (0.68 | ) | $ | (0.68 | ) | $ | 8.29 | ||||||||||||
20092 | 8.66 | 0.75 | (1.47 | ) | (0.72 | ) | (0.78 | ) | (0.78 | ) | 7.16 | |||||||||||||||||
20082 | 9.62 | 0.73 | (0.97 | ) | (0.24 | ) | (0.72 | ) | (0.72 | ) | 8.66 | |||||||||||||||||
20072 | 9.23 | 0.67 | 0.39 | 1.06 | (0.67 | ) | (0.67 | ) | 9.62 | |||||||||||||||||||
20063 | 9.42 | 0.51 | (0.20 | ) | 0.31 | (0.50 | ) | (0.50 | ) | 9.23 | ||||||||||||||||||
20054 | 9.46 | 0.68 | (0.03 | ) | 0.65 | (0.69 | ) | (0.69 | ) | 9.42 |
1 | Per share data calculated using average shares outstanding method. |
2 | For the period July 1 through June 30 in the fiscal year indicated. |
3 | For the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
4 | For the period October 1 through September 30 in the fiscal year indicated. |
5 | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
The accompanying notes are an integral part of the financial statements.
78 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return5 | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||
25.47 | % | $ | 29,532 | 1.10 | % | 8.12 | % | 1.29 | % | 7.93 | % | 132 | % | |||||||||||||
(7.26 | ) | 25,696 | 1.10 | 10.79 | 1.36 | 10.53 | 108 | |||||||||||||||||||
(2.84 | ) | 24,420 | 1.10 | 7.74 | 1.31 | 7.53 | 100 | |||||||||||||||||||
11.46 | 28,932 | 1.10 | 6.74 | 1.30 | 6.54 | 101 | ||||||||||||||||||||
3.14 | 29,573 | 1.10 | 6.94 | 1.29 | 6.75 | 68 | ||||||||||||||||||||
6.74 | 34,144 | 1.02 | 6.88 | 1.27 | 6.63 | 77 | ||||||||||||||||||||
24.56 | % | $ | 1,628 | 1.85 | % | 7.47 | % | 2.04 | % | 7.28 | % | 132 | % | |||||||||||||
(7.99 | ) | 2,157 | 1.85 | 9.92 | 2.11 | 9.66 | 108 | |||||||||||||||||||
(3.57 | ) | 3,496 | 1.85 | 6.97 | 2.06 | 6.76 | 100 | |||||||||||||||||||
10.67 | 4,814 | 1.85 | 6.00 | 2.05 | 5.80 | 101 | ||||||||||||||||||||
2.57 | 5,988 | 1.85 | 6.19 | 2.04 | 6.00 | 68 | ||||||||||||||||||||
5.97 | 7,191 | 1.77 | 6.13 | 2.02 | 5.88 | 77 | ||||||||||||||||||||
24.67 | % | $ | 6,969 | 1.85 | % | 7.41 | % | 2.04 | % | 7.22 | % | 132 | % | |||||||||||||
(7.98 | ) | 5,038 | 1.85 | 9.98 | 2.11 | 9.72 | 108 | |||||||||||||||||||
(3.57 | ) | 6,490 | 1.85 | 6.97 | 2.06 | 6.76 | 100 | |||||||||||||||||||
10.66 | 8,522 | 1.85 | 5.98 | 2.05 | 5.78 | 101 | ||||||||||||||||||||
2.56 | 9,873 | 1.85 | 6.19 | 2.04 | 6.00 | 68 | ||||||||||||||||||||
5.96 | 13,403 | 1.77 | 6.13 | 2.02 | 5.88 | 77 | ||||||||||||||||||||
25.12 | % | $ | 343 | 1.35 | % | 7.92 | % | 1.54 | % | 7.73 | % | 132 | % | |||||||||||||
(7.49 | ) | 265 | 1.35 | 10.72 | 1.61 | 10.46 | 108 | |||||||||||||||||||
(3.04 | ) | 185 | 1.35 | 7.37 | 1.56 | 7.16 | 100 | |||||||||||||||||||
11.12 | 186 | 1.35 | 6.38 | 1.56 | 6.17 | 101 | ||||||||||||||||||||
3.09 | 73 | 1.35 | 6.82 | 1.69 | 6.48 | 68 | ||||||||||||||||||||
6.23 | 4 | 1.33 | 6.31 | 1.73 | 5.91 | 77 | ||||||||||||||||||||
25.75 | % | $ | 350,066 | 0.85 | % | 8.38 | % | 1.04 | % | 8.19 | % | 132 | % | |||||||||||||
(7.01 | ) | 182,051 | 0.85 | 10.93 | 1.11 | 10.67 | 108 | |||||||||||||||||||
(2.59 | ) | 204,164 | 0.85 | 7.99 | 1.06 | 7.78 | 100 | |||||||||||||||||||
11.73 | 232,998 | 0.85 | 6.98 | 1.05 | 6.78 | 101 | ||||||||||||||||||||
3.34 | 205,382 | 0.85 | 7.19 | 1.04 | 7.00 | 68 | ||||||||||||||||||||
7.01 | 207,610 | 0.77 | 7.13 | 1.02 | 6.88 | 77 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 79 |
Financial Highlights For a share outstanding throughout the indicated periods.
Net Asset Value Beginning of Period | Net Investment Income | Realized and Unrealized Gains (Losses) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Distributions from Net Realized Gains | Distributions from Return of Capital | Total Distributions | Net Asset Value End of Period | ||||||||||||||||||||||||||||
Inflation Protected Securities Fund1 |
| |||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.59 | $ | 0.28 | $ | 0.73 | $ | 1.01 | $ | (0.27 | ) | $ | — | $ | — | $ | (0.27 | ) | $ | 10.33 | ||||||||||||||||
20092 | 10.20 | 0.14 | (0.37 | ) | (0.23 | ) | (0.26 | ) | — | (0.12 | ) | (0.38 | ) | 9.59 | ||||||||||||||||||||||
20082 | 9.43 | 0.54 | 0.76 | 1.30 | (0.53 | ) | — | — | (0.53 | ) | 10.20 | |||||||||||||||||||||||||
20072 | 9.54 | 0.39 | (0.16 | ) | 0.23 | (0.34 | ) | — | — | (0.34 | ) | 9.43 | ||||||||||||||||||||||||
20063 | 10.12 | 0.38 | (0.55 | ) | (0.17 | ) | (0.40 | ) | (0.01 | ) | — | (0.41 | ) | 9.54 | ||||||||||||||||||||||
20054 | 10.00 | 0.51 | (0.02 | ) | 0.49 | (0.37 | ) | — | — | (0.37 | ) | 10.12 | ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.53 | $ | 0.18 | $ | 0.75 | $ | 0.93 | $ | (0.22 | ) | $ | — | $ | — | $ | (0.22 | ) | $ | 10.24 | ||||||||||||||||
20092 | 10.18 | 0.11 | (0.43 | ) | (0.32 | ) | (0.21 | ) | — | (0.12 | ) | (0.33 | ) | 9.53 | ||||||||||||||||||||||
20082 | 9.41 | 0.48 | 0.75 | 1.23 | (0.46 | ) | — | — | (0.46 | ) | 10.18 | |||||||||||||||||||||||||
20072 | 9.53 | 0.33 | (0.18 | ) | 0.15 | (0.27 | ) | — | — | (0.27 | ) | 9.41 | ||||||||||||||||||||||||
20063 | 10.11 | 0.31 | (0.53 | ) | (0.22 | ) | (0.35 | ) | (0.01 | ) | — | (0.36 | ) | 9.53 | ||||||||||||||||||||||
20054 | 10.00 | 0.40 | 0.02 | 0.42 | (0.31 | ) | — | — | (0.31 | ) | 10.11 | |||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.58 | $ | 0.26 | $ | 0.72 | $ | 0.98 | $ | (0.25 | ) | $ | — | $ | — | $ | (0.25 | ) | $ | 10.31 | ||||||||||||||||
20092 | 10.20 | 0.13 | (0.39 | ) | (0.26 | ) | (0.24 | ) | — | (0.12 | ) | (0.36 | ) | 9.58 | ||||||||||||||||||||||
20082 | 9.43 | 0.52 | 0.75 | 1.27 | (0.50 | ) | — | — | (0.50 | ) | 10.20 | |||||||||||||||||||||||||
20072 | 9.55 | 0.33 | (0.13 | ) | 0.20 | (0.32 | ) | — | — | (0.32 | ) | 9.43 | ||||||||||||||||||||||||
20063 | 10.13 | 0.38 | (0.56 | ) | (0.18 | ) | (0.39 | ) | (0.01 | ) | — | (0.40 | ) | 9.55 | ||||||||||||||||||||||
20054 | 10.00 | 0.43 | 0.05 | 0.48 | (0.35 | ) | — | — | (0.35 | ) | 10.13 | |||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.59 | $ | 0.33 | $ | 0.71 | $ | 1.04 | $ | (0.29 | ) | $ | — | $ | — | $ | (0.29 | ) | $ | 10.34 | ||||||||||||||||
20092 | 10.20 | 0.23 | (0.45 | ) | (0.22 | ) | (0.27 | ) | — | (0.12 | ) | (0.39 | ) | 9.59 | ||||||||||||||||||||||
20082 | 9.43 | 0.56 | 0.76 | 1.32 | (0.55 | ) | — | — | (0.55 | ) | 10.20 | |||||||||||||||||||||||||
20072 | 9.55 | 0.40 | (0.16 | ) | 0.24 | (0.36 | ) | — | — | (0.36 | ) | 9.43 | ||||||||||||||||||||||||
20063 | 10.13 | 0.42 | (0.57 | ) | (0.15 | ) | (0.42 | ) | (0.01 | ) | — | (0.43 | ) | 9.55 | ||||||||||||||||||||||
20054 | 10.00 | 0.51 | 0.01 | 0.52 | (0.39 | ) | — | — | (0.39 | ) | 10.13 |
1 | Per share data calculated using average shares outstanding method. |
2 | For the period July 1 through June 30 in the fiscal year indicated. |
3 | For the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
4 | For the period October 1 through September 30 in the fiscal year indicated. |
5 | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
The accompanying notes are an integral part of the financial statements.
80 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return5 | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||
10.62 | % | $ | 7,894 | 0.84 | % | 2.77 | % | 1.15 | % | 2.46 | % | 72 | % | |||||||||||||
(2.18 | ) | 5,439 | 0.85 | 1.52 | 1.10 | 1.27 | 24 | |||||||||||||||||||
14.01 | 3,294 | 0.85 | 5.40 | 1.08 | 5.17 | 71 | ||||||||||||||||||||
2.41 | 2,712 | 0.85 | 4.09 | 1.06 | 3.88 | 90 | ||||||||||||||||||||
(1.69 | ) | 5,042 | 0.85 | 5.20 | 1.08 | 4.97 | 85 | |||||||||||||||||||
4.93 | 6,917 | 0.85 | 5.04 | 1.09 | 4.80 | 23 | ||||||||||||||||||||
9.76 | % | $ | 6,673 | 1.60 | % | 1.78 | % | 1.91 | % | 1.47 | % | 72 | % | |||||||||||||
(3.03 | ) | 1,406 | 1.59 | 1.19 | 1.84 | 0.94 | 24 | |||||||||||||||||||
13.20 | 365 | 1.60 | 4.82 | 1.83 | 4.59 | 71 | ||||||||||||||||||||
1.53 | 348 | 1.60 | 3.44 | 1.81 | 3.23 | 90 | ||||||||||||||||||||
(2.26 | ) | 552 | 1.60 | 4.29 | 1.83 | 4.06 | 85 | |||||||||||||||||||
4.18 | 855 | 1.60 | 3.98 | 1.84 | 3.74 | 23 | ||||||||||||||||||||
10.32 | % | $ | 1,332 | 1.09 | % | 2.64 | % | 1.40 | % | 2.33 | % | 72 | % | |||||||||||||
(2.43 | ) | 1,262 | 1.10 | 1.34 | 1.35 | 1.09 | 24 | |||||||||||||||||||
13.73 | 1,175 | 1.10 | 5.21 | 1.33 | 4.98 | 71 | ||||||||||||||||||||
2.09 | 822 | 1.10 | 3.45 | 1.31 | 3.24 | 90 | ||||||||||||||||||||
(1.80 | ) | 1 | 1.10 | 5.17 | 1.48 | 4.79 | 85 | |||||||||||||||||||
4.81 | 1 | 1.10 | 4.22 | 1.49 | 3.83 | 23 | ||||||||||||||||||||
10.92 | % | $ | 156,983 | 0.59 | % | 3.27 | % | 0.90 | % | 2.96 | % | 72 | % | |||||||||||||
(2.03 | ) | 167,501 | 0.60 | 2.48 | 0.85 | 2.23 | 24 | |||||||||||||||||||
14.29 | 278,749 | 0.60 | 5.64 | 0.83 | 5.41 | 71 | ||||||||||||||||||||
2.56 | 273,312 | 0.60 | 4.21 | 0.81 | 4.00 | 90 | ||||||||||||||||||||
(1.50 | ) | 317,977 | 0.60 | 5.73 | 0.83 | 5.50 | 85 | |||||||||||||||||||
5.24 | 269,412 | 0.60 | 5.05 | 0.84 | 4.81 | 23 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 81 |
Financial Highlights For a share outstanding throughout the indicated periods.
Net Asset Beginning of Period | Net Investment Income | Realized and Unrealized Gains (Losses) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Distributions from Net Realized Gains | Distributions from Return of Capital | Total Distributions | Net Asset Value End of Period | ||||||||||||||||||||||||||||
Intermediate Government Bond Fund1 | ||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.67 | $ | 0.20 | $ | 0.27 | $ | 0.47 | $ | (0.20 | ) | $ | (0.17 | ) | $ | — | 6 | $ | (0.37 | ) | $ | 8.77 | ||||||||||||||
20092 | 8.42 | 0.19 | 0.25 | 0.44 | (0.19 | ) | — | — | (0.19 | ) | 8.67 | |||||||||||||||||||||||||
20082 | 8.00 | 0.28 | 0.43 | 0.71 | (0.29 | ) | — | — | (0.29 | ) | 8.42 | |||||||||||||||||||||||||
20072 | 7.99 | 0.31 | 0.06 | 0.37 | (0.33 | ) | — | (0.03 | ) | (0.36 | ) | 8.00 | ||||||||||||||||||||||||
20063 | 8.26 | 0.22 | (0.22 | ) | — | (0.22 | ) | (0.05 | ) | — | (0.27 | ) | 7.99 | |||||||||||||||||||||||
20054 | 8.82 | 0.27 | (0.15 | ) | 0.12 | (0.28 | ) | (0.40 | ) | — | (0.68 | ) | 8.26 | |||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20105 | $ | 8.76 | $ | 0.09 | $ | 0.17 | $ | 0.26 | $ | (0.08 | ) | $ | (0.17 | ) | $ | — | 6 | $ | (0.25 | ) | $ | 8.77 | ||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||
20105 | $ | 8.76 | $ | 0.09 | $ | 0.20 | $ | 0.29 | $ | (0.11 | ) | $ | (0.17 | ) | $ | — | 6 | $ | (0.28 | ) | $ | 8.77 | ||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.67 | $ | 0.21 | $ | 0.27 | $ | 0.48 | $ | (0.21 | ) | $ | (0.17 | ) | $ | — | 6 | $ | (0.38 | ) | $ | 8.77 | ||||||||||||||
20092 | 8.42 | 0.21 | 0.25 | 0.46 | (0.21 | ) | — | — | (0.21 | ) | 8.67 | |||||||||||||||||||||||||
20082 | 8.00 | 0.30 | 0.42 | 0.72 | (0.30 | ) | — | — | (0.30 | ) | 8.42 | |||||||||||||||||||||||||
20072 | 7.99 | 0.32 | 0.06 | 0.38 | (0.34 | ) | — | (0.03 | ) | (0.37 | ) | 8.00 | ||||||||||||||||||||||||
20063 | 8.25 | 0.22 | (0.20 | ) | 0.02 | (0.23 | ) | (0.05 | ) | — | (0.28 | ) | 7.99 | |||||||||||||||||||||||
20054 | 8.82 | 0.28 | (0.16 | ) | 0.12 | (0.29 | ) | (0.40 | ) | — | (0.69 | ) | 8.25 | |||||||||||||||||||||||
Intermediate Term Bond Fund1 | ||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.47 | $ | 0.42 | $ | 0.86 | $ | 1.28 | $ | (0.42 | ) | $ | — | $ | — | $ | (0.42 | ) | $ | 10.33 | ||||||||||||||||
20092 | 9.90 | 0.48 | (0.40 | ) | 0.08 | (0.51 | ) | — | — | (0.51 | ) | 9.47 | ||||||||||||||||||||||||
20082 | 9.73 | 0.44 | 0.14 | 0.58 | (0.41 | ) | — | — | (0.41 | ) | 9.90 | |||||||||||||||||||||||||
20072 | 9.68 | 0.41 | 0.05 | 0.46 | (0.41 | ) | — | — | (0.41 | ) | 9.73 | |||||||||||||||||||||||||
20063 | 9.99 | 0.29 | (0.27 | ) | 0.02 | (0.30 | ) | (0.03 | ) | — | (0.33 | ) | 9.68 | |||||||||||||||||||||||
20054 | 10.25 | 0.34 | (0.17 | ) | 0.17 | (0.33 | ) | (0.10 | ) | — | (0.43 | ) | 9.99 | |||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.43 | $ | 0.43 | $ | 0.86 | $ | 1.29 | $ | (0.43 | ) | $ | — | $ | — | $ | (0.43 | ) | $ | 10.29 | ||||||||||||||||
20092 | 9.87 | 0.49 | (0.40 | ) | 0.09 | (0.53 | ) | — | — | (0.53 | ) | 9.43 | ||||||||||||||||||||||||
20082 | 9.70 | 0.45 | 0.15 | 0.60 | (0.43 | ) | — | — | (0.43 | ) | 9.87 | |||||||||||||||||||||||||
20072 | 9.65 | 0.42 | 0.06 | 0.48 | (0.43 | ) | — | — | (0.43 | ) | 9.70 | |||||||||||||||||||||||||
20063 | 9.96 | 0.30 | (0.27 | ) | 0.03 | (0.31 | ) | (0.03 | ) | — | (0.34 | ) | 9.65 | |||||||||||||||||||||||
20054 | 10.22 | 0.36 | (0.17 | ) | 0.19 | (0.35 | ) | (0.10 | ) | — | (0.45 | ) | 9.96 |
1 | Per share data calculated using average shares outstanding method. |
2 | For the period July 1 to June 30 in the fiscal year indicated. |
3 | For the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
4 | For the period October 1 to September 30 in the fiscal year indicated. |
5 | Commenced operations on October 28, 2009. All ratios for the period October 28, 2009 to June 30, 2010 have been annualized, except total return and portfolio turnover. |
6 | Includes a tax return of capital of less than $0.01. |
7 | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
The accompanying notes are an integral part of the financial statements.
82 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return7 | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Net Assets (Excluding | Ratio of Net Income Net Assets | Portfolio Turnover Rate | ||||||||||||||||||||
5.50 | % | $ | 19,003 | 0.75 | % | 2.33 | % | 1.19 | % | 1.89 | % | 105 | % | |||||||||||||
5.30 | 10,496 | 0.75 | 2.22 | 1.15 | 1.82 | 133 | ||||||||||||||||||||
8.90 | 6,504 | 0.75 | 3.32 | 1.33 | 2.74 | 118 | ||||||||||||||||||||
4.68 | 1,619 | 0.75 | 3.80 | 1.46 | 3.09 | 84 | ||||||||||||||||||||
0.06 | 1,689 | 0.75 | 3.56 | 1.26 | 3.05 | 70 | ||||||||||||||||||||
1.40 | 1,970 | 0.75 | 3.21 | 1.09 | 2.87 | 161 | ||||||||||||||||||||
3.00 | % | $ | 1,940 | 1.60 | % | 1.50 | % | 1.94 | % | 1.16 | % | 105 | % | |||||||||||||
3.34 | % | $ | 652 | 1.10 | % | 1.78 | % | 1.44 | % | 1.44 | % | 105 | % | |||||||||||||
5.66 | % | $ | 152,088 | 0.60 | % | 2.39 | % | 0.94 | % | 2.05 | % | 105 | % | |||||||||||||
5.46 | 101,253 | 0.60 | 2.41 | 0.90 | 2.11 | 133 | ||||||||||||||||||||
9.07 | 63,784 | 0.60 | 3.60 | 1.08 | 3.12 | 118 | ||||||||||||||||||||
4.84 | 37,705 | 0.60 | 3.94 | 1.21 | 3.33 | 84 | ||||||||||||||||||||
0.30 | 42,781 | 0.60 | 3.70 | 1.01 | 3.29 | 70 | ||||||||||||||||||||
1.43 | 69,349 | 0.60 | 3.34 | 0.84 | 3.10 | 161 | ||||||||||||||||||||
13.64 | % | $ | 26,341 | 0.85 | % | 4.12 | % | 1.01 | % | 3.96 | % | 58 | % | |||||||||||||
1.21 | 23,905 | 0.85 | 5.25 | 1.01 | 5.09 | 41 | ||||||||||||||||||||
6.02 | 28,364 | 0.85 | 4.38 | 1.01 | 4.22 | 102 | ||||||||||||||||||||
4.80 | 30,655 | 0.85 | 4.07 | 1.01 | 3.91 | 110 | ||||||||||||||||||||
0.23 | 38,296 | 0.75 | 3.88 | 1.03 | 3.60 | 113 | ||||||||||||||||||||
1.69 | 48,426 | 0.75 | 3.39 | 1.05 | 3.09 | 118 | ||||||||||||||||||||
13.87 | % | $ | 734,924 | 0.70 | % | 4.28 | % | 0.76 | % | 4.22 | % | 58 | % | |||||||||||||
1.26 | 724,531 | 0.70 | 5.39 | 0.76 | 5.33 | 41 | ||||||||||||||||||||
6.20 | 766,932 | 0.70 | 4.53 | 0.76 | 4.47 | 102 | ||||||||||||||||||||
4.98 | 752,984 | 0.70 | 4.22 | 0.76 | 4.16 | 110 | ||||||||||||||||||||
0.34 | 899,175 | 0.60 | 4.03 | 0.78 | 3.85 | 113 | ||||||||||||||||||||
1.85 | 1,074,624 | 0.60 | 3.55 | 0.80 | 3.35 | 118 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 83 |
Financial Highlights For a share outstanding throughout the indicated periods.
Net Asset Value Beginning of Period | Net Investment Income | Realized and Unrealized Gains (Losses) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Distributions from Net Realized Gains | Distribution from Return of Capital | Total Distributions | Net Asset Value End of Period | ||||||||||||||||||||||||||||
Short Term Bond Fund1 |
| |||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.66 | $ | 0.31 | $ | 0.34 | $ | 0.65 | $ | (0.33 | ) | $ | — | $ | — | $ | (0.33 | ) | $ | 9.98 | ||||||||||||||||
20092 | 9.89 | 0.46 | (0.26 | ) | 0.20 | (0.43 | ) | — | — | (0.43 | ) | 9.66 | ||||||||||||||||||||||||
20082 | 9.90 | 0.45 | (0.03 | ) | 0.42 | (0.43 | ) | — | — | (0.43 | ) | 9.89 | ||||||||||||||||||||||||
20072 | 9.83 | 0.36 | 0.09 | 0.45 | (0.38 | ) | — | — | (0.38 | ) | 9.90 | |||||||||||||||||||||||||
20063 | 9.93 | 0.23 | (0.06 | ) | 0.17 | (0.27 | ) | — | — | (0.27 | ) | 9.83 | ||||||||||||||||||||||||
20054 | 10.11 | 0.27 | (0.16 | ) | 0.11 | (0.29 | ) | — | — | 6 | (0.29 | ) | 9.93 | |||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20105 | $ | 9.95 | $ | 0.13 | $ | 0.06 | $ | 0.19 | $ | (0.14 | ) | $ | — | $ | — | $ | (0.14 | ) | $ | 10.00 | ||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.67 | $ | 0.32 | $ | 0.34 | $ | 0.66 | $ | (0.34 | ) | $ | — | $ | — | $ | (0.34 | ) | $ | 9.99 | ||||||||||||||||
20092 | 9.89 | 0.48 | (0.25 | ) | 0.23 | (0.45 | ) | — | — | (0.45 | ) | 9.67 | ||||||||||||||||||||||||
20082 | 9.91 | 0.46 | (0.03 | ) | 0.43 | (0.45 | ) | — | — | (0.45 | ) | 9.89 | ||||||||||||||||||||||||
20072 | 9.83 | 0.37 | 0.10 | 0.47 | (0.39 | ) | — | — | (0.39 | ) | 9.91 | |||||||||||||||||||||||||
20063 | 9.93 | 0.24 | (0.06 | ) | 0.18 | (0.28 | ) | — | — | (0.28 | ) | 9.83 | ||||||||||||||||||||||||
20054 | 10.11 | 0.28 | (0.16 | ) | 0.12 | (0.29 | ) | — | (0.01 | ) | (0.30 | ) | 9.93 | |||||||||||||||||||||||
Total Return Bond Fund1 |
| |||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.01 | $ | 0.52 | $ | 1.28 | $ | 1.80 | $ | (0.54 | ) | $ | — | $ | — | $ | (0.54 | ) | $ | 10.27 | ||||||||||||||||
20092 | 9.90 | 0.64 | (0.74 | ) | (0.10 | ) | (0.63 | ) | (0.16 | ) | — | (0.79 | ) | 9.01 | ||||||||||||||||||||||
20082 | 9.83 | 0.49 | 0.05 | 0.54 | (0.47 | ) | — | — | (0.47 | ) | 9.90 | |||||||||||||||||||||||||
20072 | 9.86 | 0.45 | (0.02 | ) | 0.43 | (0.46 | ) | — | — | (0.46 | ) | 9.83 | ||||||||||||||||||||||||
20063 | 10.18 | 0.31 | (0.33 | ) | (0.02 | ) | (0.30 | ) | — | — | (0.30 | ) | 9.86 | |||||||||||||||||||||||
20054 | 10.25 | 0.43 | (0.07 | ) | 0.36 | (0.43 | ) | — | — | (0.43 | ) | 10.18 | ||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.97 | $ | 0.45 | $ | 1.26 | $ | 1.71 | $ | (0.46 | ) | $ | — | $ | — | $ | (0.46 | ) | $ | 10.22 | ||||||||||||||||
20092 | 9.86 | 0.58 | (0.74 | ) | (0.16 | ) | (0.57 | ) | (0.16 | ) | — | (0.73 | ) | 8.97 | ||||||||||||||||||||||
20082 | 9.80 | 0.41 | 0.05 | 0.46 | (0.40 | ) | — | — | (0.40 | ) | 9.86 | |||||||||||||||||||||||||
20072 | 9.82 | 0.38 | (0.02 | ) | 0.36 | (0.38 | ) | — | — | (0.38 | ) | 9.80 | ||||||||||||||||||||||||
20063 | 10.14 | 0.25 | (0.32 | ) | (0.07 | ) | (0.25 | ) | — | — | (0.25 | ) | 9.82 | |||||||||||||||||||||||
20054 | 10.21 | 0.35 | (0.07 | ) | 0.28 | (0.35 | ) | — | — | (0.35 | ) | 10.14 | ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.96 | $ | 0.43 | $ | 1.27 | $ | 1.70 | $ | (0.46 | ) | $ | — | $ | — | $ | (0.46 | ) | $ | 10.20 | ||||||||||||||||
20092 | 9.84 | 0.58 | (0.73 | ) | (0.15 | ) | (0.57 | ) | (0.16 | ) | — | (0.73 | ) | 8.96 | ||||||||||||||||||||||
20082 | 9.78 | 0.42 | 0.04 | 0.46 | (0.40 | ) | — | — | (0.40 | ) | 9.84 | |||||||||||||||||||||||||
20072 | 9.80 | 0.37 | (0.01 | ) | 0.36 | (0.38 | ) | — | — | (0.38 | ) | 9.78 | ||||||||||||||||||||||||
20063 | 10.12 | 0.25 | (0.32 | ) | (0.07 | ) | (0.25 | ) | — | — | (0.25 | ) | 9.80 | |||||||||||||||||||||||
20054 | 10.20 | 0.35 | (0.07 | ) | 0.28 | (0.36 | ) | — | — | (0.36 | ) | 10.12 | ||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.07 | $ | 0.42 | $ | 1.32 | $ | 1.74 | $ | (0.50 | ) | $ | — | $ | — | $ | (0.50 | ) | $ | 10.31 | ||||||||||||||||
20092 | 9.95 | 0.62 | (0.73 | ) | (0.11 | ) | (0.61 | ) | (0.16 | ) | — | (0.77 | ) | 9.07 | ||||||||||||||||||||||
20082 | 9.88 | 0.47 | 0.05 | 0.52 | (0.45 | ) | — | — | (0.45 | ) | 9.95 | |||||||||||||||||||||||||
20072 | 9.90 | 0.43 | (0.02 | ) | 0.41 | (0.43 | ) | — | — | (0.43 | ) | 9.88 | ||||||||||||||||||||||||
20063 | 10.23 | 0.30 | (0.34 | ) | (0.04 | ) | (0.29 | ) | — | — | (0.29 | ) | 9.90 | |||||||||||||||||||||||
20054 | 10.29 | 0.41 | (0.07 | ) | 0.34 | (0.40 | ) | — | — | (0.40 | ) | 10.23 | ||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.01 | $ | 0.55 | $ | 1.25 | $ | 1.80 | $ | (0.55 | ) | $ | — | $ | — | $ | (0.55 | ) | $ | 10.26 | ||||||||||||||||
20092 | 9.89 | 0.66 | (0.73 | ) | (0.07 | ) | (0.65 | ) | (0.16 | ) | — | (0.81 | ) | 9.01 | ||||||||||||||||||||||
20082 | 9.83 | 0.52 | 0.04 | 0.56 | (0.50 | ) | — | — | (0.50 | ) | 9.89 | |||||||||||||||||||||||||
20072 | 9.85 | 0.47 | (0.01 | ) | 0.46 | (0.48 | ) | — | — | (0.48 | ) | 9.83 | ||||||||||||||||||||||||
20063 | 10.17 | 0.33 | (0.33 | ) | — | (0.32 | ) | — | — | (0.32 | ) | 9.85 | ||||||||||||||||||||||||
20054 | 10.24 | 0.46 | (0.07 | ) | 0.39 | (0.46 | ) | — | — | (0.46 | ) | 10.17 |
1 | Per share data calculated using average shares outstanding method. |
2 | For the period July 1 to June 30 in the fiscal year indicated. |
3 | For the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
4 | For the period October 1 to September 30 in the fiscal year indicated. |
5 | Commenced operations on October 28, 2009. All ratios for the period October 28, 2009 to June 30, 2010 have been annualized, except total return and portfolio turnover. |
6 | Includes a tax return of capital of less than $0.01. |
7 | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
The accompanying notes are an integral part of the financial statements.
84 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Total Return7 | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||
6.77 | % | $ | 87,631 | 0.75 | % | 3.17 | % | 1.04 | % | 2.88 | % | 44 | % | |||||||||||||
2.22 | 65,704 | 0.74 | 4.87 | 1.06 | 4.55 | 54 | ||||||||||||||||||||
4.30 | 59,933 | 0.74 | 4.48 | 1.05 | 4.17 | 55 | ||||||||||||||||||||
4.60 | 66,722 | 0.75 | 3.61 | 1.04 | 3.32 | 47 | ||||||||||||||||||||
1.75 | 78,771 | 0.75 | 3.11 | 1.04 | 2.82 | 60 | ||||||||||||||||||||
1.08 | 97,863 | 0.75 | 2.68 | 1.05 | 2.38 | 64 | ||||||||||||||||||||
1.90 | % | $ | 3,111 | 1.60 | % | 1.95 | % | 1.79 | % | 1.76 | % | 44 | % | |||||||||||||
6.92 | % | $ | 629,151 | 0.60 | % | 3.26 | % | 0.79 | % | 3.07 | % | 44 | % | |||||||||||||
2.48 | 315,024 | 0.59 | 5.02 | 0.81 | 4.80 | 54 | ||||||||||||||||||||
4.35 | 257,403 | 0.59 | 4.62 | 0.80 | 4.41 | 55 | ||||||||||||||||||||
4.86 | 311,131 | 0.60 | 3.74 | 0.79 | 3.55 | 47 | ||||||||||||||||||||
1.87 | 454,665 | 0.60 | 3.26 | 0.79 | 3.07 | 60 | ||||||||||||||||||||
1.23 | 625,392 | 0.60 | 2.83 | 0.80 | 2.63 | 64 | ||||||||||||||||||||
20.21 | % | $ | 28,165 | 0.92 | % | 5.19 | % | 1.13 | % | 4.98 | % | 96 | % | |||||||||||||
0.16 | 13,948 | 1.00 | 7.58 | 1.13 | 7.45 | 147 | ||||||||||||||||||||
5.51 | 15,567 | 0.99 | 4.87 | 1.11 | 4.75 | 124 | ||||||||||||||||||||
4.36 | 13,198 | 1.00 | 4.48 | 1.13 | 4.35 | 180 | ||||||||||||||||||||
(0.17 | ) | 15,522 | 1.00 | 4.14 | 1.17 | 3.97 | 166 | |||||||||||||||||||
3.57 | 19,113 | 1.00 | 4.20 | 1.25 | 3.95 | 285 | ||||||||||||||||||||
19.22 | % | $ | 1,413 | 1.74 | % | 4.48 | % | 1.87 | % | 4.35 | % | 96 | % | |||||||||||||
(0.58 | ) | 1,719 | 1.75 | 6.84 | 1.88 | 6.71 | 147 | |||||||||||||||||||
4.65 | 2,384 | 1.74 | 4.13 | 1.86 | 4.01 | 124 | ||||||||||||||||||||
3.69 | 2,272 | 1.75 | 3.74 | 1.88 | 3.61 | 180 | ||||||||||||||||||||
(0.74 | ) | 3,657 | 1.75 | 3.40 | 1.92 | 3.23 | 166 | |||||||||||||||||||
2.81 | 4,395 | 1.75 | 3.45 | 2.00 | 3.20 | 285 | ||||||||||||||||||||
19.13 | % | $ | 6,748 | 1.75 | % | 4.34 | % | 1.88 | % | 4.21 | % | 96 | % | |||||||||||||
(0.48 | ) | 2,778 | 1.75 | 6.77 | 1.88 | 6.64 | 147 | |||||||||||||||||||
4.66 | 3,673 | 1.74 | 4.22 | 1.86 | 4.10 | 124 | ||||||||||||||||||||
3.70 | 1,792 | 1.75 | 3.73 | 1.88 | 3.60 | 180 | ||||||||||||||||||||
(0.74 | ) | 2,501 | 1.75 | 3.40 | 1.92 | 3.23 | 166 | |||||||||||||||||||
2.71 | 2,858 | 1.75 | 3.46 | 2.00 | 3.21 | 285 | ||||||||||||||||||||
19.47 | % | $ | 601 | 1.24 | % | 4.19 | % | 1.37 | % | 4.06 | % | 96 | % | |||||||||||||
0.02 | 681 | 1.25 | 7.39 | 1.38 | 7.26 | 147 | ||||||||||||||||||||
5.22 | 293 | 1.24 | 4.66 | 1.36 | 4.54 | 124 | ||||||||||||||||||||
4.20 | 219 | 1.25 | 4.22 | 1.44 | 4.03 | 180 | ||||||||||||||||||||
(0.44 | ) | 14 | 1.25 | 4.05 | 1.57 | 3.73 | 166 | |||||||||||||||||||
3.40 | 3 | 1.25 | 3.98 | 1.65 | 3.58 | 285 | ||||||||||||||||||||
20.31 | % | $ | 655,301 | 0.74 | % | 5.44 | % | 0.87 | % | 5.31 | % | 96 | % | |||||||||||||
0.52 | 633,108 | 0.75 | 7.77 | 0.88 | 7.64 | 147 | ||||||||||||||||||||
5.67 | 1,069,211 | 0.74 | 5.15 | 0.86 | 5.03 | 124 | ||||||||||||||||||||
4.73 | 851,513 | 0.75 | 4.71 | 0.88 | 4.58 | 180 | ||||||||||||||||||||
0.02 | 378,338 | 0.75 | 4.43 | 0.92 | 4.26 | 166 | ||||||||||||||||||||
3.83 | 278,777 | 0.75 | 4.43 | 1.00 | 4.18 | 285 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 85 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
1 > Organization
Core Bond Fund, High Income Bond Fund, Inflation Protected Securities Fund, Intermediate Government Bond Fund, Intermediate Term Bond Fund, Short Term Bond Fund, and Total Return Bond Fund (each a “fund” and collectively, the “funds”) are mutual funds offered by First American Investment Funds, Inc. (“FAIF”), which is a member of the First American Family of Funds. As of June 30, 2010, FAIF offered 38 funds, including the funds listed above. Effective at the close of business on January 29, 2010, U.S. Government Mortgage Fund merged with Intermediate Government Bond Fund. Intermediate Government Bond Fund is the accounting survivor. FAIF is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. FAIF’s articles of incorporation permit the funds’ board of directors to create additional funds in the future. Each fund is a diversified open-end management investment company.
The funds may offer Class A, Class C, Class R, and Class Y shares. Class A shares of Intermediate Government Bond Fund, Intermediate Term Bond Fund, and Short Term Bond Fund are sold with a front-end sales charge of 2.25%. Class A shares of Core Bond Fund, High Income Bond Fund, Inflation Protected Securities Fund, and Total Return Bond Fund are sold with a front-end sales charge of 4.25%. Class C shares may be subject to a contingent deferred sales charge for 12 months, and will not convert to Class A shares. Class R shares have no sales charge and are offered only through certain tax-deferred retirement plans. Class Y shares have no sales charge and are offered only to qualifying institutional investors and certain other qualifying accounts. Class C and Class R shares are not currently offered by Intermediate Term Bond Fund. Class R shares are not currently offered by Short Term Bond Fund. Prior to the close of business on June 30, 2008, Core Bond Fund, High Income Bond Fund, and Total Return Bond Fund offered Class B shares. Subsequent to that date, no new or additional investments are allowed in Class B shares, except through permitted exchanges and any reinvested dividends. Class B shares are subject to a contingent deferred sales charge for six years and automatically convert to Class A shares after eight years.
The funds’ prospectus provides descriptions of each fund’s investment objective, principal investment strategies, and principal risks. All classes of shares in a fund have identical voting, dividend, liquidation, and other rights, and the same terms and conditions, except that certain fees, including distribution and shareholder servicing fees, may differ among classes. Each class has exclusive voting rights on any matters relating to that class’s servicing or distribution arrangements.
2 > Summary of Significant Accounting Policies
The significant accounting policies followed by the funds are as follows:
SECURITY VALUATIONS – Security valuations for the funds’ investments are furnished by an independent pricing service that has been approved by the funds’ board of directors. Investments in equity securities that are traded on a national securities exchange (or reported on the Nasdaq national market system) are stated at the last quoted sales price if readily available for such securities on each business day. For securities traded on the Nasdaq national market system, the funds utilize the Nasdaq Official Closing Price which compares the last trade to the bid/ask range of a security. If the last trade falls within the bid/ask range, then that price will be the closing price. If the last trade is outside the bid/ask range, and falls above the ask, then the ask price will be the closing price. If the last trade is below the bid, then the bid will be the closing price. Other equity securities traded in the over-the-counter market and listed equity securities for which no sale was reported on that date are stated at the last quoted bid price. Investments in open-end funds are valued at their respective net asset values on the valuation date. Investments in closed-end funds are valued at their reported closing prices on the national securities exchange on which they trade.
Debt obligations exceeding 60 days to maturity are valued by an independent pricing service. The pricing service may employ methodologies that utilize actual market transactions, broker-dealer supplied valuations, or other formula-driven valuation techniques. These techniques generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings, and general market conditions. Securities for which prices are not available from an independent pricing service, but where an active market exists, are valued using market quotations obtained from one or more dealers that make markets in the securities or from a widely used quotation system. Debt obligations with 60 days or less remaining until maturity will be valued at their amortized cost, which approximates fair value. Foreign securities are valued at the closing prices on the principal exchanges on which they trade. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. Exchange rates are provided daily by recognized independent pricing agents.
The following investment vehicles, when held by a fund, are priced as follows: Exchange listed futures and options on futures are priced at their last sale price on the exchange on which they are principally traded, as determined by FAF Advisors, Inc. (“FAF Advisors”), on the day the valuation is made. If there were no sales on that day, futures and options on futures will be valued at the last reported bid price. Options on securities, indices, and currencies traded
86 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
on Nasdaq or listed on a stock exchange, whether domestic or foreign, are valued at the last sale price on Nasdaq or on any exchange on the day the valuation is made. If there were no sales on that day, the options will be valued at the last sale price on the previous valuation date. Last sale prices are obtained from an independent pricing service. Forward contracts (other than foreign currency forward contracts), swaps, and over-the-counter options on securities, indices, and currencies are valued at the quotations received from an independent pricing service, if available. Foreign currency forward contracts are valued at the current day’s interpolated foreign exchange rate, as calculated using the current day’s exchange rate, and the 30-, 60-, 90-, 180-, and 360-day forward rates provided by an independent pricing service.
When market quotations are not readily available, securities are internally valued at fair value as determined in good faith by procedures established and approved by the funds’ board of directors. Some of the factors which may be considered in determining fair value are fundamental analytical data relating to the investment; the nature and duration of any restrictions on disposition; trading in similar securities of the same issuer or comparable companies; information from broker-dealers; and an evaluation of the forces that influence the market in which the securities are purchased and sold. If events occur that materially affect the value of securities (including non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities will be valued at fair value. Price movements in futures contracts and ADRs (American Depositary Receipts), and various other indices, may be
reviewed in the course of making a good faith determination of a security’s fair value. The use of fair value pricing by a fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without fair value pricing. As of June 30, 2010, High Income Bond Fund held internally fair valued securities with a total fair value of $323, or 0.1%, of total net assets.
Generally accepted accounting principles (“GAAP”) require disclosures regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or technique. These principles establish a three-tier fair value hierarchy for inputs used in measuring fair value. Fair value inputs are summarized in the three broad levels listed below:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Other significant observable inputs (including quoted prices for similar securities, with similar interest rates, prepayment speeds, credit risk, etc. and foreign securities for which an independent pricing service may be employed for purposes of fair market valuation).
Level 3 – Significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments). Generally, the types of securities included in Level 3 of a fund are securities for which there is limited or no observable fair value inputs available, and as such the fair value is determined through independent broker quotations or management’s fair value procedures established by the funds’ board of directors.
The valuation levels are not necessarily an indication of the risk associated with investing in these investments.
As of June 30, 2010, each fund’s investments were classified as follows:
Fund | Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||
Core Bond Fund | ||||||||||||||||
Corporate Bonds | $ | — | $ | 553,502 | $ | 10,014 | $ | 563,516 | ||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 288,770 | — | 288,770 | ||||||||||||
Asset-Backed Securities | — | 227,161 | — | 227,161 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | — | 71,921 | — | 71,921 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 37,817 | 18,461 | 56,278 | ||||||||||||
U.S. Government & Agency Securities | — | 53,598 | — | 53,598 | ||||||||||||
Preferred Stock | 74 | — | — | 74 | ||||||||||||
Short-Term Investments | 25,359 | 4,400 | — | 29,759 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 81,712 | — | — | 81,712 | ||||||||||||
Total Investments | $ | 107,145 | $ | 1,237,169 | $ | 28,475 | $ | 1,372,789 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 87 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
Fund | Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||
High Income Bond Fund | ||||||||||||||||
High Yield Corporate Bonds | $ | — | $ | 328,599 | $ | 7,215 | $ | 335,814 | ||||||||
Preferred Stocks | 12,403 | — | 879 | 13,282 | ||||||||||||
Investment Grade Corporate Bonds | — | 9,270 | — | 9,270 | ||||||||||||
Exchange-Traded Funds | 6,028 | — | — | 6,028 | ||||||||||||
Convertible Securities | 1,950 | 3,864 | — | 5,814 | ||||||||||||
Closed-End Funds | 4,438 | — | — | 4,438 | ||||||||||||
Common Stocks | 2,333 | — | 22 | 2,355 | ||||||||||||
Asset-Backed Securities | — | 5 | 323 | 328 | ||||||||||||
Short-Term Investments | 10,100 | 140 | — | 10,240 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 77,333 | — | — | 77,333 | ||||||||||||
Total Investments | $ | 114,585 | $ | 341,878 | $ | 8,439 | $ | 464,902 | ||||||||
Inflation Protected Securities Fund | ||||||||||||||||
U.S. Government & Agency Securities | $ | — | $ | 151,592 | $ | — | $ | 151,592 | ||||||||
Corporate Bonds | — | 10,010 | — | 10,010 | ||||||||||||
Asset-Backed Securities | — | 5,534 | — | 5,534 | ||||||||||||
Municipal Bond | — | 760 | — | 760 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Security | — | — | 703 | 703 | ||||||||||||
Preferred Stocks | 212 | — | 180 | 392 | ||||||||||||
Exchange-Traded Fund | 212 | — | — | 212 | ||||||||||||
Convertible Security | 108 | — | — | 108 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Security | — | 80 | — | 80 | ||||||||||||
Short-Term Investments | 3,533 | 189 | — | 3,722 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 7,192 | — | — | 7,192 | ||||||||||||
Total Investments | $ | 11,257 | $ | 168,165 | $ | 883 | $ | 180,305 | ||||||||
Intermediate Government Bond Fund | ||||||||||||||||
U.S. Government & Agency Securities | $ | — | $ | 95,023 | $ | — | $ | 95,023 | ||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 41,704 | — | 41,704 | ||||||||||||
Asset-Backed Securities | — | 14,732 | — | 14,732 | ||||||||||||
Corporate Bonds | — | 6,806 | — | 6,806 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | — | 6,550 | — | 6,550 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 5,708 | — | 5,708 | ||||||||||||
Short-Term Investments | 2,218 | 150 | — | 2,368 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 23,635 | — | — | 23,635 | ||||||||||||
Total Investments | $ | 25,853 | $ | 170,673 | $ | — | $ | 196,526 | ||||||||
Intermediate Term Bond Fund | ||||||||||||||||
Corporate Bonds | $ | — | $ | 397,410 | $ | — | $ | 397,410 | ||||||||
Asset-Backed Securities | — | 151,309 | — | 151,309 | ||||||||||||
U.S. Government & Agency Securities | — | 70,933 | — | 70,933 | ||||||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 60,178 | — | 60,178 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | — | 56,807 | — | 56,807 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 9,375 | 10,874 | 20,249 | ||||||||||||
Municipal Bond | — | 1,620 | — | 1,620 | ||||||||||||
Preferred Stock | 35 | — | — | 35 | ||||||||||||
Short-Term Investments | 3,902 | 2,008 | — | 5,910 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 99,022 | — | — | 99,022 | ||||||||||||
Total Investments | $ | 102,959 | $ | 749,640 | $ | 10,874 | $ | 863,473 | ||||||||
Short Term Bond Fund | ||||||||||||||||
Corporate Bonds | $ | — | $ | 286,845 | $ | 1,939 | $ | 288,784 | ||||||||
Asset-Backed Securities | — | 180,933 | — | 180,933 | ||||||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 84,429 | — | 84,429 | ||||||||||||
U.S. Government & Agency Securities | — | 57,850 | — | 57,850 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | — | 56,610 | — | 56,610 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 10,124 | 6,864 | 16,988 | ||||||||||||
Short-Term Investments | 27,796 | 2,148 | — | 29,944 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 64,562 | — | — | 64,562 | ||||||||||||
Total Investments | $ | 92,358 | $ | 678,939 | $ | 8,803 | $ | 780,100 |
88 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Fund | Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||
Total Return Bond Fund | ||||||||||||||||
Corporate Bonds | $ | — | $ | 416,716 | $ | 5,286 | $ | 422,002 | ||||||||
Asset-Backed Securities | — | 96,686 | — | 96,686 | ||||||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 81,590 | — | 81,590 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 24,609 | 6,020 | 30,629 | ||||||||||||
U.S. Government & Agency Securities | — | 23,537 | — | 23,537 | ||||||||||||
Preferred Stocks | 1,981 | — | 718 | 2,699 | ||||||||||||
Municipal Bond | — | 1,530 | — | 1,530 | ||||||||||||
Closed-End Funds | 712 | — | — | 712 | ||||||||||||
Short-Term Investments | 31,063 | 4,861 | — | 35,924 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 70,391 | — | — | 70,391 | ||||||||||||
Total Investments | $ | 104,147 | $ | 649,529 | $ | 12,024 | $ | 765,700 |
As of June 30, 2010, each fund’s investments in other financial instruments* were classified as follows:
Fund | Level 1 | Level 2 | Level 3 | Total Unrealized Appreciation (Depreciation) | ||||||||||||
Core Bond Fund | $ | (2,117 | ) | $ | (2,539 | ) | $ | — | $ | (4,656 | ) | |||||
High Income Bond Fund | 179 | — | — | 179 | ||||||||||||
Inflation Protected Securities Fund | (134 | ) | (312 | ) | — | (446 | ) | |||||||||
Intermediate Government Bond Fund | 58 | — | — | 58 | ||||||||||||
Intermediate Term Bond Fund | 260 | (1,492 | ) | — | (1,232 | ) | ||||||||||
Short Term Bond Fund | (1,320 | ) | (1,072 | ) | — | (2,392 | ) | |||||||||
Total Return Bond Fund | (2,208 | ) | (320 | ) | — | (2,528 | ) |
* | Other financial instruments are derivative instruments such as futures and swaps, which are valued at the unrealized appreciation (depreciation) on the instrument. |
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | |||||||||||||||||||
Balance as of June 30, 2009 | $ | 27,756 | $ | 4,741 | $ | 84 | $ | 12,824 | $ | 9,564 | $ | 7,668 | ||||||||||||
Accrued discounts | 84 | 119 | 2 | — | 6 | 79 | ||||||||||||||||||
Realized gain (loss) | (2,929 | ) | 588 | 15 | (1,643 | ) | (80 | ) | (761 | ) | ||||||||||||||
Net change in unrealized appreciation or depreciation | 5,095 | (1,331 | ) | 7 | 2,423 | 466 | 2,078 | |||||||||||||||||
Net purchases (sales) | (4,031 | ) | 4,322 | 775 | (2,730 | ) | 847 | 2,960 | ||||||||||||||||
Transfers in and/or out of Level 3 | 2,500 | — | — | — | (2,000 | ) | — | |||||||||||||||||
Balance as of June 30, 2010 | $ | 28,475 | $ | 8,439 | $ | 883 | $ | 10,874 | $ | 8,803 | $ | 12,024 | ||||||||||||
Net change in unrealized appreciation or depreciation during the period of Level 3 securities held as of June 30, 2010 | $ | 504 | $ | (1,323 | ) | $ | 6 | $ | (12 | ) | $ | 71 | $ | 258 |
During the period ended June 30, 2010, the funds recognized no significant transfers to/from Level 1 or Level 2. Transfers in and/or out of level 3 are shown using beginning of period values.
SECURITY TRANSACTIONS AND INVESTMENT INCOME – For financial statement purposes, the funds record security transactions on the trade date of the security purchase or sale. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of bond premiums and accretion of bond discounts, is recorded on an accrual basis. Security gains and losses are determined on the basis of identified cost, which is the same basis used for federal income tax purposes. The resulting gain/loss is calculated as the difference between the sales price and the underlying cost of the security on the transaction date.
DISTRIBUTIONS TO SHAREHOLDERS – Distributions from net investment income are declared daily and are payable in
cash or reinvested in additional shares of the fund at net asset value on the last business day of each month. Any net realized capital gains on sales of a fund’s securities are distributed to shareholders at least annually.
FEDERAL TAXES – Each fund is treated as a separate taxable entity. Each fund intends to continue to qualify as a regulated investment company as provided in Subchapter M of the Internal Revenue Code, as amended, and to distribute all taxable income, if any, to its shareholders. Accordingly, no provision for federal income or excise taxes is required.
As of June 30, 2010, the funds did not have any tax positions that did not meet the “more-likely-than-not”
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 89 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
threshold of being sustained by the applicable tax authority. Generally, tax authorities can examine all the tax returns filed for the last three years.
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book-to-tax differences. These differences are primarily due to deferred wash sale and straddle losses, paydowns on
pass through obligations, expiration of capital loss carryforwards, tax mark-to-market adjustments for certain derivatives in accordance with IRC Section 1256, and tax mark-to-market adjustments under Section 311(e) of the Taxpayer Relief Act of 1997. To the extent these differences are permanent, reclassifications are made to the appropriate capital accounts in the fiscal period that the differences arise.
On the Statements of Assets and Liabilities, the following reclassifications were made:
June 30, 2010 | ||||||||||||
Fund | Accumulated Net Realized Gain (Loss) | Undistributed Net Investment Income | Portfolio Capital | |||||||||
Core Bond Fund | $ | (2,333 | ) | $ | 2,333 | $ | — | |||||
High Income Bond Fund | 36 | (36 | ) | — | ||||||||
Inflation Protected Securities Fund | 51 | (51 | ) | — | ||||||||
Intermediate Government Bond Fund | (14,303 | ) | (169 | ) | 14,472 | |||||||
Intermediate Term Bond Fund | (171 | ) | 171 | — | ||||||||
Short Term Bond Fund | 159 | (159 | ) | — | ||||||||
Total Return Bond Fund | (2,096 | ) | 2,096 | — |
The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. In addition, due to the timing of dividend distributions, the fiscal year in which the amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the fund. The distributions paid during the fiscal years ended June 30, 2010 and June 30, 2009 (adjusted by dividends payable as of June 30, 2010 and June 30, 2009) were as follows:
June 30, 2010 | ||||||||||||||||
Fund | Ordinary Income | Long Term Gain | Return of Capital | Total | ||||||||||||
Core Bond Fund | $ | 67,866 | $ | — | $ | — | $ | 67,866 | ||||||||
High Income Bond Fund | 26,351 | — | — | 26,351 | ||||||||||||
Inflation Protected Securities Fund | 3,582 | — | — | 3,582 | ||||||||||||
Intermediate Government Bond Fund | 4,765 | 256 | 18 | 5,039 | ||||||||||||
Intermediate Term Bond Fund | 33,897 | — | — | 33,897 | ||||||||||||
Short Term Bond Fund | 18,434 | — | — | 18,434 | ||||||||||||
Total Return Bond Fund | 38,377 | — | — | 38,377 |
The funds designated as long term capital gain dividends, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and profits of the fund’s related to net capital gain to zero for the tax year ended June 30, 2010.
June 30, 2009 | ||||||||||||||||
Fund | Ordinary Income | Long Term Gain | Return of Capital | Total | ||||||||||||
Core Bond Fund | $ | 87,252 | $ | — | $ | — | $ | 87,252 | ||||||||
High Income Bond Fund | 20,185 | — | — | 20,185 | ||||||||||||
Inflation Protected Securities Fund | 9,065 | — | 2,773 | 11,838 | ||||||||||||
Intermediate Government Bond Fund | 2,682 | — | — | 2,682 | ||||||||||||
Intermediate Term Bond Fund | 40,934 | — | — | 40,934 | ||||||||||||
Short Term Bond Fund | 14,988 | — | — | 14,988 | ||||||||||||
Total Return Bond Fund | 74,167 | 188 | — | 74,355 |
90 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
As of June 30, 2010, the funds’ most recently completed fiscal year-end, the components of accumulated earnings (deficit) on a tax basis were as follows:
Fund | Undistributed Ordinary Income | Accumulated Capital and Post-October Losses | Unrealized Appreciation (Depreciation) | Total Accumulated Earnings (Deficit) | ||||||||||||
Core Bond Fund | $ | 3,843 | $ | (53,848 | ) | $ | 41,352 | $ | (8,653 | ) | ||||||
High Income Bond Fund | 2,342 | (23,659 | ) | (7,823 | ) | (29,140 | ) | |||||||||
Inflation Protected Securities Fund | 1,342 | (15,092 | ) | 4,280 | (9,470 | ) | ||||||||||
Intermediate Government Bond Fund | — | (13,110 | ) | 4,306 | (8,804 | ) | ||||||||||
Intermediate Term Bond Fund | 1,595 | (20,417 | ) | 29,171 | 10,349 | |||||||||||
Short Term Bond Fund | 373 | (23,042 | ) | 8,364 | (14,305 | ) | ||||||||||
Total Return Bond Fund | 4,209 | (86,664 | ) | 9,259 | (73,196 | ) |
The difference between book and tax basis unrealized appreciation (depreciation) is primarily due to the tax deferral of losses on wash sales and straddles, tax mark-to-market adjustments for certain derivatives in accordance with IRC Section 1256, and tax mark-to-market adjustments made under Section 311(e) of the Taxpayer Relief Act of 1997.
As of June 30, 2010, the following funds had capital loss carryforwards, which, if not offset by subsequent capital gains, will expire on the funds’ fiscal year-ends as follows:
Expiration Year | ||||||||||||||||||||||||||||||||||||
Fund | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | Total | |||||||||||||||||||||||||||
Core Bond Fund | $ | — | $ | — | $ | — | $ | — | $ | 994 | $ | — | $ | 25,107 | $ | 17,128 | $ | 43,229 | ||||||||||||||||||
High Income Bond Fund | — | — | — | — | — | — | 23,659 | — | 23,659 | |||||||||||||||||||||||||||
Inflation Protected Securities Fund | — | — | — | 256 | 5,928 | 953 | 4,724 | 2,807 | 14,668 | |||||||||||||||||||||||||||
Intermediate Government Bond Fund | 2,293 | 1,293 | 554 | 1,629 | 2,447 | 165 | 3,538 | — | 11,919 | |||||||||||||||||||||||||||
Intermediate Term Bond Fund | — | — | — | — | 3,607 | — | 11,744 | 4,697 | 20,048 | |||||||||||||||||||||||||||
Short Term Bond Fund | — | — | 1,315 | 8,101 | 7,433 | — | 839 | 2,980 | 20,668 | |||||||||||||||||||||||||||
Total Return Bond Fund | — | — | — | — | — | — | 41,302 | 37,557 | 78,859 |
Certain funds incurred a loss for tax purposes for the period from November 1, 2009 to June 30, 2010. As permitted by tax regulations, the funds intend to elect to defer and treat these losses as arising in the fiscal year ending June 30, 2011. The following funds had deferred losses:
Fund | Amount | |||
Core Bond Fund | $ | 10,619 | ||
Inflation Protected Securities Fund | 424 | |||
Intermediate Government Bond Fund | 1,191 | |||
Intermediate Term Bond Fund | 369 | |||
Short Term Bond Fund | 2,374 | |||
Total Return Bond Fund | 7,805 |
DERIVATIVES – The funds may invest in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. The funds’ investments objectives allow the funds to enter into various types of derivative contracts, including, but not limited to, futures contracts, foreign exchange contracts, credit default swaps, interest rate swaps, total return swaps, currency swaps, and purchased and written options. Derivatives may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and the potential for market movements which may expose the funds to gains or losses in excess of the amounts shown on the Statements of Assets and Liabilities.
FUTURES TRANSACTIONS – The funds are subject to equity price risk, interest rate risk, and foreign currency exchange rate risk in the normal course of pursuing their investment objectives. In order to gain exposure or protect against changes in the market and to maintain sufficient liquidity to meet redemption requests, each fund may enter into futures contracts. Upon entering into a futures contract, the fund is required to deposit cash or pledge U.S. Government securities. The margin required for a futures contract is set by the exchange on which the contract is traded. Subsequent payments, which are dependent on the daily fluctuations in the value of the underlying security or securities, are made or received by the fund each day (daily variation margin) and are recorded as unrealized gains (losses) until the contract is closed. When the contract is closed, the fund records a realized gain (loss) equal to the difference between the proceeds from (or cost of) the closing transaction and the fund’s basis in the contract.
Risks of entering into futures contracts, in general, include the possibility that there will not be a perfect price correlation between the futures contracts and the underlying securities. Second, it is possible that a lack of liquidity for futures contracts could exist in the secondary market, resulting in an inability to close a futures position prior to its maturity date. Third, the purchase of a futures contract involves the risk that a fund could lose more than the original margin deposit required to initiate a futures transaction. These contracts involve market risk in excess of the amount reflected in the funds’ Statements of Assets
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 91 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
and Liabilities. Unrealized gains (losses) on outstanding positions in futures contracts held at the close of the year will be recognized as capital gains (losses) for federal income tax purposes.
As of June 30, 2010, the following funds had outstanding futures contracts as disclosed in their Schedule of Investments: Core Bond Fund, High Income Bond Fund, Inflation Protected Securities Fund, Intermediate Government Bond Fund, Intermediate Term Bond Fund, Short Term Bond Fund, and Total Return Bond Fund.
SWAP AGREEMENTS – The funds may invest in swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The funds may enter into credit default, interest rate, and total return swap agreements to manage exposure to credit and interest rate risk. In connection with these agreements, securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.
Swap agreements are marked-to-market daily based upon quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statements of Operations. Payments received or made at the beginning of the measurement period are reflected on the Statements of Assets and Liabilities. A liquidation payment received or made at the termination of the swap agreement is recorded as realized gain or loss in the Statements of Operations. Net periodic payments received by the funds are included as part of interest from unaffiliated investments on the Statements of Operations. Entering into these agreements involves, to varying degrees, elements of credit, market and documentation risk in excess of the amounts recognized on the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements, and that there may be unfavorable changes in interest rates.
Credit Default Swaps
The funds are subject to credit risk in the normal course of pursuing their investment objectives. Each fund may enter into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. Credit default swap agreements involve one party making a stream of payments (referred to as the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the event of a default or other credit event for the reference entity or index. As
a seller of protection on credit default swap agreements, a fund will generally receive from the buyer of protection a fixed rate of income throughout the term of the swap provided that there is no credit event. As the seller, a fund would effectively add leverage to its portfolio because, in addition to its total net assets, a fund would be subject to investment exposure on the notional amount of the swap.
If a fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, a fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the reference entity, other deliverable obligations or underlying securities comprising the reference index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference entity or underlying securities comprising the reference index.
If a fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, a fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the reference entity, other deliverable obligations or underlying securities comprising the reference index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference entity or underlying securities comprising the reference index. Recovery values are assumed by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value.
Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end are disclosed in the footnotes to the Schedules of Investments and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular reference entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk. Wider credit spreads and increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
92 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
The maximum potential amount of future payments (undiscounted) that a fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of June 30, 2010 for which a fund is the seller of protection are disclosed in the footnotes to the Schedules of Investments. These potential amounts would be partially offset by any recovery values of the respective reference entity or index, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by a fund for the same reference entity or entities. As of June 30, 2010, the following fund had outstanding credit default swap agreements as disclosed in its Schedule of Investments: Total Return Bond Fund.
Interest Rate Swaps
The funds are subject to interest rate risk exposure in the normal course of pursuing their investment objectives. Because the funds hold fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, each fund may enter into interest rate swap contracts. Interest rate swap agreements involve the exchange by a fund with another party of their respective commitments to pay or receive interest with respect to the notional amount of principal. Certain forms of interest rate swap agreements may include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or “cap”, (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified rate, or “floor”, (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels, (iv) callable interest rate swaps, under which the counterparty may terminate the swap transaction in whole at zero cost by a predetermined date and time prior to the maturity date, (v) spreadlocks, which allow the interest rate swap users to lock in the forward differential (or spread) between the interest rate swap rate and a specified benchmark, or (vi) basis swap, under which two parties can exchange variable interest rates based on different money markets.
The funds’ maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from/paid to the counterparty over the contract’s remaining life, to the extent that that amount is positive. This risk is mitigated by having a master netting arrangement between the fund and the counterparty and by the posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty. As of
June 30, 2010, the following funds had outstanding interest rate swap agreements: Core Bond Fund, Inflation Protected Securities Fund, Intermediate Term Bond Fund, Short Term Bond Fund, and Total Return Bond Fund.
Total Return Swaps
Certain funds may enter into total return swap agreements. 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, less frequently, 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. To the extent the total return of the underlying asset exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. As of June 30, 2010, no funds had outstanding total return swap agreements.
Currency Swaps
Certain funds may enter into currency swaps. A currency swap is an agreement between two parties to exchange equivalent fixed amounts in two different currencies for a fixed period of time. The exchange of currencies at the inception date of the contract takes place at the current spot rate. Such an agreement may provide that, for the duration of the swap, each party pays interest to the other on the received amount at an agreed upon fixed or floating interest rate. When the contract ends, the parties re-exchange the currencies at the initial exchange rate, a specified rate, or the then current spot rate. Some currency swaps may not provide for exchanging currencies, but only for exchanging interest cash flows. As of June 30, 2010, no funds had outstanding currency swap agreements.
OPTIONS TRANSACTIONS – The funds may utilize options in an attempt to manage market or business risk or enhance returns. When a call or put option is written, an amount equal to the premium received is recorded as a liability. The liability is marked-to-market daily to reflect the current market value of the option written. When a written option expires, a gain is realized in the amount of the premium originally received. If a closing purchase contract is entered into, a gain or loss is realized in the amount of the original premium less the cost of the closing transaction. If a written call option is exercised, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received reduces the cost of the security which is purchased upon exercise of the option. As of June 30, 2010, no funds held written options.
Options purchased are recorded as investments and marked-to-market daily to reflect the current market value
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 93 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
of the option contract. If an option purchased expires, a loss is realized in the amount of the cost of the option. If a closing transaction is entered into, a gain or loss is realized to the extent that the proceeds from the sale are greater or less than the cost of the option. If a purchased put option is exercised, a gain or loss is realized from the sale
of the underlying security by adjusting the proceeds from such sale by the amount of the premium originally paid. If a purchased call option is exercised, the cost of the security purchased upon exercise is increased by the premium originally paid. As of June 30, 2010, no funds held purchased options.
For the fiscal year ended June 30, 2010, the quarterly average gross notional amounts of the derivatives held by the funds were:
Fund | Futures/ Long | Futures/ Short | Credit Default Swaps | Interest Rate Swaps | Options Written- Call | Options Written- Put | ||||||||||||||||||
Core Bond Fund | $ | 91,034 | $ | 136,642 | $ | 24,519 | $ | 91,600 | $ | — | $ | — | ||||||||||||
High Income Bond Fund | 24,231 | — | — | — | — | — | ||||||||||||||||||
Inflation Protected Securities Fund | 9,350 | 2,467 | 1,040 | 10,400 | — | — | ||||||||||||||||||
Intermediate Government Bond Fund | 10,676 | 3,114 | — | — | — | — | ||||||||||||||||||
Intermediate Term Bond Fund | 110,656 | 19,401 | 5,194 | 52,000 | — | — | ||||||||||||||||||
Short Term Bond Fund | 45,820 | 66,890 | 13,600 | 40,400 | — | — | ||||||||||||||||||
Total Return Bond Fund | 15,049 | 153,846 | 38,961 | 40,400 | 217 | 150 |
As of June 30, 2010, the funds’ fair values of derivative instruments categorized by risk exposure were classified as follows:
Statement of Assets and Liabilities Location | Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | |||||||||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||||||||
Foreign Exchange Contracts | Receivables, Net Assets – Unrealized Appreciation* | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2 | |||||||||||||||
Interest Rate Contracts | Receivables, Net Assets – Unrealized Appreciation* | — | 179 | — | 142 | 604 | 57 | 2 | ||||||||||||||||||||||
Credit Contracts | Receivables, Unrealized Appreciation | — | — | — | — | — | — | — | ||||||||||||||||||||||
Balance as of June 30, 2010 | $ | — | $ | 179 | $ | — | $ | 142 | $ | 604 | $ | 57 | $ | 4 | ||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||||||||
Foreign Exchange Contracts | Payables, Net Assets – Unrealized Depreciation* | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Interest Rate Contracts | Payables, Net Assets – Unrealized Depreciation* | 4,656 | — | 446 | 84 | 1,836 | 2,449 | 2,210 | ||||||||||||||||||||||
Credit Contracts | Payables, Unrealized Depreciation | — | — | — | — | — | — | 322 | ||||||||||||||||||||||
Balance as of June 30, 2010 | $ | 4,656 | $ | — | $ | 446 | $ | 84 | $ | 1,836 | $ | 2,449 | $ | 2,532 |
* | Includes cumulative appreciation/depreciation of futures contracts as reported in the footnotes to the funds’ Schedule of Investments. Only the current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The effect of derivative instruments on the Statements of Operations for the fiscal year ended June 30, 2010:
Amount of realized gain (loss) on derivatives recognized in income:
Core Bond Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | (2,976 | ) | $ | (968 | ) | $ | (3,944 | ) | |||
Credit Contracts | — | 6,639 | 6,639 | |||||||||
Foreign Exchange Contracts | 203 | — | 203 | |||||||||
High Income Bond Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | 52 | $ | — | $ | 52 | ||||||
Inflation Protected Securities Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | 768 | $ | (110 | ) | $ | 658 | |||||
Credit Contracts | — | 125 | 125 | |||||||||
Foreign Exchange Contracts | 43 | — | 43 | |||||||||
Intermediate Government Bond Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | 321 | $ | — | $ | 321 |
94 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Term Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | 2,078 | $ | (540 | ) | $ | 1,538 | |||||||||
Credit Contracts | — | 942 | 942 | |||||||||||||
Short Term Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | (2,801 | ) | $ | (340 | ) | $ | (3,141 | ) | |||||||
Credit Contracts | — | 854 | 854 | |||||||||||||
Foreign Exchange Contracts | 22 | — | 22 | |||||||||||||
Total Return Bond Fund | Options | Futures | Swaps | Total | ||||||||||||
Interest Rate Contracts | $ | 272 | $ | (12,026 | ) | $ | 2,892 | $ | (8,862 | ) | ||||||
Credit Contracts | — | — | 3,343 | 3,343 | ||||||||||||
Foreign Exchange Contracts | — | 2,362 | — | 2,362 | ||||||||||||
Change in unrealized appreciation (depreciation) on derivatives recognized in income: | ||||||||||||||||
Core Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | (1,145 | ) | $ | (2,322 | ) | $ | (3,467 | ) | |||||||
Credit Contracts | — | (1,442 | ) | (1,442 | ) | |||||||||||
Foreign Exchange Contracts | 178 | — | 178 | |||||||||||||
High Income Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | 187 | $ | — | $ | 187 | ||||||||||
Inflation Protected Securities Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | (167 | ) | $ | 116 | $ | (51 | ) | ||||||||
Credit Contracts | — | (285 | ) | (285 | ) | |||||||||||
Foreign Exchange Contracts | 29 | — | 29 | |||||||||||||
Intermediate Government Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | 58 | $ | — | $ | 58 | ||||||||||
Intermediate Term Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | 1,416 | $ | (1,384 | ) | $ | 32 | |||||||||
Credit Contracts | — | 73 | 73 | |||||||||||||
Short Term Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | (1,168 | ) | $ | (1,018 | ) | $ | (2,186 | ) | |||||||
Credit Contracts | — | 152 | 152 | |||||||||||||
Foreign Exchange Contracts | 29 | — | 29 | |||||||||||||
Total Return Bond Fund | Options | Futures | Swaps | Total | ||||||||||||
Interest Rate Contracts | $ | (88 | ) | $ | (1,040 | ) | $ | (1,584 | ) | $ | (2,712 | ) | ||||
Credit Contracts | — | — | 907 | 907 | ||||||||||||
Foreign Exchange Contracts | — | 511 | — | 511 |
INFLATION-INDEXED BONDS – The funds may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond however, interest will be paid based on a principal value which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond will be included as interest income in the Statements of Operations, even
though investors do not receive their principal until maturity.
FOREIGN CURRENCY TRANSLATION – The books and records of Core Bond Fund, High Income Bond Fund, Inflation Protected Securities Fund, and Total Return Bond Fund relating to the funds’ non-U.S. dollar denominated investments are maintained in U.S. dollars on the following basis:
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 95 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
• | market value of investment securities, assets, and liabilities are translated at the current rate of exchange; and |
• | purchases and sales of investment securities, income, and expenses are translated at the relevant rates of exchange prevailing on the respective dates of such transactions. |
The funds do not isolate the portion of gains and losses on investments in debt securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of debt securities. The funds isolate the effect of fluctuations in foreign currency rates when determining the gain or loss upon sale or maturity of foreign currency denominated debt obligations pursuant to the federal income tax regulations. Such amounts are categorized as foreign currency gain(loss) for both financial reporting and income tax reporting purposes.
The funds report certain foreign currency-related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.
As of June 30, 2010, Inflation Protected Securities Fund and Total Return Bond Fund had non-U.S. dollar denominated investments with a total fair value of $3,530, and $31,869 or 2.0%, and 4.6%, respectively, of total net assets.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS – Delivery and payment for securities that have been purchased by a fund on a when-issued or forward-commitment basis can take place up to a month or more after the transaction. Such securities do not earn interest, are subject to market fluctuations, and may increase or decrease in value prior to their delivery. Each fund segregates assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued or forward-commitment basis may increase the volatility of a fund’s net asset value if the fund makes such purchases while remaining substantially fully invested. As of June 30, 2010, Core Bond Fund, Intermediate Government Bond Fund, and Total Return Bond Fund had when-issued or forward-commitment securities outstanding with a total cost of $18,834, $583, and $9,897, respectively.
In connection with the ability to purchase securities on a when-issued basis, each fund may also enter into dollar rolls in which the fund sells securities purchased on a forward-commitment basis and simultaneously contracts with a counterparty to repurchase similar (same type, coupon, and maturity), but not identical securities on a specified future date. As an inducement for the fund to “rollover” its purchase commitments, the fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. Dollar rolls are considered a form of leverage. As of and for the fiscal year
ended June 30, 2010, the funds had no outstanding dollar roll transactions.
ILLIQUID OR RESTRICTED SECURITIES – A security may be considered illiquid if it lacks a readily available market. Securities are generally considered liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the price at which the security is valued by the fund. Illiquid securities may be valued under methods approved by the funds’ board of directors as reflecting fair value. Each fund intends to invest no more than 15% of its total net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. Certain restricted securities may be considered illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and may be valued under methods approved by the funds’ board of directors as reflecting fair value. Certain restricted securities eligible for resale to qualified institutional investors, including Rule 144A securities, are not subject to the limitation on a fund’s investment in illiquid securities if they are determined to be liquid in accordance with procedures adopted by the funds’ board of directors. As of June 30, 2010, Core Bond Fund, High Income Bond Fund, Intermediate Government Bond Fund, Intermediate Term Bond Fund, Short Term Bond Fund, and Total Return Bond Fund had investments in illiquid securities with a total fair value of $4,382, $509, $2,247, $1,616, $1,624, and $7,885, respectively, or 0.3%, 0.1%, 1.3%, 0.2%, 0.2%, and 1.1%, respectively, of total net assets.
Information concerning illiquid securities, including restricted securities considered to be illiquid, is as follows:
Core Bond Fund | Par | Dates Acquired | Cost Basis | |||||||||||||||
Amresco Residential Security Mortgage, Series 1997-3, Class A9 | $ 36 | 10/02 | $ | 37 | ||||||||||||||
Banc of America Funding, Series 2007-4, Class 1A2 | 1,784 | 9/07 | 1,712 | |||||||||||||||
Bear Stearns Commercial Mortgage Securities, Series 2007-T28, Class D | 3,165 | 10/07 | 2,992 | |||||||||||||||
GSMPS Mortgage Loan Trust, Series 2003-1, Class B1 | 738 | 5/09 | 186 | |||||||||||||||
Merrill Lynch Mortgage Trust, Series 2005-CIP1, Class C | 3,102 | 10/07 | 2,960 | |||||||||||||||
Westam Mortgage Financial, Series 11, Class A | 38 | 9/97 | 37 |
High Income Bond Fund | Shares/Par | Dates Acquired | Cost Basis | |||||||||
American Home Mortgage Investments, Series B | 10 | 7/07 | $ | 190 | ||||||||
Exum, Series 2007-1A, Class C | $ | 1,063 | 2/07-3/10 | 1,063 | ||||||||
Exum, Series 2007-2A, Class C | $ | 1,101 | 4/07-6/10 | 1,101 | ||||||||
Georgia Gulf | 14 | 10/09 | 182 | |||||||||
Green Tree Financial, Series 1998-1, Class A4 | $ | 5 | 5/99 | 5 |
96 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Government Bond Fund | Par | Dates Acquired | Cost Basis | |||||||||
GRMT Mortgage Loan Trust, Series 2001-1A, Class M1 | $ | 41 | 9/02 | $ | 42 | |||||||
GSMPS Mortgage Loan Trust, | 868 | 12/06 | 897 | |||||||||
GSR Mortgage Loan Trust, | 1,297 | 5/06 | 1,231 | |||||||||
Impac Secured Assets, | 392 | 3/08 | 338 | |||||||||
Residential Accredit Loans, | 651 | 11/05 | 634 |
Intermediate Term Bond Fund | Par | Dates Acquired | Cost Basis | |||||||||
Amresco Residential Security Mortgage, Series 1997-3, Class A9 | $ | 25 | 10/02 | $ | 25 | |||||||
Bear Stearns Commercial Mortgage Securities, Series 2007-T28, Class D | 1,470 | 10/07 | 1,390 | |||||||||
Contimortgage Home Equity Loan Trust, Series 1997-2, Class A9 | 13 | 10/02 | 13 | |||||||||
Green Tree Financial, Series 1996-9, Class A5 | 76 | 4/00 | 76 | |||||||||
Merrill Lynch Mortgage Trust, Series 2005-CIP1, Class C | 1,455 | 10/07 | 1,388 | |||||||||
Westam Mortgage Financial, Series 11, Class A | 16 | 11/97 | 16 |
Short Term Bond Fund | Par | Dates Acquired | Cost Basis | |||||||||
Equivantage Home Equity Loan Trust, Series 1996-1, Class A | $ | 10 | 2/99 | $ | 10 | |||||||
Equivantage Home Equity Loan Trust, Series 1996-4, Class A | 168 | 1/00 | 165 | |||||||||
GSR Mortgage Loan Trust, | 1,952 | 5/06 | 1,892 | |||||||||
IMC Home Equity Loan Trust, Series 1998-3, Class A7 | 1,227 | 10/02 | 1,284 |
Total Return Bond Fund | Par | Dates Acquired | Cost Basis | |||||||||
Bank of America Alternative Loan Trust, Series 2007-1, Class 2A2 | $ | 2,138 | 9/07 | $ | 2,092 | |||||||
Bear Stearns Commercial Mortgage Securities, Series 2007-T28, Class D | 1,780 | 10/07 | 1,683 | |||||||||
GRMT Mortgage Loan Trust, Series 2001-1A, Class M1 | 122 | 5/01 | 122 | |||||||||
GSMPS Mortgage Loan Trust, Series 2003-1, Class B1 | 2,619 | 12/06 | 2,707 | |||||||||
GSR Mortgage Loan Trust, Series 2005-4F, Class B1 | 2,161 | 5/06 | 2,052 | |||||||||
GSR Mortgage Loan Trust, Series 2005-AR1, Class B1 | 1,997 | 5/06 | 1,935 | |||||||||
Impac Secured Assets, Series 2000-3, Class M1 | 2,278 | 3/08 | 1,967 | |||||||||
Merrill Lynch Mortgage Trust, Series 2005-CIP1, Class C | 1,730 | 10/07 | 1,651 |
SECURITIES LENDING – In order to generate additional income, each fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks,
or other institutional borrowers of securities. Each fund’s policy is to receive collateral from the borrower in the form of cash, U.S. Government securities, or other high-grade debt obligations equal to at least 100% of the value of securities loaned. If the value of the securities on loan increases, additional collateral is received from the borrower. As with other extensions or credit, there may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the security fail financially.
U.S. Bank National Association (“U.S. Bank”), the parent company of the funds’ advisor, serves as the securities lending agent for the funds in transactions involving the lending of portfolio securities on behalf of the funds. U.S. Bank acts as the securities lending agent pursuant to, and subject to compliance with conditions contained in, an exemptive order issued by the Securities and Exchange Commission (“SEC”). As the securities lending agent, U.S. Bank receives fees of up to 25% of each fund’s net income from securities lending transactions and pays half of such fees to FAF Advisors for certain securities lending services provided by FAF Advisors. Collateral for securities on loan is invested in a money market fund administered by FAF Advisors and FAF Advisors receives an administration fee equal to 0.02% of such fund’s average daily net assets in this money market fund. Securities lending fees paid to U.S. Bank by the funds during the fiscal year ended June 30, 2010, were as follows:
Fund | Amount | |||
Core Bond Fund | $ | 32 | ||
High Income Bond Fund | 83 | |||
Inflation Protected Securities Fund | 11 | |||
Intermediate Government Bond | 4 | |||
Intermediate Term Bond Fund | 24 | |||
Short Term Bond Fund | 15 | |||
Total Return Bond Fund | 16 |
Income from securities lending is recorded on the Statements of Operations as securities lending income net of fees paid to U.S. Bank.
EXPENSES – Expenses that are directly related to one of the funds are charged directly to that fund. Other operating expenses are allocated to the funds on several bases, including evenly across all funds, allocated based on relative net assets of all funds within the First American Family of Funds, or a combination of both methods. Class specific expenses, such as distribution fees and shareholder servicing fees, are borne by that class. Income, other expenses, and realized and unrealized gains and losses of a fund are allocated to each respective class in proportion to the relative net assets of each class.
INTERFUND LENDING PROGRAM – Pursuant to an exemptive order issued by the SEC, the funds, along with other registered investment companies in the First American Family of Funds, may participate in an interfund lending program. This program provides an alternative credit
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 97 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
facility allowing the funds to borrow from, or lend money to, other participating funds. The funds did not have any interfund lending transactions during the fiscal year ended June 30, 2010.
DEFERRED COMPENSATION PLAN – Under a Deferred Compensation Plan (the “Plan”), non-interested directors of the First American Family of Funds may participate and elect to defer receipt of part or all of their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of selected open-end First American Funds, as designated by each director. All amounts in the Plan are 100% vested and accounts under the Plan are obligations of the funds. Deferred amounts remain in the funds until distributed in accordance with the Plan.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS – The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. Actual results could differ from those estimates.
3> Fees and Expenses
INVESTMENT ADVISORY FEES – Pursuant to an investment advisory agreement (the “Agreement”), FAF Advisors manages each fund’s assets and furnishes related office facilities, equipment, research, and personnel. The Agreement requires each fund to pay FAF Advisors a monthly fee based upon average daily net assets. The annual fee for each fund is as follows:
Fund | ||||
Core Bond Fund | 0.50 | % | ||
High Income Bond Fund | 0.70 | |||
Inflation Protected Securities Fund | 0.50 | |||
Intermediate Government Bond Fund | 0.50 | |||
Intermediate Term Bond Fund | 0.50 | |||
Short Term Bond Fund | 0.50 | |||
Total Return Bond Fund | 0.60 |
FAF Advisors has agreed to waive fees and reimburse other fund expenses at least through October 31, 2010, so that total fund operating expenses, as a percentage of average daily net assets, do not exceed the following amounts:
Share Class | ||||||||||||||||||||
Fund | A | B | C | R | Y | |||||||||||||||
Core Bond Fund | 0.95 | % | 1.70 | % | 1.70 | % | 1.20 | % | 0.70 | % | ||||||||||
High Income Bond Fund | 1.10 | 1.85 | 1.85 | 1.35 | 0.85 | |||||||||||||||
Inflation Protected Securities Fund | 0.85 | NA | 1.60 | 1.10 | 0.60 | |||||||||||||||
Intermediate Government Bond Fund1 | 0.75 | NA | 1.60 | 1.10 | 0.60 | |||||||||||||||
Intermediate Term Bond Fund | 0.85 | NA | NA | NA | 0.70 | |||||||||||||||
Short Term Bond Fund2 | 0.75 | NA | 1.60 | NA | 0.60 | |||||||||||||||
Total Return Bond Fund | 0.89 | * | 1.75 | 1.75 | 1.25 | 0.75 |
NA = Not Applicable
1 | The fund began offering Class C and Class R on October 28, 2009. |
2 | The fund began offering Class C on October 28, 2009. |
* | Prior to October 28, 2009, FAF Advisors had contractually agreed to waive fees and reimburse other fund expenses so that the total annual Class A operating expenses after waivers by the advisor and the distributor did not exceed 1.00% of average daily net assets. |
The funds may invest in related money market funds that are series of First American Funds, Inc., subject to certain limitations. In order to avoid the payment of duplicative investment advisory fees to FAF Advisors, which acts as the investment advisor to both the investing funds and the related money market funds, FAF Advisors will reimburse each investing fund an amount equal to that portion of FAF Advisors’ investment advisory fee received from the related money market funds that is attributable to the assets of the investing fund. This reimbursement, if any, is included in “Fee waivers” in the Statements of Operations.
ADMINISTRATION FEES – FAF Advisors serves as the funds’ administrator pursuant to an administration agreement between FAF Advisors and the funds. U.S. Bancorp Fund Services, LLC (“USBFS”) serves as sub-administrator pursuant to a sub-administration agreement between USBFS and FAF Advisors. FAF Advisors is a subsidiary of U.S. Bank. Both U.S. Bank and USBFS are direct subsidiaries of U.S. Bancorp. Under the administration agreement, FAF Advisors is compensated to provide, or compensates other entities to provide, services to the funds. These services include various legal, oversight, administrative, and accounting services. The funds pay FAF Advisors administration fees, which are calculated daily and paid monthly, equal to each fund’s pro rata share of an amount equal, on a annual basis, to 0.25% of the aggregate average daily net assets of all open-end funds in the First American Family of Funds up to $8 billion, 0.235% on the next $17 billion of the aggregate average daily net assets, 0.22% on the next $25 billion of the aggregate average daily net assets, and 0.20% of the aggregate average daily net assets in excess of $50 billion. Effective July 1, 2010, such administration fees are based on the aggregate average daily net assets of all open-end funds in the First American Family of Funds, other than the series of First American Strategy Funds, Inc. All fees paid to the sub-administrator are paid from the administration fee. In
98 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
addition to these fees, the funds may reimburse FAF Advisors and the sub-administrator for any out-of-pocket expenses incurred in providing administration services.
TRANSFER AGENT FEES – USBFS serves as the funds’ transfer agent pursuant to a transfer agent agreement with FAIF. The funds are charged transfer agent fees on a per shareholder account basis, subject to a minimum fee per share class. These fees are charged to each fund based upon the number of accounts within that fund. In addition to these fees, the funds may reimburse USBFS for out-of-pocket expenses incurred in providing transfer agent services.
CUSTODIAN FEES – U.S. Bank serves as the custodian for each fund pursuant to a custodian agreement with FAIF. The custodian fee charged for each fund is equal to an annual rate of 0.005% of average daily net assets. All fees are computed daily and paid monthly.
Under the custodian agreement, interest earned on uninvested cash balances is used to reduce a portion of each fund’s custodian expenses. These credits, if any, are disclosed as “Indirect payments from custodian” in the Statements of Operations. Conversely, the custodian charges a fee for any cash overdrafts incurred, which increases the fund’s custodian expenses.
For the fiscal year ended June 30, 2010, custodian fees were not increased as a result of overdrafts and were not decreased as a result of interest earned.
DISTRIBUTION AND SHAREHOLDER SERVICING (12B-1) FEES – Quasar Distributors, LLC (“Quasar”), a subsidiary of U.S. Bancorp, serves as the distributor of the funds pursuant to a distribution agreement with FAIF. Under the distribution agreement, and pursuant to a plan adopted by each fund under rule 12b-1 of the Investment Company Act, each fund pays Quasar a monthly distribution and/or shareholder servicing fee equal to an annual rate of 0.25%, 1.00%, 1.00%, and 0.50% of each fund’s average daily net assets of the Class A, Class B, Class C, and Class R shares, respectively. No distribution or shareholder servicing fees are paid by Class Y shares. These fees may be used by Quasar to provide compensation for sales support, distribution activities, and/or shareholder servicing activities.
Quasar is currently waiving a portion of its 12b-1 fees for Class A shares, limiting its fees to 0.15% of average daily net assets for Intermediate Government Bond Fund, Intermediate Term Bond Fund, and Short Term Bond Fund. Effective October 28, 2009, FAF Advisors is waiving an additional amount of Class A 12b-1 fees equal to 0.11% of average daily net assets of Class A shares for Total Return Bond Fund.
For the fiscal year ended June 30, 2010, total distribution and shareholder servicing fees waived by Quasar for the funds included in this annual report were as follows:
Fund | Amount | |||
Intermediate Government Bond Fund | $ | 13 | ||
Intermediate Term Bond Fund | 27 | |||
Short Term Bond Fund | 81 |
Under the distribution and shareholder servicing agreement, the following amounts were retained by affiliates of FAF Advisors for the fiscal year ended June 30, 2010:
Fund | Amount | |||
Core Bond Fund | $ | 141 | ||
High Income Bond Fund | 36 | |||
Inflation Protected Securities Fund | 42 | |||
Intermediate Government Bond Fund | 12 | |||
Intermediate Term Bond Fund | 22 | |||
Short Term Bond Fund | 71 | |||
Total Return Bond Fund | 56 |
OTHER FEES AND EXPENSES – In addition to the investment advisory fees, administration fees, transfer agent fees, custodian fees, and distribution and shareholder servicing fees, each fund is responsible for paying other operating expenses, including: legal, auditing, registration fees, postage and printing of shareholder reports, fees and expenses of independent directors, insurance, and other miscellaneous expenses. For the fiscal year ended June 30, 2010, legal fees and expenses of $39 were paid to a law firm of which an Assistant Secretary of the funds is a partner.
CONTINGENT DEFERRED SALES CHARGES – A contingent deferred sales charge (“CDSC”) is imposed on redemptions made in the Class B shares. The CDSC varies depending on the number of years from time of payment for the purchase of Class B shares until the redemption of such shares. Class B shares automatically convert to Class A shares after eight years.
Year Since Purchase | CDSC as a Percentage of Dollar Amount Subject to Charge | |||
First | 5.00 | % | ||
Second | 5.00 | |||
Third | 4.00 | |||
Fourth | 3.00 | |||
Fifth | 2.00 | |||
Sixth | 1.00 | |||
Seventh | — | |||
Eighth | — |
A CDSC of 1.00% is imposed on redemptions made in Class C shares for the first 12 months.
The CDSC for Class B shares and Class C shares is imposed on the value of the purchased shares, or the value at the time of redemption, whichever is less.
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 99 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
For the fiscal year ended June 30, 2010, total front-end sales charges and CDSCs retained by affiliates of FAF Advisors for distributing the funds’ shares were as follows:
Fund | Amount | |||
Core Bond Fund | $ | 69 | ||
High Income Bond Fund | 64 | |||
Inflation Protected Securities Fund | 83 | |||
Intermediate Government Bond Fund | 1 | |||
Intermediate Term Bond Fund | 44 | |||
Short Term Bond Fund | 194 | |||
Total Return Bond Fund | 101 |
4> Capital Share Transactions
FAIF has 372 billion shares of $0.0001 par value capital stock authorized. Capital share transactions for the funds were as follows:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | ||||||||||||||||||||||
Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | |||||||||||||||||||
Class A: | ||||||||||||||||||||||||
Shares issued | 1,069 | 1,052 | 3,282 | 2,674 | 483 | 345 | ||||||||||||||||||
Shares issued in lieu of cash distributions | 303 | 415 | 212 | 238 | 15 | 12 | ||||||||||||||||||
Shares redeemed | (1,255 | ) | (1,968 | ) | (3,521 | ) | (2,143 | ) | (300 | ) | (113 | ) | ||||||||||||
Total Class A transactions | 117 | (501 | ) | (27 | ) | 769 | 198 | 244 | ||||||||||||||||
Class B: | ||||||||||||||||||||||||
Shares issued | 10 | 40 | 25 | 19 | — | — | ||||||||||||||||||
Shares issued in lieu of cash distributions | 17 | 35 | 13 | 24 | — | — | ||||||||||||||||||
Shares redeemed | (284 | ) | (212 | ) | (143 | ) | (146 | ) | — | — | ||||||||||||||
Total Class B transactions | (257 | ) | (137 | ) | (105 | ) | (103 | ) | — | — | ||||||||||||||
Class C: | ||||||||||||||||||||||||
Shares issued | 81 | 100 | 264 | 76 | 550 | 141 | ||||||||||||||||||
Shares issued in lieu of cash distributions | 12 | 18 | 27 | 41 | 9 | 1 | ||||||||||||||||||
Shares redeemed | (122 | ) | (154 | ) | (154 | ) | (162 | ) | (55 | ) | (31 | ) | ||||||||||||
Total Class C transactions | (29 | ) | (36 | ) | 137 | (45 | ) | 504 | 111 | |||||||||||||||
Class R: | ||||||||||||||||||||||||
Shares issued | 10 | 16 | 12 | 15 | 13 | 34 | ||||||||||||||||||
Shares issued in lieu of cash distributions | 2 | 2 | 1 | 1 | 3 | 5 | ||||||||||||||||||
Shares redeemed | (18 | ) | (4 | ) | (8 | ) | (1 | ) | (19 | ) | (22 | ) | ||||||||||||
Total Class R transactions | (6 | ) | 14 | 5 | 15 | (3 | ) | 17 | ||||||||||||||||
Class Y: | ||||||||||||||||||||||||
Shares issued | 20,683 | 50,362 | 23,104 | 9,209 | 5,733 | 4,880 | ||||||||||||||||||
Shares issued in lieu of cash distributions | 1,694 | 2,469 | 218 | 259 | 58 | 224 | ||||||||||||||||||
Shares redeemed | (44,709 | ) | (60,581 | ) | (6,515 | ) | (7,617 | ) | (8,068 | ) | (14,964 | ) | ||||||||||||
Total Class Y transactions | (22,332 | ) | (7,750 | ) | 16,807 | 1,851 | (2,277 | ) | (9,860 | ) | ||||||||||||||
Net increase (decrease) in capital shares | (22,507 | ) | (8,410 | ) | 16,817 | 2,487 | (1,578 | ) | (9,488 | ) |
100 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | |||||||||||||||||||||||||||||
Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | Year Ended 6/30/10 | Year Ended 6/30/09 | |||||||||||||||||||||||||
Class A: | ||||||||||||||||||||||||||||||||
Shares issued | 415 | 1,743 | 588 | 346 | 3,251 | 1,786 | 1,622 | 468 | ||||||||||||||||||||||||
Shares issued from merger | 1,538 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | 47 | 24 | 88 | 120 | 206 | 205 | 76 | 112 | ||||||||||||||||||||||||
Shares redeemed | (1,044 | ) | (1,330 | ) | (651 | ) | (806 | ) | (1,476 | ) | (1,253 | ) | (504 | ) | (605 | ) | ||||||||||||||||
Total Class A transactions | 956 | 437 | 25 | (340 | ) | 1,981 | 738 | 1,194 | (25 | ) | ||||||||||||||||||||||
Class B: | ||||||||||||||||||||||||||||||||
Shares issued | — | — | — | — | — | — | 14 | 26 | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | — | — | — | — | — | — | 6 | 16 | ||||||||||||||||||||||||
Shares redeemed | — | — | — | — | — | — | (74 | ) | (92 | ) | ||||||||||||||||||||||
Total Class B transactions | — | — | — | — | — | — | (54 | ) | (50 | ) | ||||||||||||||||||||||
Class C1: | ||||||||||||||||||||||||||||||||
Shares issued | 10 | — | — | — | 345 | — | 408 | 138 | ||||||||||||||||||||||||
Shares issued from merger | 235 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | 1 | — | — | — | 2 | — | 14 | 20 | ||||||||||||||||||||||||
Shares redeemed | (25 | ) | — | — | — | (36 | ) | — | (70 | ) | (221 | ) | ||||||||||||||||||||
Total Class C transactions | 221 | — | — | — | 311 | — | 352 | (63 | ) | |||||||||||||||||||||||
Class R1: | ||||||||||||||||||||||||||||||||
Shares issued | 15 | — | — | — | — | — | 33 | 56 | ||||||||||||||||||||||||
Shares issued from merger | 102 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | 1 | — | — | — | — | — | 2 | 4 | ||||||||||||||||||||||||
Shares redeemed | (44 | ) | — | — | — | — | — | (52 | ) | (14 | ) | |||||||||||||||||||||
Total Class R transactions | 74 | — | — | — | — | — | (17 | ) | 46 | |||||||||||||||||||||||
Class Y: | ||||||||||||||||||||||||||||||||
Shares issued | 3,775 | 12,740 | 19,865 | 21,980 | 53,506 | 14,211 | 15,080 | 34,364 | ||||||||||||||||||||||||
Shares issued from merger | 9,456 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | 288 | 155 | 799 | 1,202 | 370 | 398 | 956 | 2,723 | ||||||||||||||||||||||||
Shares redeemed | (7,857 | ) | (8,797 | ) | (26,062 | ) | (24,094 | ) | (23,455 | ) | (8,043 | ) | (22,465 | ) | (74,865 | ) | ||||||||||||||||
Total Class Y transactions | 5,662 | 4,098 | (5,398 | ) | (912 | ) | 30,421 | 6,566 | (6.429 | ) | (37,778 | ) | ||||||||||||||||||||
Net increase (decrease) in capital shares | 6,913 | 4,535 | (5,373 | ) | (1,252 | ) | 32,713 | 7,304 | (4,954 | ) | (37,870 | ) |
1 | Class C and Class R shares were not offered by Intermediate Government Bond Fund, Intermediate Term Bond Fund, and Short Term Bond Fund during the fiscal year ended June 30, 2009. Intermediate Government Bond Fund began offering Class C and Class R shares on October 28, 2009. Short Term Bond Fund began offering Class C shares on October 28, 2009. |
Each fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of readily marketable securities in the fund instead of cash. Class B shares converted to Class A shares (reflected as Class A shares issued and Class B shares redeemed) during the fiscal years ended June 30, 2010 and June 30, 2009, were as follows:
Fund | Year Ended 6/30/10 | Year Ended 6/30/09 | ||||||
Core Bond Fund | 197 | 63 | ||||||
High Income Bond Fund | 60 | 26 | ||||||
Total Return Bond Fund | 48 | 16 |
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 101 |
Notes to Financial Statements June 30, 2010, all dollars and shares are rounded to thousands (000)
5> Investment Security Transactions
During the fiscal year ended June 30, 2010, purchases of securities and proceeds from sales of securities, other than temporary investments in short-term securities, were as follows:
U.S. Government Securities | Other Investment Securities | |||||||||||||||
Fund | Purchases | Sales | Purchases | Sales | ||||||||||||
Core Bond Fund | $ | 706,223 | $ | 705,959 | $ | 390,174 | $ | 724,074 | ||||||||
High Income Bond Fund | 32 | — | 547,449 | 414,457 | ||||||||||||
Inflation Protected Securities Fund | 96,264 | 111,097 | 11,852 | 12,225 | ||||||||||||
Intermediate Government Bond Fund | 188,209 | * | 156,087 | 30,504 | * | 2,563 | ||||||||||
Intermediate Term Bond Fund | 176,343 | 45,299 | 256,543 | 406,449 | ||||||||||||
Short Term Bond Fund | 180,730 | 81,229 | 356,304 | 155,590 | ||||||||||||
Total Return Bond Fund | 338,425 | 328,184 | 289,875 | 386,855 |
* | Intermediate Government Bond Fund includes $59,513 of U.S. Government Securities and $16,062 of Other Investment Securities from U.S. Government Mortgage Fund that were acquired in a fund merger as described in Note 9. These amounts are excluded for purposes of calculating the fund’s portfolio turnover rate. |
6> Options Written
Transactions in options written for the fiscal year ended June 30, 2010, were as follows:
Put Options Written | Call Options Written | |||||||||||||||
Total Return Bond Fund | Number Contracts | Premium Amount | Number Contracts | Premium Amount | ||||||||||||
Balance at June 30, 2009 | 749 | $ | 571 | 612 | $ | 329 | ||||||||||
Opened | 1,516 | 644 | 2,409 | 1,180 | ||||||||||||
Expired | (103 | ) | (47 | ) | — | — | ||||||||||
Closed | (2,162 | ) | (1,168 | ) | (3,021 | ) | (1,509 | ) | ||||||||
Balance at June 30, 2010 | — | $ | — | — | $ | — |
7> Concentration of Risks
Core Bond Fund, High Income Bond Fund, Inflation Protected Securities Fund, Intermediate Term Bond Fund, Short Term Bond Fund, and Total Return Bond Fund invest in lower-rated (e.g., rated Ba or lower by Moody’s or BB or lower by Standard & Poor’s or Fitch) corporate and foreign debt obligations, which are commonly referred to as “junk bonds.” Lower-rated securities will usually offer higher yields than higher-rated securities. However, there is more risk associated with these investments. These lower-rated bonds may be more susceptible to real or perceived adverse economic conditions than investment grade bonds. Lower-rated securities tend to have more price volatility and carry more risk to principal than higher-rated securities.
8> Indemnifications
The funds enter into contracts that contain a variety of indemnifications. The funds’ maximum exposure under these arrangements is unknown. However, the funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
102 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
9> Fund Merger
As of the close of business on January 29, 2010, Intermediate Government Bond Fund acquired the assets and assumed the liabilities of U.S. Government Mortgage Fund. Intermediate Government Bond Fund was deemed to be the accounting survivor in the merger. Shareholders of U.S. Government Mortgage Fund approved the merger on January 21, 2010.
The merger was accomplished by tax free exchanges as detailed below:
Intermediate Government Bond Fund | Class A | Class B | Class C | Class R | Class Y | Total | ||||||||||||||||||
Net assets of U.S. Government Mortgage Fund | $ | 10,604 | $ | 2,621 | $ | 2,023 | $ | 874 | $ | 81,335 | $ | 97,457 | ||||||||||||
U.S. Government Mortgage Fund shares exchanged | 1,045 | 258 | 200 | 86 | 8,012 | 9,601 | ||||||||||||||||||
Intermediate Government Bond shares issued | 1,538 | — | 235 | 102 | 9,456 | 11,331 | ||||||||||||||||||
Net assets of Intermediate Government Bond Fund immediately before the merger | $ | 8,063 | $ | — | $ | 1 | $ | 1 | $ | 87,606 | $ | 95,671 | ||||||||||||
Net assets of Intermediate Government Bond Fund immediately after the merger | $ | 21,289 | $ | — | $ | 2,024 | $ | 875 | $ | 168,940 | $ | 193,128 |
The components of U.S. Government Mortgage Fund’s net assets prior to adjustments for any permanent book-to-tax differences at the merger date were as follows:
Fund | Total Net Assets | Portfolio Capital | Undistributed Net Investment Loss | Accumulated Net Realized Loss | Net Unrealized Appreciation | |||||||||||||||
U.S. Government Mortgage Fund | $ | 97,457 | $ | 111,558 | $ | (474 | ) | $ | (13,746 | ) | $ | 119 |
10> New Accounting Pronouncements
On January 21, 2010, the Financial Accounting Standards Board issued an Accounting Standard Update for Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements. The update provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires the funds to disclose purchases, sales, issuances and settlements on a gross basis in the Level 3 rollforward rather than as one net number. The effective date of the amendment is for interim and annual periods beginning after December 15, 2010. At this time management is evaluating the implications of the update and the impact to the financial statements.
11> Subsequent Event
On July 28, 2010, U.S. Bancorp, the indirect parent company of FAF Advisors, Inc. (the “Advisor”), entered into an agreement to sell a portion of the Advisor’s asset management business to Nuveen Investments, Inc. (the “Purchaser”). Included in the sale will be that part of the Advisor’s asset management business that advises the funds. The sale is subject to the satisfaction of customary conditions, and is currently expected to close by the end of 2010.
Under the Investment Company Act of 1940, the closing of the transaction will cause each fund’s current investment advisory agreement with the Advisor to terminate. In connection with the transaction, the funds’ Board of Directors will be asked to consider and approve new investment advisory agreements for the funds with Nuveen Asset Management, a subsidiary of the Purchaser. If approved by the Board of Directors, each fund’s new investment advisory agreement will be submitted to the fund’s shareholders for their approval and, if approved, will take effect upon the closing of the transaction (or such later time as shareholder approval is obtained). The funds’ Board of Directors also will be asked to consider and approve new distribution agreements with Nuveen Investments, LLC. There will be no change in the funds’ investment objectives or policies as a result of the transaction.
Management has evaluated fund related events and transactions that occurred subsequent to June 30, 2010, through the date of issuance of the funds’ financial statements and determined that no additional events have occurred that require disclosure.
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 103 |
Notice to Shareholders June 30, 2010 (unaudited)
TAX INFORMATION
The information set forth below is for each fund’s fiscal period as required by federal laws. Most shareholders, however, must report distributions on a calendar year basis for income tax purposes, which may include distributions for portions of two fiscal periods of a fund. Accordingly, the information needed for income tax purposes will be sent in early 2011 on Form 1099-DIV. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended June 30, 2010, each fund has designated long term capital gains, ordinary income, and return of capital with regard to distributions paid during the period as follows:
Fund | Long Term Capital Gains Distributions (Tax Basis) (a) | Ordinary Income Distributions (Tax Basis) (a) | Return of Capital (Tax Basis) (a) | Total Distributions (Tax Basis) (b) | ||||||||||||
Core Bond Fund | 0.0 | % | 100.0 | % | 0.0 | % | 100.0 | % | ||||||||
High Income Bond Fund | 0.0 | 100.0 | 0.0 | 100.0 | ||||||||||||
Inflation Protected Securities Fund | 0.0 | 100.0 | 0.0 | 100.0 | ||||||||||||
Intermediate Government Bond Fund | 5.1 | 94.5 | 0.4 | 100.0 | ||||||||||||
Intermediate Term Bond Fund | 0.0 | 100.0 | 0.0 | 100.0 | ||||||||||||
Short Term Bond Fund | 0.0 | 100.0 | 0.0 | 100.0 | ||||||||||||
Total Return Bond Fund | 0.0 | 100.0 | 0.0 | 100.0 |
(a) | Based on a percentage of the fund’s total distributions. |
(b) | Except as noted below, none of the distributions made by these funds are eligible for the dividends received deduction or are characterized as qualified dividend income. |
Shareholder Notification of Federal Tax Status:
The percentage of dividends declared during the fiscal year ended June 30, 2010, that are designated as dividends qualifying for the dividends received deduction available to corporate shareholders were as follows:
Core Bond Fund | 0.15 | % | ||
High Income Bond Fund | 6.04 | |||
Inflation Protected Securities Fund | 0.63 | |||
Intermediate Term Bond Fund | 0.10 | |||
Total Return Bond Fund | 0.69 |
The percentage of dividends declared from net investment income during the fiscal year ended June 30, 2010, as qualified income available to individual shareholders under the Jobs and Growth Tax Relief Reconciliation Act of 2003 were as follows:
Core Bond Fund | 0.14 | % | ||
High Income Bond Fund | 9.01 | |||
Inflation Protected Securities Fund | 0.63 | |||
Intermediate Term Bond Fund | 0.11 | |||
Total Return Bond Fund | 0.78 |
Additional Information Applicable to Foreign Shareholders Only:
The percentage of taxable ordinary income distributions that are designated as interest-related dividends under Internal Revenue Code Section 871(k)(1)(c) for each fund were as follows:
Core Bond Fund | 99.68 | % | ||
High Income Bond Fund | 92.67 | |||
Inflation Protected Securities Fund | 93.24 | |||
Intermediate Government Bond Fund | 97.51 | |||
Intermediate Term Bond Fund | 99.95 | |||
Short Term Bond Fund | 100.00 | |||
Total Return Bond Fund | 99.03 |
104 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Code Section 871(k)(2)(c) for each fund were as follows:
Core Bond Fund | 0 | % | ||
High Income Bond Fund | 0 | |||
Inflation Protected Securities Fund | 0 | |||
Intermediate Government Bond Fund | 0 | |||
Intermediate Term Bond Fund | 0 | |||
Short Term Bond Fund | 26 | |||
Total Return Bond Fund | 0 |
HOW TO OBTAIN A COPY OF THE FUNDS’ PROXY VOTING POLICIES AND PROXY VOTING RECORD
A description of the policies and procedures that the funds use to determine how to vote proxies relating to portfolio securities, as well as information regarding how the funds voted proxies relating to portfolio securities is available at FirstAmericanFunds.com and on the U.S. Securities and Exchange Commission’s website at www.sec.gov. A description of the funds’ policies and procedures is also available without charge, upon request, by calling 800.677.3863.
FORM N-Q HOLDINGS INFORMATION
Each fund is required to file its complete schedule of portfolio holdings for the first and third quarters of each fiscal year with the Securities and Exchange Commission on Form N-Q. The funds’ Forms N-Q are available without charge (1) upon request by calling 800.677.3863 and (2) on the U.S. Securities and Exchange Commission’s website at www.sec.gov. In addition, you may review and copy the funds’ Forms N-Q at the Commission’s Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling 800.SEC.0330.
QUARTERLY PORTFOLIO HOLDINGS
Each fund will make portfolio holdings information publicly available by posting the information at FirstAmericanFunds.com on a quarterly basis. The funds will attempt to post such information within 10 business days of the calendar quarter end.
APPROVAL OF THE FUNDS’ INVESTMENT ADVISORY AGREEMENT
The Board of Directors of the Funds (the “Board”), which is comprised entirely of independent directors, oversees the management of each Fund and, as required by law, determines annually whether to renew the Funds’ advisory agreement with FAF Advisors, Inc. (“FAF Advisors”).
At a meeting on May 3-4, 2010, the Board considered information relating to the Funds’ investment advisory agreement with FAF Advisors (the “Agreement”). In advance of the meeting, the Board received materials relating to the Agreement, and had the opportunity to ask questions and request further information in connection with its consideration. At a subsequent meeting on June 15-17, 2010, the Board concluded its consideration of and approved the Agreement through June 30, 2011.
Although the Agreement, which is with First American Investment Funds, Inc., relates to all of the Funds, the Board separately considered and approved the Agreement with respect to each Fund. In considering the Agreement, the Board, advised by independent legal counsel, reviewed and analyzed the factors it deemed relevant, including: (1) the nature, quality, and extent of FAF Advisors’ services to each Fund, (2) the investment performance of the Funds, (3) the profitability of FAF Advisors related to the Funds, including an analysis of FAF Advisors’ cost of providing services and comparative expense information, (4) whether economies of scale may be realized as the Funds grow and whether fee levels are adjusted to enable Fund investors to share in these potential economies of scale, and (5) other benefits that accrue to FAF Advisors through its relationship with the Funds. In its deliberations, the Board did not identify any single factor which alone was responsible for the Board’s decision to approve the Agreement with respect to any Fund.
Before approving the Agreement, the independent directors met in executive session with their independent counsel on numerous occasions to consider the materials provided by FAF Advisors and the terms of the Agreement. Based on its evaluation of those materials, the Board concluded that the Agreement is fair and in the best interests of the shareholders of each Fund. In reaching its conclusions, the Board considered the following:
Nature, Quality, and Extent of Investment Advisory Services
The Board examined the nature, quality, and extent of the services provided by FAF Advisors to each Fund. The Board reviewed FAF Advisors’ key personnel who provide investment management services to each Fund as well as the fact that,
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 105 |
Notice to Shareholders June 30, 2010 (unaudited)
under the Agreement, FAF Advisors has the authority and responsibility to make and execute investment decisions for each Fund within the framework of that Fund’s investment policies and restrictions, subject to review by the Board. The Board further considered that FAF Advisors’ duties with respect to each Fund include: (i) investment research and security selection, (ii) adherence to (and monitoring compliance with) the Fund’s investment policies and restrictions and the Investment Company Act of 1940, and (iii) monitoring the performance of the various organizations providing services to the Funds, including the Funds’ distributor, sub-administrator, transfer agent and custodian. Finally, the Board considered FAF Advisors’ representation that the services provided by FAF Advisors under the Agreement are the types of services customarily provided by investment advisors in the fund industry. The Board also considered compliance reports about FAF Advisors from the Funds’ Chief Compliance Officer.
Based on the foregoing, the Board concluded that each Fund is likely to benefit from the nature, quality, and extent of the services provided by FAF Advisors under the Agreement.
Investment Performance of the Funds
The Board considered the performance of each Fund on a gross-of-expenses basis, including comparative information provided by an independent data service, regarding the median performance of a group of comparable funds selected by that data service (the “performance universe”) and how each Fund performed versus its benchmark index for the one-, three-, and five-year periods ending February 28, 2010.
Core Bond Fund. The Board considered that the Fund outperformed or performed competitively against its performance universe median and its benchmark index for all periods. The Board concluded that, in light of the Fund’s competitive performance, it would be in the interest of the Fund and its shareholders to renew the Agreement.
High Income Bond Fund. The Board considered that the Fund outperformed its benchmark index for the one-year period, though the Fund underperformed its benchmark index for the three- and five-year periods. The Board also considered that the Fund outperformed its performance universe median for all periods. The Board concluded that, in light of the Fund’s competitive performance, it would be in the interest of the Fund and its shareholders to renew the Agreement.
Inflation Protected Securities Fund. The Board considered that the Fund outperformed or performed competitively against its performance universe median and its benchmark index for all periods. The Board concluded that, in light of the Fund’s competitive performance, it would be in the interest of the Fund and its shareholders to renew the Agreement.
Intermediate Term Bond Fund. The Board considered that the Fund outperformed its performance universe median and its benchmark index for all periods. The Board concluded that, in light of the Fund’s competitive performance, it would be in the interest of the Fund and its shareholders to renew the Agreement.
Intermediate Government Bond Fund. The Board considered that, for all periods, the Fund outperformed its benchmark index though it underperformed its performance universe median. The Board considered that the Fund’s former goal of providing investors with current income that is exempt from state income tax resulted in a constrained investment strategy that did not lend itself well to comparisons. The Board noted that, effective August 31, 2009, the investment objective and principal strategies of the Fund were changed to allow for investments in the full range of U.S. government securities, including mortgage-related securities. The Board considered FAF Advisors’ assertion that rebalancing of the Fund’s portfolio has been completed and that the Fund is now positioned to perform well relative to its performance universe. The Board concluded that, in light of the foregoing, it would be in the interest of the Fund and its shareholders to renew the Agreement.
Short Term Bond Fund. The Board considered that the Fund outperformed or performed competitively against its performance universe median and its benchmark for all periods. The Board concluded that, in light of the Fund’s competitive performance, it would be in the interest of the Fund and its shareholders to renew the Agreement.
Total Return Bond Fund. The Board considered that the Fund outperformed its performance universe median and its benchmark index for all periods. The Board concluded that, in light of the Fund’s competitive performance, it would be in the interest of the Fund and its shareholders to renew the Agreement.
Costs of Services and Profits Realized by FAF Advisors
The Board reviewed FAF Advisors’ costs in serving as the Funds’ investment manager, including the costs associated with the personnel and systems necessary to manage the Funds. The Board also considered the profitability of FAF Advisors and its affiliates resulting from their relationship with each Fund. The Board compared fee and expense information for each Fund to fee and expense information for comparable funds managed by other advisors. The Board also reviewed advisory fees for other funds advised or sub-advised by FAF Advisors and for private accounts managed by FAF Advisors. The Board found that while the management fees for FAF Advisors’ institutional separate accounts are generally lower than the management fees
106 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
charged by FAF Advisors to mutual funds, mutual funds receive additional services from FAF Advisors that separate accounts do not receive.
Using information provided by an independent data service, the Board also evaluated each Fund’s advisory fee compared to the median advisory fee for other mutual funds similar in size, character and investment strategy, and each Fund’s total expense ratio after waivers compared to the median total expense ratio of comparable funds. In connection with its review of Fund fees and expenses, the Board considered FAF Advisors’ pricing philosophy. FAF Advisors attempts generally to maintain each Fund’s total operating expenses at a level that approximates the median of a peer group of funds selected by an independent data service. In addition, FAF Advisors has committed to waive its investment advisory fees to the extent necessary to maintain the Funds’ total expense ratios at levels generally in line with their respective peer groups.
Further detail considered by the Board regarding the advisory fees and total expense ratios of each Fund is set forth below:
High Income Bond Fund, Inflation Protected Securities Fund, Intermediate Government Bond Fund, Intermediate Term Bond Fund and Short Term Bond Fund. The Board considered that each Fund’s advisory fee, after waivers, and total expense ratio, after waivers, were equal to, or lower than, the peer group median. The Board concluded that each Fund’s advisory fee and total expense ratio are reasonable in light of the services provided.
Core Bond Fund and Total Return Bond Fund. The Board considered that, although the Fund’s advisory fee, after waivers, and total expense ratio, after waivers, were higher than the peer group median, the Fund’s total expense ratio was within a range consistent with FAF Advisors’ pricing philosophy. The Board concluded that the Fund’s advisory fee and total expense ratio are reasonable in light of the services provided.
Economies of Scale in Providing Investment Advisory Services
The Board considered whether each Fund’s investment advisory fee reflects the potential for economies of scale for the benefit of Fund shareholders. Based on information provided by FAF Advisors, the Board noted that profitability will likely increase somewhat as assets grow over time. The Board considered that, although the Funds do not have advisory fee breakpoints in place, FAF Advisors has committed to waive advisory fees to the extent necessary to keep each Fund’s total expenses generally in line with the median total expenses of a peer group of funds as selected by an independent data service. The Board considered information presented by FAF Advisors to support its assertion that the median total expense ratio of a Fund’s peer group should reflect the effect of any breakpoints in the advisory fee schedules of the funds in that group and any economies of scale which those funds realize. Therefore, by capping a Fund’s total expense ratio at a level close to the median, Fund shareholders will effectively receive the benefit of any breakpoints in the comparable funds’ advisory fee schedules and any such economies of scale. In light of FAF Advisors’ commitment to keep total Fund expenses competitive, the Board concluded that it would be reasonable and in the interest of each Fund and its shareholders to renew the Agreement.
Other Benefits to FAF Advisors
In evaluating the benefits that accrue to FAF Advisors through its relationship with the Funds, the Board noted that FAF Advisors and certain of its affiliates serve the Funds in various capacities, including as investment advisor, administrator, transfer agent, distributor, custodian and securities lending agent, and receive compensation from the Funds in connection with providing services to the Funds. The Board considered that each service provided to the Funds by FAF Advisors or one of its affiliates is pursuant to a written agreement, which the Board evaluates periodically as required by law.
After full consideration of these factors, the Board concluded that approval of each Agreement was in the interest of the respective Fund and its shareholders.
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 107 |
Notice to Shareholders June 30, 2010 (unaudited)
Directors and Officers of the Funds
Independent Directors | ||||||||||
Name, Address, and Year of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director † | |||||
Benjamin R. Field III P.O. Box 1329 Minneapolis, MN 55440-1329 (1938) | Director | Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Director of FAIF since September 2003 | Retired | First American Funds Complex: twelve registered investment companies, including fifty-six portfolios | None | |||||
Roger A. Gibson P.O. Box 1329 Minneapolis, MN 55440-1329 (1946) | Director | Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Director of FAIF since October 1997 | Director, Charterhouse Group, Inc., a private equity firm, since October 2005; Advisor/Consultant, Future Freight™, a logistics/supply chain company; Director, Towne Airfreight; non-profit board member; prior to retirement in 2005, served in several executive positions for United Airlines, including Vice President and Chief Operating Officer – Cargo; Independent Director, First American Fund Complex since 1997 | First American Funds Complex: twelve registered investment companies, including fifty-six portfolios | None | |||||
Victoria J. Herget P.O. Box 1329 Minneapolis, MN 55440-1329 (1951) | Director | Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Director of FAIF since September 2003 | Investment consultant and non-profit board member; Board Chair, United Educators Insurance Company | First American Funds Complex: twelve registered investment companies, including fifty-six portfolios | None | |||||
John P. Kayser P.O. Box 1329 Minneapolis, MN 55440-1329 (1949) | Director | Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Director of FAIF since October 2006 | Retired | First American Funds Complex: twelve registered investment companies, including fifty-six portfolios | None | |||||
Leonard W. Kedrowski P.O. Box 1329 Minneapolis, MN 55440-1329 (1941) | Director | Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Director of FAIF since November 1993 | Owner and President, Executive and Management Consulting, Inc., a management consulting firm; Board member, GC McGuiggan Corporation (dba Smyth Companies), a label printer; Member, investment advisory committee, Sisters of the Good Shepherd | First American Funds Complex: twelve registered investment companies, including fifty-six portfolios | None | |||||
Richard K. Riederer P.O. Box 1329 Minneapolis, MN 55440-1329 (1944) | Director | Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Director of FAIF since August 2001 | Owner and Chief Executive Officer, RKR Consultants, Inc., a consulting company providing advice on business strategy, mergers and acquisitions; non-profit board member since 2005 | First American Funds Complex: twelve registered investment companies, including fifty-six portfolios | Cliffs Natural Resources, Inc. (a producer of iron ore pellets and coal) | |||||
Joseph D. Strauss P.O. Box 1329 Minneapolis, MN 55440-1329 (1940) | Director | Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Director of FAIF since April 1991 | Attorney At Law, Owner and President, Strauss Management Company, a Minnesota holding company for various organizational management business ventures; Owner, Chairman, and Chief Executive Officer, Community Resource Partnerships, Inc., a corporation engaged in strategic planning, operations management, government relations, transportation planning, and public relations; Owner, Chairman, and Chief Executive Officer, Excensus™, LLC, a demographic planning and application development firm | First American Funds Complex: twelve registered investment companies, including fifty-six portfolios | None |
108 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
Independent Directors – concluded | ||||||||||
Name, Address, and Year of Birth | Position(s) Held | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director † | |||||
Virginia L. Stringer P.O. Box 1329 Minneapolis, MN 55440-1329 (1944) | Chair; Director | Chair Term three years. Directors Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Chair of FAIF’s Board since September 1997; Director of FAIF since September 1987 | Board member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institute’s Independent Directors Council; Governance consultant and non-profit board member; former Owner and President, Strategic Management Resources, Inc., a management consulting firm | None | ||||||
James M. Wade P.O. Box 1329 Minneapolis, MN 55440-1329 (1943) | Director | Term expiring earlier of death, resignation, removal, disqualification, or successor duly elected and qualified. Director of FAIF since August 2001 | Owner and President, Jim Wade Homes, a homebuilding company | First American Funds Complex: twelve registered investment companies, including fifty-six portfolios | None |
† | Includes only directorships in a company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act or subject to the requirements of Section 15(d) of the Securities Exchange Act, or any company registered as an investment company under the Investment Company Act. |
The Statement of Additional Information (SAI) includes additional information about fund directors and is available upon request without charge by calling 800.677.3863 or writing to First American Funds, P.O. Box 1330, Minneapolis, Minnesota, 55440-1330.
FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT | 109 |
Notice to Shareholders June 30, 2010 (unaudited)
Officers | ||||||
Name, Address, and Year of Birth | Position(s) Held with Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Thomas S. Schreier, Jr. FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1962)* | President | Re-elected by the Board annually; President of FAIF since February 2001 | Chief Executive Officer, FAF Advisors, Inc.; Chief Investment Officer, FAF Advisors, Inc., since September 2007 | |||
Jeffery M. Wilson FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1956)* | Vice President – Administration | Re-elected by the Board annually; Vice President – Administration of FAIF since March 2000 | Senior Vice President, FAF Advisors, Inc. | |||
Charles D. Gariboldi, Jr. FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1959)* | Treasurer | Re-elected by the Board annually; Treasurer of FAIF since December 2004 | Mutual Funds Treasurer, FAF Advisors, Inc. | |||
Jill M. Stevenson FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1965)* | Assistant Treasurer | Re-elected by the Board annually; Assistant Treasurer of FAIF since September 2005 | Mutual Funds Assistant Treasurer, FAF Advisors, Inc., since September 2005; prior thereto, Director and Senior Project Manager, FAF Advisors, Inc. | |||
David H. Lui FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1960)* | Chief Compliance Officer | Re-elected by the Board annually; Chief Compliance Officer of FAIF since March 2005 | Chief Compliance Officer, FAF Advisors, Inc. | |||
Cynthia C. DeRuyter FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1973)* | Anti-Money Laundering Officer | Re-elected by the Board annually; Anti-Money Laundering Officer of FAIF since June 2010 | Compliance Director, FAF Advisors, Inc., since March 2010; prior thereto, Compliance Manager, RSM McGladrey, Inc., since March 2006; prior thereto, Compliance Manager, FAF Advisors, Inc. | |||
Kathleen L. Prudhomme FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1953)* | Secretary | Re-elected by the Board annually; Secretary of FAIF since December 2004 | Deputy General Counsel, FAF Advisors, Inc. | |||
James D. Alt Dorsey & Whitney LLP 50 South Sixth Street Suite 1500, Minneapolis, MN 55402 (1951) | Assistant Secretary | Re-elected by the Board annually; Assistant Secretary of FAIF since December 2004; prior thereto, Secretary of FAIF since June 2002; Assistant Secretary of FAIF from September 1998 through June 2002 | Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm | |||
James R. Arnold U.S. Bancorp Fund Services, LLC 615 E. Michigan Street Milwaukee, WI 53202 (1957)* | Assistant Secretary | Re-elected by the Board annually; Assistant Secretary of FAIF since June 2003 | Senior Vice President, U.S. Bancorp Fund Services, LLC | |||
Richard J. Ertel FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1967)* | Assistant Secretary | Re-elected by the Board annually; Assistant Secretary of FAIF since June 2006 and from June 2003 through August 2004 | Counsel, FAF Advisors, Inc., since May 2006; prior thereto, Counsel, Ameriprise Financial Services, Inc., from September 2004 to May 2006 | |||
Michael W. Kremenak FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, MN 55402 (1978)* | Assistant Secretary | Re-elected by the Board annually; Assistant Secretary of FAIF since February 2009 | Counsel, FAF Advisors, Inc., since January 2009; prior thereto, Associate, Skadden, Arps, Slate, Meagher & Flom LLP, a New York City-based law firm, from September 2005 to January 2009 |
* | Messrs. Schreier, Wilson, Gariboldi, Lui, Ertel and Kremenak, Mses. Stevenson, DeRuyter and Prudhomme are each officers and/or employees of FAF Advisors, Inc., which serves as investment adviser and administrator for FAIF. Mr. Arnold is an officer of U.S. Bancorp Fund Services, LLC, which is a subsidiary of U.S. Bancorp and which serves as transfer agent for FAIF. |
110 | FIRST AMERICAN FUNDS | 2010 ANNUAL REPORT |
First American Funds’ Privacy Policy
We want you to understand what information we collect and how it’s used.
“Nonpublic personal information” is nonpublic information that we obtain while providing financial products or services to you.
Why we collect your information
We gather nonpublic personal information about you and your accounts so that we can:
• | Know who you are and prevent unauthorized access to your information. |
• | Comply with the laws and regulations that govern us. |
The types of information we collect
We may collect the following nonpublic personal information about you:
• | Information about your identity, such as your name, address, and social security number. |
• | Information about your transactions with us. |
• | Information you provide on applications, such as your beneficiaries and banking information, if provided to us. |
Confidentiality and security
We require our service providers to restrict access to nonpublic personal information about you to those employees who need that information in order to provide products or services to you. We also require them to maintain physical, electronic, and procedural safeguards that comply with applicable federal standards and regulations to guard your information.
What information we disclose
We may share all of the nonpublic personal information that we collect about you with our affiliated providers of financial services, including our family of funds and their advisor, and with companies that perform marketing services on our behalf.
We’re permitted by law to disclose nonpublic personal information about you to other third parties in certain circumstances. For example, we may disclose nonpublic personal information about you to affiliated and nonaffiliated third parties to assist us in servicing your account (e.g., mailing of fund-related materials) and to government entities (e.g., IRS for tax purposes).
We’ll continue to adhere to the privacy policies and practices described here even after your account is closed or becomes inactive.
Additional rights and protections
You may have other privacy protections under applicable state laws. To the extent that these state laws apply, we will comply with them when we share information about you. This privacy policy does not apply to your relationship with other financial service providers, such as broker-dealers. We may amend this privacy notice at any time, and we will inform you of changes as required by law.
Our pledge applies to products and services offered by:
• First American Funds, Inc. | • American Select Portfolio Inc. | |
• First American Investment Funds, Inc. | • American Municipal Income Portfolio Inc. | |
• First American Strategy Funds, Inc. | • Minnesota Municipal Income Portfolio Inc. | |
• American Strategic Income Portfolio Inc. | • First American Minnesota Municipal Income Fund II, | |
• American Strategic Income Portfolio Inc. II | Inc. | |
• American Strategic Income Portfolio Inc. III | • American Income Fund, Inc.
| |
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
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BOARD OF DIRECTORS First American Investment Funds, Inc.
Virginia Stringer
Chairperson of First American Investment Funds, Inc.
Governance Consultant; Chair Emeritus of Saint Paul Riverfront Corporation;
former Owner and President of Strategic Management Resources, Inc.
Benjamin Field III
Director of First American Investment Funds, Inc.
Retired; former Senior Financial Advisor, Senior Vice President,
Chief Financial Officer, and Treasurer of Bemis Company, Inc.
Roger Gibson
Director of First American Investment Funds, Inc.
Director of Charterhouse Group, Inc.
Victoria Herget
Director of First American Investment Funds, Inc.
Investment Consultant; Chair of United Educators Insurance Company;
former Managing Director of Zurich Scudder Investments
John Kayser
Director of First American Investment Funds, Inc.
Retired; former Principal, Chief Financial Officer, and Chief Administrative
Officer of William Blair & Company, LLC
Leonard Kedrowski
Director of First American Investment Funds, Inc.
Owner and President of Executive and Management Consulting, Inc.
Richard Riederer
Director of First American Investment Funds, Inc.
Owner and Chief Executive Officer of RKR Consultants, Inc.
Joseph Strauss
Director of First American Investment Funds, Inc.
Owner and President of Strauss Management Company
James Wade
Director of First American Investment Funds, Inc.
Owner and President of Jim Wade Homes
First American Investment Funds’ Board of Directors is comprised entirely of independent directors.
First American Funds
P.O. Box 1330
Minneapolis, MN 55440-1330
This report and the financial statements contained herein are not intended to be a forecast of future events, a guarantee of future results, or investment advice. Further, there is no assurance that certain securities will remain in or out of each fund’s portfolio. The views expressed in this report reflect those of the portfolio managers only through the period ended June 30, 2010. The portfolio managers views are subject to change at any time based upon market or other conditions. This report is for the information of shareholders of the First American Investment Funds, Inc. It may also be used as sales literature when preceded or accompanied by a current prospectus, which contains information concerning investment objectives, risks, and charges and expenses of the funds. Read the prospectus carefully before investing.
The figures in this report represent past performance and do not guarantee future results. The principal value of an investment and investment return will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
INVESTMENT ADVISOR FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, Minnesota 55402
ADMINISTRATOR FAF Advisors, Inc. 800 Nicollet Mall Minneapolis, Minnesota 55402
TRANSFER AGENT U.S. Bancorp Fund Services, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202 | CUSTODIAN U.S. Bank National Association 60 Livingston Avenue St. Paul, Minnesota 55101
DISTRIBUTOR Quasar Distributors, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202 | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 220 South Sixth Street Suite 1400 Minneapolis, Minnesota 55402
COUNSEL Dorsey & Whitney LLP 50 South Sixth Street Suite 1500 Minneapolis, Minnesota 55402 |
In an attempt to reduce shareholder costs and help eliminate duplication, First American Funds will try to limit their mailing to one report for each address that lists one or more shareholders with the same last name. If you would like additional copies, please call First American Investor Services at 800.677.3863 or visit FirstAmericanFunds.com.
0285-10 8/2010 AR-INCOME
Mutual Funds
Nuveen Taxable Income Funds
(formerly First American Taxable Income Funds)
For investors seeking attractive monthly income and portfolio diversification potential.
Semi-Annual Report
December 31, 2010
Share Class / Ticker Symbol | ||||||||||||||||||||
Fund Name | Class A | Class B | Class C | Class R3 | Class I | |||||||||||||||
Nuveen Core Bond Fund | FAFIX | FFIBX | FFAIX | FFISX | FFIIX | |||||||||||||||
Nuveen High Income Bond Fund | FJSIX | FJSBX | FCSIX | FANSX | FJSYX | |||||||||||||||
Nuveen Inflation Protected Securities Fund | FAIPX | — | FCIPX | FRIPX | FYIPX | |||||||||||||||
Nuveen Intermediate Government Bond Fund | FIGAX | — | FYGCX | FYGRX | FYGYX | |||||||||||||||
Nuveen Intermediate Term Bond Fund | FAIIX | — | NTIBX | — | FINIX | |||||||||||||||
Nuveen Short Term Bond Fund | FALTX | — | FBSCX | — | FLTIX | |||||||||||||||
Nuveen Total Return Bond Fund | FCDDX | FCBBX | FCBCX | FABSX | FCBYX |
NUVEEN INVESTMENTS COMPLETES STRATEGIC COMBINATION WITH FAF ADVISORS
On December 31, 2010, Nuveen Investments completed the strategic combination between Nuveen Asset Management, LLC, the largest investment affiliate of Nuveen Investments, and FAF Advisors. As part of this transaction, U.S. Bancorp—the parent of FAF Advisors—received cash consideration and a 9.5% stake in Nuveen Investments in exchange for the long term investment business of FAF Advisors, including investment-management responsibilities for the non-money market mutual funds of the First American Funds family.
The approximately $27 billion of mutual fund and institutional assets managed by FAF Advisors, along with the investment professionals managing these assets and other key personnel, have become part of Nuveen Asset Management, LLC. With these additions to Nuveen Asset Management, LLC, this affiliate now manages more than $100 billion of assets across a broad range of strategies from municipal and taxable fixed income to traditional and specialized equity investments.
This combination does not affect the investment objectives or strategies of the Funds included in this report. Over time, Nuveen Investments expects that the combination will provide even more ways to meet the needs of investors who work with financial advisors and consultants by enhancing the multi-boutique model of Nuveen Investments, which also includes highly respected investment teams at HydePark, NWQ Investment Management, Santa Barbara Asset Management, Symphony Asset Management, Tradewinds Global Investors and Winslow Capital. Nuveen Investments managed approximately $195 billion of assets as of December 31, 2010.
Must be preceded or accompanied by a prospectus.
Mutual fund investing involves risk; principal loss is possible.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
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Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Any reference to credit ratings for portfolio holdings denotes the highest rating assigned by a Nationally Recognized Statistical Rating Organization (NRSRO) such as Standard & Poor’s, Moody’s or Fitch. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below investment grade. Holdings and ratings may change over time.
CHAIRMAN’S LETTER TO SHAREHOLDERS
Dear Shareholders, |
On behalf of my fellow directors, I would like to welcome you to the Nuveen Investments family. You will notice a new name for your Fund, and a new look to this report — but the investment objective and strategies of your Fund remain the same. All of us associated with Nuveen Investments and FAF Advisors have worked diligently to make the transition of the management of your Fund as seamless as possible, and we look forward to continue providing the attractive income and return you have come to expect from your investment. |
The global economy recorded another year of recovery from the financial and economic crises of 2008, but many of the factors that caused the crises still weigh on the prospects for continued recovery. In the U.S., ongoing weakness in housing values is putting pressure on homeowners and mortgage lenders. Similarly, the strong earnings recovery for corporations and banks has not been translated into increased hiring or more active lending. In addition, media and analyst reports on the fiscal conditions of various state and local entities have raised concerns with some investors. Globally, deleveraging by private and public borrowers is inhibiting economic growth and this process is far from complete. |
Encouragingly, a variety of constructive actions are being taken by governments around the world to stimulate further recovery. In the U.S., the recent passage of a stimulatory tax bill relieves some of the pressure on the Federal Reserve System to promote economic expansion through quantitative easing and offers the promise of faster economic growth. A number of European governments are undertaking programs that could significantly reduce their budget deficits. Governments across the emerging markets are implementing various steps to deal with global capital flows without undermining international trade and investment. |
The success of these government actions could have an important impact on whether 2011 brings further economic recovery and financial market progress. One risk associated with the extraordinary efforts to strengthen U.S. economic growth is that the debt of the U.S. government will continue to grow to unprecedented levels. Another risk is that over time there could be upward pressures on asset values in the U.S. and abroad, because what happens in the U.S. impacts the rest of the world economy. We must hope that the progress made on the fiscal front in 2010 will continue into 2011. In this environment, your Nuveen investment team continues to seek sustainable investment opportunities and to remain alert to potential risks in a recovery still facing many headwinds. On your behalf, we monitor their activities to assure they maintain their investment disciplines. |
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead. |
Sincerely, |
Robert P. Bremner |
Chairman of the Board and Lead Independent Director |
February 22, 2011 |
Nuveen Investments | 1 |
Portfolio Manager Commentary and Fund Performance
Nuveen Core Bond Fund (formerly known as First American Core Bond Fund)
The portfolio managers for the Fund during the six-month reporting period, Chris Neuharth, Timothy Palmer, Wan-Chong Kung, and Jeffrey Ebert, recently examined key investment strategies and the performance of the Nuveen Core Bond Fund. Chris Neuharth, CFA, who has 30 years of investment experience, has managed the Fund since 2006. Timothy Palmer, CFA, with 25 years of investment experience, Wan-Chong Kung, CFA, with 27 years of investment experience, and Jeffrey Ebert, with 20 years of investment experience, have been part of the management team for the Fund since 2003, 2001, and 2005, respectively.
How did the Fund perform during the six-month reporting period ended December 31, 2010?
During the six months ending December 31, 2010, the Nuveen Core Bond Fund returned 2.99% (Class A Shares at net asset value). In comparison, the unmanaged Barclays Capital U.S. Aggregate Bond Index returned 1.15% and the Lipper Intermediate Investment Grade Debt Funds Category Average returned 2.26% during the same period. The table on page 14 provides additional Class A Share total returns for the Fund for the one-year, five-year, and ten-year reporting periods ending December 31, 2010.
The economy appeared to be losing steam as we entered the reporting period due to concerns about the European financial system and a slowdown in U.S. consumer spending. Fixed-income markets were fearful of a double-dip recession and were in risk on/risk off mode, with little investor conviction regarding the durability of the economic recovery or risk appetite amid high levels of market volatility. Ultimately, policy initiatives proved supportive of European sovereigns, corporate earnings were again very strong, consumer deleveraging transformed into consumer spending, and the labor market showed signs of modest improvement.
Following the Federal Reserve’s November announcement of another round of balance sheet expansion, the Treasury market was rocked by concerns about the accommodative monetary policy and the potential longer term fiscal and inflation issues. Extension of the Bush-era tax cuts, although certainly not unexpected, gave deficit hawks more reason to fret and fueled consternation about a “bond bubble” in media headlines. Rates climbed steadily during late 2010 as poor duration positioning by some investors, ongoing hedging activity of excess mortgage duration by servicers, and a lack of overseas appetite for U.S. government bonds applied continuous pressure to the interest rate markets. Conversely, what was bad for rates was good for riskier assets. Improving fundamentals propelled higher beta fixed-income assets such as high-yield corporates and longer maturity, high-quality, commercial mortgage-backed securities (CMBS) to outperform Treasuries by wide margins with returns in excess of 10%. Market technicals continued to be extremely supportive for non-government bonds as retail investors pushed more than $200 billion into taxable fixed-income funds of all types in 2010, much of it later in the year, in search of higher yields.
The Fund enjoyed strong performance relative to both its benchmark and against its peers during the reporting period. Because we believed that the economy would avoid a renewed downturn, we positioned the Fund with an overweight to corporate bonds, particularly financials, and CMBS which generally outperform in times of expanding earnings and strong growth, and a significant underweight in Treasuries. Overall, our sector positioning accounted for more than half of the Fund’s outperformance relative to the benchmark while our lower quality bias and security selection within the corporate and mortgage sectors accounted for the balance.
On the negative side, although we positioned the Fund with an overall portfolio duration, or sensitivity to interest-rate movements, around neutral, our curve exposure was biased toward a flatter yield curve. This strategy was a modest drag on returns as the short and intermediate portions of the curve were better anchored than the long end by stable monetary policy and Treasury buybacks amid the rise in rates.
What strategies were used to manage the Fund? How did these strategies influence performance?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. We use a highly collaborative, research-driven approach that we believe offers the best opportunity to achieve consistent, superior long-term performance on a risk-adjusted basis across the full range of market environments.
Given our view that economic growth would continue at a slow pace and that policy would remain supportive of global financial issues, we’ve continued to favor the non-government sectors of the bond market. From a sector perspective, the Fund maintained a significant underweight to Treasuries, agencies, and, to a lesser extent, agency mortgage-backed securities (MBS) over the reporting period. On the flip side, the Fund’s exposure to corporate bonds, both high-grade and high-yield, was typically between 40% and 45% of portfolio assets over the period. Likewise, the Fund has a nearly 20% exposure to the CMBS and asset-backed securities (ABS) sectors, which benefited greatly from improving fundamentals and lack of new issuance in these market segments. This exposure remained intact heading into 2011 as values continued to be attractive compared to long-term
2 | Nuveen Investments |
averages and credit metrics continued to show improvement.
Additionally, as the economy gained momentum later in the year, we shifted the Fund’s exposure out of high-grade corporates to high-yield bonds and new issue non-senior CMBS. We believed these sectors were poised to benefit from strong investor demand for higher income-producing securities given the supportive macro environment. Our bias to be overweight financials, in our view the most attractively priced investment-grade corporate sector, also paid off as the sector posted excess returns of more than 400 basis points over the reporting period. We typically positioned the Fund with between 12% and 15% of assets in the financial sector over the time period, with a bias toward systemically important domestic institutions with improving capital bases and stable to improving credit profiles. We have continued to shade the Fund’s mortgage exposure toward an underweight. We believe this sector will need to gradually cheapen in the absence of an institutional buyer such as the Fed or government sponsored enterprises (GSEs), who have been large sponsors of MBS over the past decade, but have now moved into runoff mode.
Our duration policy was close to neutral compared to the Fund’s benchmark during the period. Although the economic landscape is improving, we expect that the Fed will be on hold into 2012. As much as we’d like to establish a long-term defensive duration position, we believe that rates are currently fairly priced and don’t see significant movement higher for the time being.
Nuveen Investments | 3 |
Nuveen High Income Bond Fund (formerly known as First American High Income Bond Fund)
The portfolio managers for the Fund during the six-month reporting period, John Fruit, Greg Hanson, and Jeffrey Schmitz, recently examined key investment strategies and the performance of the Nuveen High Income Bond Fund. John Fruit, CFA, who has 23 years of investment experience, has managed the Fund since 2006. Jeffrey Schmitz, CFA, with 24 years of investment experience, has been part of the management team for the Fund since 2008. Effective January 1, 2011, Greg Hanson is no longer a portfolio manager of the Fund.
How did the Fund perform during the six-month reporting period ended December 31, 2010?
During the six months ending December 31, 2010, the Nuveen High Income Bond Fund returned 12.16% (Class A Shares at net asset value). In comparison, the unmanaged Barclays Capital U.S. High Yield 2% Issuer Capped Bond Index returned 10.04% and the Lipper High Current Yield Funds Category Average returned 10.19% during the same period. The table on page 14 provides additional Class A Share total returns for the Fund for the one-year, five-year, and since inception reporting periods ending December 31, 2010.
During the six-month period, the high-yield market enjoyed very strong performance, overcoming the mid-year concerns surrounding the European sovereign crisis and persistent macroeconomic fears in the United States. The anchor of high cash coupons from high-yield bonds in a low-interest rate market provided much support for the high-yield market, as did the record inflows into the asset class. While higher quality, BB-rated bonds fared better in the first half of the year, CCC-rated bonds were the best performers in the last six months of 2010.
Against this backdrop, the Fund’s relative performance was aided by tactically adding to higher-yielding securities and from overweighting more cyclical industries. For example, we added securities in the oil field services, technology, and media sectors to take advantage of the higher yields and improving fundamentals in these areas. We tended to underweight the more defensive areas such as utilities and healthcare. The strong high-yield market was bolstered by the ability of high-yield companies to successfully refinance debt and extend maturities while locking in low rates. We were fortunate to experience no defaults in the Fund during the six-month reporting period. An improvement in corporate liquidity tends to reward lower quality companies and issuers, and provided another reason to add to single-B and CCC-rated at the expense of BB-rated bonds, which tend to be more interest-rate sensitive.
Emerging market debt also performed well in the latter half of 2010 as world economic prospects improved. In addition to the strong technical backdrop, corporate credit fundamentals remained on an improving trajectory. While the Fund maintained only a 5% weighting to emerging market corporates, the strong performance by the international sector helped performance.
On the negative side, the Fund’s below-market exposure to the financial sector was a slight detractor to results when measured vs. the index. As many of these issuers were new entrants to the high-yield universe coming out of the financial crisis, they were off the radar screen of traditional high-yield investors. However, financials were among the very best performers for both the second half of 2010 as well as the full year, registering nearly 25% returns for the year vs. the broad high-yield market return of 14.94%, as measured by the Barclays Capital U.S. High Yield 2% Issuer Capped Bond Index.
What strategies were used to manage the Fund? How did these strategies influence performance?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. We use a highly collaborative, research-driven approach that we believe offers the best opportunity to achieve consistent, superior long-term performance on a risk-adjusted basis across the full range of market environments.
Heading into the beginning of the reporting period, we had added to the Fund’s Treasury duration as a hedge against further market volatility like we experienced last May. During that period, a substantial correction in risky assets occurred broadly, with only Treasuries posting positive returns as European sovereign concerns took center stage. Certain portfolio positions such as financial preferreds and hybrid securities suffered during this period. As mixed economic data in July and August turned slightly more positive from September on, the appetite for risk improved. However, continued macro fears persisted, leading the Federal Reserve to announce a second round of quantitative easing, benefiting not only our hedge position in Treasuries, but also the riskiest of high-yield securities. We gradually became more constructive on the market and began to add lower-rated debt and higher yielding securities. We also gravitated toward sectors that are perceived to be more cyclical in nature, such as media, basic materials, and industrials. Additionally, we added selectively to financial issues, which were benefiting greatly from the general reparation of bank and insurance company balance sheets.
As mentioned, investment flows into the high-yield asset class were brisk and we shared in receiving healthy inflows into the Fund. Meanwhile, high-yield supply mostly met this demand through record primary market issuance of new bonds, having priced $262.7 billion in 2010. This new issuance shattered the prior record set in 2009 by more than 70%. We were able to use this heavy new issue calendar to selectively add to new investment opportunities. One of the benefits of using the new issue
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calendar is the ability to add bonds trading near par; conversely, many secondary issues trade at significant premiums and also have call features that may prevent meaningful upside.
We also used the more favorable period for financials to add to select closed-end funds and preferred stocks. Specifically, we used the weakness during the early part of the reporting period to add to floating-rate bank preferred securities of Bank of America and Goldman Sachs. Following the concerns surrounding the European sovereign crisis, many closed-end funds that own investment-grade, high-yield, and emerging market debt sold off to trade at significant discounts to net asset value, presenting an opportunity. Finally, we added a handful of oil-services bonds to the Fund that are backed by physical interests in oil rigs. In the aftermath of the Gulf of Mexico oil spill in the spring, these securities had cheapened to very attractive levels.
Nuveen Investments | 5 |
Nuveen Inflation Protected Securities Fund (formerly known as First American Inflation Protected Securities Fund)
The portfolio manager for the Fund during the six-month reporting period, Wan-Chong Kung, recently examined key investment strategies and the performance of the Nuveen Inflation Protected Securities Fund. Wan-Chong Kung, CFA, who has 27 years of investment experience, has managed the Fund since its inception in 2004.
Effective January 1, 2011, Chad Kemper, with 12 years of investment experience, has become a co-portfolio manager.
How did the Fund perform during the six-month reporting period ended December 31, 2010?
During the six months ending December 31, 2010, the Nuveen Inflation Protected Securities Fund returned 2.05% (Class A Shares at net asset value). In comparison, the unmanaged Barclays Capital U.S. TIPS Index returned 1.82% and the Lipper U.S. Treasury Inflation Protected Securities Category Average returned 2.10% during the same period. The table on page 14 provides additional Class A Share total returns for the Fund for the one-year, five-year, and since inception reporting periods ending December 31, 2010.
During the period, the economy pulled out of the mid-year growth scare caused by the European debt crisis, showing signs of long-term stability and resulting in meaningful upgrades to long-term growth forecasts. After a fall rally in rates induced by the prospects of additional Federal Reserve balance sheet expansion, rates retraced the drop and rose as the fourth quarter progressed. As the economy gained steam, equities rallied significantly. With the Fed’s balance sheet expansion providing comfort to the market that policy would remain supportive of risk-taking, investors were eager to move money off the sidelines. Retail investors pushed more than $200 billion into taxable fixed-income funds of all types in 2010, much of it later in the year, in search of higher yields. Fixed-income risk premiums tightened steadily, leading to meaningful outperformance by non-government securities such as corporate bonds, commercial mortgage-backed securities (CMBS), and asset-backed securities (ABS). Not surprisingly, high-yield bonds performed quite well, posting roughly a 10% return in the second half of 2010.
Early in the period, yields for Treasury Inflation-Protected Securities (TIPS) couldn’t keep pace with falling rates for nominal Treasuries as the market reflected markedly lower growth and low near-term inflation outlooks. This caused TIPS to underperform regular Treasuries in the first two months of the semi-annual reporting period. However, as the period progressed, greater optimism surrounding the economic recovery combined with stronger incoming economic data led to higher inflation expectations. Yields for TIPS rose, but by less than nominal Treasury yields, helping the segment to recover strongly and close ahead for the period.
The Fund outperformed its Barclays Capital benchmark and performed in line with its Lipper peer group for the period. We maintained an underweight position to TIPS throughout, which proved favorable in the initial months of the period, but was then detrimental in the latter months as TIPS outperformed nominal Treasuries. Within the TIPS segment, the portfolio was rewarded for its underweight position in 5-year maturity TIPS in the first few months, against a position in nominal Treasuries, as that segment bore the brunt of tighter breakeven spreads. Toward the middle of the period, we benefited from our move to an overweight position in longer maturity TIPS. By overweighting longer vs. shorter maturity TIPS, the Fund captured the relative breakeven performance on the curve. Additionally, we made an advantageous reallocation out of longer TIPS and into 5-year maturities in the final months of the reporting period, which helped us capture the relative outperformance of the 5-year securities on the TIPS yield curve.
In the strong-performing environment for risk assets, the Fund’s allocations to non-TIPS spread sectors – such as CMBS and ABS – provided solid excess returns and contributed positively to performance. Foreign exposure also added to results with positions in non-dollar bonds and currency exposures performing well, particularly our emphasis on commodity sensitive economies and currencies such as Canada and Australia. However, our Fund’s tactical duration, or sensitivity to interest rates, for the most part detracted from returns during the period.
What strategies were used to manage the Fund? How did these strategies influence performance?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. We use a highly collaborative, research-driven approach that we believe offers the best opportunity to achieve consistent, superior long-term performance on a risk-adjusted basis across the full range of market environments.
We began the semi-annual reporting period with a modest underweight position in all TIPS segments, particularly 5-year maturities, which proved beneficial as TIPS underperformed. However, as time progressed, our underweight to TIPS hindered results. Improvements in economic data supported investors’ more optimistic outlook for growth, which in turn increased investors’ appetite for inflation protection, causing TIPS to outperform nominal Treasuries. Throughout the period, the Fund benefited from its steady allocation to the high-yield corporate debt, CMBS, and ABS sectors as these segments turned in strong results in light of the strengthening economy. Toward the end of 2010, we began looking for more opportunities in those sectors
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based on the positive backdrop described earlier. At the same time, we shifted our emphasis in the TIPS portion of the portfolio toward 5-year maturities while underweighting 10-year and longer maturities. We believed positive growth trends – combined with strong commodity price gains and the return of more favorable seasonal Consumer Price Index prints toward the end of the period – would favor TIPS performance, particularly in shorter, 5-year maturities.
We continued to manage the duration of the Fund on a tactical basis, adjusting to current market conditions using its nominal Treasury positions. The Fund began the reporting period with a short to neutral duration position vs. the benchmark, which detracted from results as rates for nominal bonds and TIPS raced lower. We moved the Fund to a long duration later in the period, which also proved unsuccessful as rates continued to sell off.
Nuveen Investments | 7 |
Nuveen Intermediate Government Bond Fund (formerly known as First American Intermediate Government Bond Fund)
The portfolio managers for the Fund during the six-month reporting period, Wan-Chong Kung, Chris Neuharth, and Jason O’Brien, recently examined key investment strategies and the performance of the Nuveen Intermediate Government Bond Fund. Wan-Chong Kung, CFA, who has 27 years of investment experience, has managed the Fund since 2002. Chris Neuharth, CFA, with 30 years of investment experience, and Jason O’Brien, CFA, with 18 years of investment experience, have been on the Fund’s management team since 2009.
How did the Fund perform during the six-month reporting period ended December 31, 2010?
During the six months ending December 31, 2010, the Nuveen Intermediate Government Bond Fund returned 1.06% (Class A Shares at net asset value). In comparison, the unmanaged Barclays Capital Intermediate Government Bond Index returned 0.54% and the Lipper Intermediate U.S. Government Funds Category Average returned 0.32% during the same period. The table on page 14 provides additional Class A Share total returns for the Fund for the one-year, five-year, and since inception reporting periods ending December 31, 2010.
During the six-month period, the economy pulled out of the mid-year growth scare caused by the European debt crisis, showing signs of long-term stability and resulting in meaningful upgrades to long-term growth forecasts. After a fall rally in rates induced by prospects of additional Federal Reserve balance sheet expansion, rates retraced the drop and rose as the fourth quarter progressed. Yields on 10-year Treasuries moved higher by 36 basis points over the six-month period, causing the 2-to 10-year yield curve to steepen. As the economy gained steam, equities rallied significantly. With the Fed’s balance sheet expansion providing comfort to the market that policy would remain supportive of risk-taking, investors were eager to move money off the sidelines. Retail investors pushed more than $200 billion into taxable fixed-income funds of all types in 2010, much of it later in the year, in search of higher yields. Fixed-income risk premiums tightened steadily, leading to meaningful outperformance by non-government securities such as corporate bonds, commercial mortgage-backed securities (CMBS), and asset-backed securities (ABS). Not surprisingly, high-yield bonds performed quite well, posting roughly a 10% return in the second half of 2010.
The Fund’s performance relative to its benchmark and peers benefited from allocations to risk assets within the fixed-income marketplace. Specifically, its overweight positions in CMBS, mortgage-backed securities (MBS), and ABS provided a significant amount of the Fund’s excess returns. These sectors produced stellar results as they benefited not only from improving fundamentals as the economic recovery gained momentum, but also a lack of new issuance in these market segments. The Fund was also rewarded for its significant underweight to nominal U.S. Treasuries as the Treasury market was rocked by concerns about the Fed’s accommodative monetary policy and the potential for longer term fiscal and inflation issues. However, our small allocation to Treasury Inflation-Protected Securities (TIPS), which we actually increased during the period, helped the Fund’s results. The TIPS segment outperformed nominal Treasuries by about 50 basis points. On the negative side, we positioned the Fund with a longer duration, or sensitivity to interest rates, later in the period, which proved unsuccessful as rates continued to sell off.
What strategies were used to manage the Fund? How did these strategies influence performance?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. We use a highly collaborative, research-driven approach that we believe offers the best opportunity to achieve consistent, superior long-term performance on a risk-adjusted basis across the full range of market environments.
During the six-month period, we reduced the Fund’s Treasury exposure by about 15% because we believed we could find more compelling opportunities in risk assets. We used the proceeds from the sales to fund purchases in agency debt, CMBS, and TIPS. Within agency debt, we boosted the Fund’s weighting by approximately 11% as the sector cheapened and the outlook remained strong for continued U.S. Treasury support of the segment. In CMBS, we increased the Fund’s allocation by about 2% because we liked the stronger macroeconomic backdrop, improving commercial real estate fundamentals, and attractive valuations we still could find in that sector. A cheapening in TIPS valuations also provided an opportune time to increase the Fund’s exposure in TIPS by approximately 2% as the stronger economic climate brought back some inflationary concerns. We roughly maintained the Fund’s same overweight allocations to MBS and ABS. During the Treasury market selloff, we used the cheapening of intermediate maturity Treasuries, in the 5- to 10-year range, to reduce the Fund’s underweight in that segment.
After lengthening the duration of the Fund later in the period, we quickly retreated to a more neutral stance. Although the economic landscape is improving, we expect that the Fed will be on hold into 2012. As much as we’d like to establish a long-term defensive duration position, we believe that rates are currently fairly priced and don’t see significant movement higher for the time being.
8 | Nuveen Investments |
Nuveen Intermediate Term Bond Fund (formerly known as First American Intermediate Term Bond Fund)
The portfolio managers for the Fund during the six-month reporting period, Wan-Chong Kung and Jeffrey Ebert, recently examined key investment strategies and the performance of the Nuveen Intermediate Term Bond Fund. Wan-Chong Kung, CFA, who has 27 years of investment experience, has managed the Fund since 2002 and Jeffrey Ebert, with 20 years of investment experience, since 2000.
How did the Fund perform during the six-month reporting period ended December 31, 2010?
During the six months ending December 31, 2010, the Nuveen Intermediate Term Bond Fund returned 2.15% (Class A Shares at net asset value). In comparison, the unmanaged Barclays Capital U.S. Intermediate Government/Credit Bond Index returned 1.27% and the Lipper Short-Intermediate Investment Grade Debt Funds Category Average returned 1.64% during the same period. The table on page 14 provides additional Class A Share total returns for the Fund for the one-year, five-year, and ten-year reporting periods ending December 31, 2010.
During the six-month period, the economy pulled out of the mid-year growth scare caused by the European debt crisis, showing signs of long-term stability and resulting in meaningful upgrades to long-term growth forecasts. After a fall rally in rates induced by prospects of additional Federal Reserve balance sheet expansion, rates retraced the drop and rose as the fourth quarter progressed. Yields on 10-year Treasuries moved higher by 36 basis points over the six-month period, causing the 2-to 10-year yield curve to steepen. As the economy gained steam, equities rallied significantly. With the Fed’s balance sheet expansion providing comfort to the market that policy would remain supportive of risk-taking, investors were eager to move money off the sidelines. Retail investors pushed more than $200 billion into taxable fixed-income funds of all types in 2010, much of it later in the year, in search of higher yields. Fixed-income risk premiums tightened steadily, leading to meaningful outperformance by non-government securities such as corporate bonds, commercial mortgage-backed securities (CMBS), and asset-backed securities (ABS). Not surprisingly, high-yield bonds performed quite well, posting roughly a 10% return in the second half of 2010.
The Fund’s performance relative to its benchmark and peers benefited from allocations to risk assets within the fixed-income marketplace. Specifically, its overweight positions in mortgage-backed securities (MBS), corporate bonds, and ABS provided a significant amount of the Fund’s excess returns. These sectors produced stellar results as they benefited not only from improving fundamentals as the economic recovery gained momentum, but also a lack of new issuance in these market segments. The Fund was also rewarded for its significant underweight to nominal U.S. Treasuries as the Treasury market was rocked by concerns about the Fed’s accommodative monetary policy and the potential longer term fiscal and inflation issues. However, our small allocation to Treasury Inflation-Protected Securities (TIPS), which we actually increased during the period, helped the Fund’s results. The TIPS segment outperformed nominal Treasuries by about 50 basis points. On the negative side, we positioned the Fund with a longer duration, or sensitivity to interest rates, later in the period, which proved unsuccessful as rates continued to sell off.
What strategies were used to manage the Fund? How did these strategies influence performance?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. We use a highly collaborative, research-driven approach that we believe offers the best opportunity to achieve consistent, superior long-term performance on a risk-adjusted basis across the full range of market environments.
During the six-month period, we reduced the Fund’s Treasury exposure by approximately 5% because we believed we could find more compelling opportunities in risk assets. We used the proceeds from the sales to fund purchases in CMBS and TIPS. In CMBS, we increased the Fund’s allocation by about 5% because we liked the stronger macroeconomic backdrop, improving commercial real estate fundamentals, and attractive valuations we still could find in that sector. A cheapening in TIPS valuations also provided an opportune time to increase the Fund’s exposure in TIPS by approximately 2% as the stronger economic climate brought back some inflationary concerns. We roughly maintained the Fund’s same overweight allocations to MBS, corporates, and ABS. Within agency debt, we kept the Fund’s underweight position because we believed other sectors offered better spread tightening potential. During the Treasury market selloff, we used the cheapening of intermediate maturity Treasuries, in the 5- to 10-year range, to reduce the Fund’s underweight in that segment.
After lengthening the duration of the Fund later in the period, we quickly retreated to a more neutral stance. Although the economic landscape is improving, we expect that the Fed will be on hold into 2012. As much as we’d like to establish a long-term defensive duration position, we believe that rates are currently fairly priced and don’t see significant movement higher for the time being.
Nuveen Investments | 9 |
Nuveen Short Term Bond Fund (formerly known as First American Short Term Bond Fund)
The portfolio managers for the Fund during the six-month reporting period, Chris Neuharth and Marie Newcome, recently examined key investment strategies and the performance of the Nuveen Short Term Bond Fund. Chris Neuharth, CFA, who has 30 years of investment experience, has managed the Fund since 2004.
Effective January 1, 2011, Marie Newcome is no longer a portfolio manager of the Fund. Peter Agrimson, CFA, with 6 years of investment experience joined the Fund’s management team.
How did the Fund perform during the six-month reporting period ended December 31, 2010?
During the six months ending December 31, 2010, the Nuveen Short Term Bond Fund returned 1.46% (Class A Shares at net asset value). In comparison, the unmanaged Barclays Capital 1-3 Year Government/Credit Bond Index returned 0.83% and the Lipper Short Investment Grade Debt Funds Category Average returned 1.48% during the same period. The table on page 14 provides additional Class A Share total returns for the Fund for the one-year, five-year, and ten-year reporting periods ending December 31, 2010.
During the six-month period, the economy pulled out of the mid-year growth scare caused by the European debt crisis, showing signs of long-term stability and resulting in meaningful upgrades to long-term growth forecasts. After a fall rally in rates induced by prospects of additional Federal Reserve balance sheet expansion, rates retraced the drop and rose as the fourth quarter progressed. Short Treasury rates ended the reporting period roughly unchanged while longer term rates rose modestly. As the economy gained steam, equities rallied significantly. With the Fed’s balance sheet expansion providing comfort to the market that policy would remain supportive of risk-taking, investors were eager to move money off the sidelines. Fixed-income risk premiums tightened steadily, leading to meaningful outperformance by non-government securities such as corporate bonds, commercial mortgage-backed securities (CMBS), and asset-backed securities (ABS). Not surprisingly, high-yield bonds performed quite well, posting roughly a 10% return in the second half of 2010.
Because we believed that the economy would avoid a renewed downturn, we positioned the Fund with an overweight to corporate bonds, which generally outperform in times of expanding earnings and strong growth, and a significant underweight in Treasuries. Additionally, as the economy gained momentum, we added to the Fund’s exposure to high-yield bonds, which seemed poised to benefit from strong investor demand for higher income producing securities given the supportive macro environment. The Fund performed well relative to its benchmark over the reporting period, with roughly three-fourths of the excess return generated by its diversified high-grade sector overweights, particularly financials and CMBS. Our crossover high-yield corporate positioning added the balance of the Fund’s outperformance. These sector decisions were positive contributors to the Fund’s solid peer group performance for the reporting period as well.
At the same time, given the extremely low level of short-term rates, we positioned the Fund with a long-term strategic bias to be near the short end of the one- to three-year duration band allowed by policy. This decision put the Fund’s duration, or sensitivity to interest-rate movements, more than a half year short of the benchmark’s duration. As short rates remained stubbornly low, this strategy was a modest drag on performance relative to the Barclays Capital benchmark. However, it was beneficial relative to our peers as most competitors appeared to manage to a slightly longer duration than the benchmark over the reporting period.
What strategies were used to manage the Fund? How did these strategies influence performance?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. We use a highly collaborative, research-driven approach that we believe offers the best opportunity to achieve consistent, superior long-term performance on a risk-adjusted basis across the full range of market environments.
Going into the reporting period, our fundamental domestic macro view was fairly constructive and centered on continued accommodative monetary and fiscal policy, strong company earnings, improving corporate balance sheets, and gradual improvements in both the labor market and consumer spending. We also believed that – outside of ongoing struggles with the peripheral countries in Europe – the global economy was recovering, if not expanding, and that this would be supportive of domestic growth. Toward the end of the reporting period, these views were generally validated. While we didn’t make significant changes to portfolio strategy, we did gradually raise the Fund’s exposure to non-investment grade securities, a sector of the market that we believed would benefit the most from the improvement in economic fundamentals. As other investors embraced higher risk fixed-income securities and money continued to flow into fixed-income funds, demand for higher yielding fixed-income assets was strong.
Our sector allocations and security selection were the primary drivers of the Fund’s returns during period and remain our most important strategies going forward. Because we continued to expect private sector debt to outperform public sector debt, we maintained the Fund’s
10 | Nuveen Investments |
overweight in non-government spread sectors. We received significant amounts of new cash into the Fund which allowed us to take advantage of market opportunities. Many of the Fund’s purchases involved either the new issue CMBS market or the secondary non-agency mortgage-related sector. We have been eager to add new issue CMBS as these bonds are backed by extremely clean loans with strong credit characteristics. Our purchases in the non-agency market were generally very short, high-quality cash flow bonds. The majority of these bonds were secondary pieces that cheapened up modestly due to ongoing concerns about mortgage representations and warranties. As always, we performed our own credit and cash-flow analysis in evaluating bonds in these market sectors.
With rates at historic lows, we remain committed to maintaining a defensive interest rate posture in the Fund. We continue to manage duration toward the lower end of the 1- to 3-year policy range. We have added to the Fund’s exposure in high-quality floating rate product to mitigate the negative impact of higher rates on the value of the Fund.
Nuveen Investments | 11 |
Nuveen Total Return Bond Fund (formerly known as First American Total Return Bond Fund)
The portfolio managers for the Fund during the six-month reporting period, Timothy Palmer, Jeffrey Ebert, Wan-Chong Kung, and Chris Neuharth, recently examined key investment strategies and the performance of the Nuveen Total Return Bond Fund. Timothy Palmer, CFA, with 25 years of investment experience, has been the lead manager of the Fund since 2005. Jeffrey Ebert, who has 20 years of investment experience, has been on the management team since 2000.
Effective January 1, 2011, Wan-Chong Kung and Chris Neuharth are no longer portfolio managers of the Fund. Marie Newcome, CFA, with 19 years of investment experience, joined the Fund’s portfolio management team.
How did the Fund perform during the six-month reporting period ended December 31, 2010?
During the six months ending December 31, 2010, the Nuveen Total Return Bond Fund returned 5.28% (Class A Shares at net asset value). In comparison, the unmanaged Barclays Capital U.S. Aggregate Bond Index returned 1.15% and the Lipper Intermediate Investment Grade Debt Funds Category Average returned 2.26% during the same period. The table on page 14 provides additional Class A Share total returns for the Fund for the one-year, five-year, and ten-year reporting periods ending December 31, 2010.
The economy appeared to be losing steam as we entered the reporting period due to concerns about the European financial system and a slowdown in U.S. consumer spending. Fixed-income markets were fearful of a double-dip recession and in risk on/risk off mode, with little investor conviction regarding the durability of the economic recovery or risk appetite amid high levels of market volatility. Ultimately, policy initiatives proved supportive of European sovereigns, corporate earnings were again very strong, consumer deleveraging transformed into consumer spending, and the labor market showed signs of modest improvement.
Following the Federal Reserve’s November announcement of another round of balance sheet expansion, the Treasury market was rocked by concerns about the accommodative monetary policy and the potential for longer term fiscal and inflation issues. Although global rates rose, foreign markets outperformed Treasuries. The dollar slid to annual lows in anticipation of the move and, although it firmed somewhat early in the fourth quarter, the dollar remained soft, particularly vs. growth-oriented currencies. Extension of the Bush-era tax cuts, although certainly not unexpected, gave deficit hawks more reason to fret and fueled consternation about a “bond bubble” in media headlines. Rates climbed steadily during late 2010 as poor duration positioning by some investors, ongoing hedging activity of excess mortgage duration by servicers, and a lack of overseas appetite for U.S. government bonds applied continuous pressure to the interest rate markets. Conversely, what was bad for U.S. government securities was good for riskier assets as they were extremely well bid against the backdrop of continued strong corporate earnings and a global economy clearly in recovery, if not expansion, mode. Improving fundamentals propelled higher beta fixed-income assets such as high-yield corporates, emerging market bonds, and longer maturity, high-quality, commercial mortgage-backed securities (CMBS) to outperform Treasuries by wide margins with returns in excess of 10%. Market technicals continued to be extremely supportive for non-U.S. government bonds as retail investors pushed more than $200 billion into taxable fixed-income funds of all types in 2010, much of it later in the year, in search of higher yields.
The Fund enjoyed very strong performance, outpacing the Barclays Capital U.S. Aggregate Bond Index by a large margin and performing near the top of its peer group for the reporting period. Our decision to substantially underweight Treasuries, agencies, and mortgage-backed security (MBS) pass-throughs in favor of corporates, high yield, and CMBS accounted for most of the Fund’s excess returns. The additional income from these sectors combined with a contraction in risk premiums aided performance. Foreign exposure added significantly to results as well with positions in foreign bonds and currency exposures performing well, particularly our emphasis on solid, growth-oriented countries such as Canada and Australia. Issue selection and the Fund’s lower quality bias also benefited returns. The Fund’s overweight position in financials paid off as did selection within the high-yield market and participation in many new issues in both the corporate and securitized sectors. Also, our lower rated credits, especially BBB-rated and crossover issues, beat higher rated bonds.
What strategies were used to manage the Fund? How did these strategies influence performance?
The Fund continued to employ the same fundamental investment strategies and tactics used in previous years. We use a highly collaborative, research-driven approach that we believe offers the best opportunity to achieve consistent, superior long-term performance on a risk-adjusted basis across the full range of market environments.
Given our view that economic growth would continue at a slow pace and that policy would remain supportive of global financial issues, we continued to favor the non-government sectors of the bond market. From a high-level view, our Fund allocations were little changed during the reporting period with continued overweights to corporate bonds, CMBS, and asset-backed securities (ABS) as well as allocations to non-core sectors including high-yield and emerging market debt. With risk premiums contracting significantly over the past several years, our corporate bond strategy has become increasingly bottom-up in nature and focused on opportunities in specific credits,
12 | Nuveen Investments |
particularly in the financial and energy sectors. The Fund is roughly 20% overweight in investment-grade corporates, with an overweight to financials and a lower quality bias. As some of our corporate holdings have reached valuation targets, we have moved into new credits identified through our research process. We are also maintaining a significant weight to high-yield corporates and select emerging market issues. We remain constructive on foreign markets and are biased to overweight growth-sensitive markets and currencies, responding as global conditions develop.
We were also eager to add CMBS in the new-issue market, which we believe has vastly superior credit metrics compared to seasoned deals and remains quite attractively valued from a long-term perspective. We used concerns surrounding the mortgage foreclosure process along with representation and warranty issues to add to the Fund’s exposure in short, high-quality, mortgage-related assets at attractive levels vs. traditional consumer ABS. We have kept the Fund’s mortgage underweight intact. We believe this sector will need to gradually cheapen in the absence of an institutional buyer such as the Fed or government sponsored enterprises (GSEs), who have been large sponsors of MBS over the past decade, but have now moved into runoff mode.
We adjusted the Fund’s duration, or sensitivity to interest-rate movements, between underweight and neutral compared to its benchmark during the period, based on valuations in the market. Although the economic landscape is improving, we expect that the Fed will be on hold into 2012. As much as we’d like to establish a long-term defensive duration position, we believe that rates are currently fairly priced and will look for better opportunities to express our long-term view.
Nuveen Investments | 13 |
Class A Shares – Average Annual Total Returns
As of 12/31/2010
Cumulative | Average Annual | |||||||
6-Month | 1-Year | 5-Year | 10-Year | |||||
Nuveen Core Bond Fund | ||||||||
A Shares at NAV | 2.99% | 7.69% | 5.49% | 5.28% | ||||
A Shares at Offer | -1.40% | 3.08% | 4.58% | 4.82% | ||||
Lipper Intermediate Investment Grade Debt Funds Category1 | 2.26% | 7.73% | 5.18% | 5.34% | ||||
Barclays Capital U.S. Aggregate Bond Index2 | 1.15% | 6.56% | 5.80% | 5.84% | ||||
Nuveen Intermediate Term Bond Fund | ||||||||
A Shares at NAV | 2.15% | 6.42% | 5.43% | 5.05% | ||||
A Shares at Offer | -0.92% | 3.25% | 4.78% | 4.72% | ||||
Lipper Short-Intermediate Investment Grade Debt Funds Category1 | 1.64% | 5.49% | 4.55% | 4.45% | ||||
Barclays Capital U.S. Intermediate Gov’t/Credit Bond Index2 | 1.27% | 5.89% | 5.53% | 5.51% | ||||
Nuveen Short Term Bond Fund | ||||||||
A Shares at NAV | 1.46% | 3.33% | 4.10% | 3.77% | ||||
A Shares at Offer | -0.82% | 0.99% | 3.62% | 3.54% | ||||
Lipper Short Investment Grade Debt Funds Category1 | 1.48% | 3.90% | 3.61% | 6.35% | ||||
Barclays Capital 1-3 Year Gov’t/Credit Bond Index2 | 0.83% | 2.80% | 4.53% | 4.34% | ||||
Nuveen Total Return Bond Fund | ||||||||
A Shares at NAV | 5.28% | 9.12% | 6.73% | 6.39% | ||||
A Shares at Offer | 0.77% | 4.49% | 5.80% | 5.93% | ||||
Lipper Intermediate Investment Grade Debt Funds Category1 | 2.26% | 7.73% | 5.18% | 5.34% | ||||
Barclays Capital U.S. Aggregate Bond Index2 | 1.15% | 6.56% | 5.80% | 5.84% | ||||
Cumulative | Average Annual | |||||||
6-Month | 1-Year | 5-Year | Since Inception* | |||||
Nuveen High Income Bond Fund | ||||||||
A Shares at NAV | 12.16% | 15.35% | 7.58% | 7.06% | ||||
A Shares at Offer | 6.87% | 9.84% | 6.53% | 6.50% | ||||
Lipper High Current Yield Funds Category1 | 10.19% | 14.24% | 6.60% | 7.08% | ||||
Barclays Capital U.S. High Yield 2% Issuer Capped Bond Index2 | 10.04% | 14.94% | 8.91% | 9.04% | ||||
Nuveen Inflation Protected Securities Fund | ||||||||
A Shares at NAV | 2.05% | 6.94% | 4.86% | 4.67% | ||||
A Shares at Offer | -2.30% | 2.36% | 3.95% | 3.95% | ||||
Lipper U.S. Treasury Inflation Protected Securities Funds Category1 | 2.10% | 5.84% | 4.31% | 4.64% | ||||
Barclays Capital U.S. TIPS Index2 | 1.82% | 6.31% | 5.33% | 5.22% | ||||
Nuveen Intermediate Government Bond Fund | ||||||||
A Shares at NAV | 1.06% | 5.30% | 4.98% | 3.81% | ||||
A Shares at Offer | -1.96% | 2.18% | 4.35% | 3.42% | ||||
Lipper Intermediate U.S. Government Funds Category1 | 0.32% | 5.05% | 5.00% | 4.06% | ||||
Barclays Capital Intermediate Government Bond Index2 | 0.54% | 5.29% | 5.42% | 4.22% |
Six-month returns are cumulative; all other returns are annualized.
Returns quoted represent past performance which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Class A Shares have a maximum sales charge; see Notes to Financial Statements, Footnote 7 – Management Fees and Other Transactions with Affiliates, Other Fees and Expenses for more information. Returns at NAV would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares. Returns may reflect a contractual agreement between certain Funds and the investment adviser to waive certain fees and expenses; see Notes to Financial Statements, Footnote 7 – Management Fees and Other Transactions with Affiliates, Investment Advisory Fees for more information. In addition, returns may reflect a voluntary expense limitation by the Funds’ investment adviser that may be modified or discontinued at any time without notice. For the most recent month-end performance, visit www.nuveen.com or call (800) 257-8787.
* | The since-inception return for the Nuveen High Income Bond Fund is from 8/30/01, for the Nuveen Inflation Protected Securities Fund is from 10/1/04, and for the Nuveen Intermediate Government Bond Fund is from 10/25/02. |
1 | The Lipper Funds Categories represent the average annualized returns for all the funds in each respective Lipper Funds category. Average returns do not include the effects of sales charges. It is not possible to invest directly in a Lipper category average. |
2 | The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index that includes all investment-grade, publicly issued, fixed-rate, dollar denominated, nonconvertible debt issues and commercial mortgage backed securities with maturities of at least one year and outstanding par values of $150 million or more. The Barclays Capital U.S. High-Yield 2% Issuer Capped Bond Index is an issuer-constrained version of the U.S. Corporate High-Yield Index that covers the U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bond market. The Barclays Capital U.S. TIPS Index is an unmanaged index that includes all publicly issued, U.S. Treasury inflation-protected securities that have at least one year remaining to maturity, are rated investment grade, and have $250 million or more of outstanding face value. The Barclays Capital Intermediate Government Bond Index is an unmanaged index that includes all publicly issued, U.S. Treasury securities that have a remaining maturity of greater than or equal to 1 year and less than 10 years, are rated investment grade, and have $250 million or more of outstanding face value. The Barclays Capital U.S. Intermediate Government/Credit Bond Index is an unmanaged index that measures the performance of U.S. dollar denominated U.S. Treasuries, government-rated and investment grade U.S. corporate fixed-rate, non-convertible securities having $250 million or more of outstanding face value and a remaining maturity of greater than or equal to 1 year and less than 10 years. The Barclays Capital 1-3 Year Government/Credit Bond Index is an unmanaged index that includes all medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar-denominated bonds that have maturities of between 1 and 3 years and are publicly issued. Index returns do not include the effects of any sales charges or management fees. It is not possible to invest directly in an index. |
14 | Nuveen Investments |
Effective January 18, 2011, former First American Fund’s Class R Shares were renamed Class R3 shares and Class Y Shares were renamed Class I Shares.
Average Annual Total Returns at Offer for Class A Shares reflect the Fund’s maximum sales charge that went into effect January 18, 2011.
Returns quoted represent past performance which is no guarantee of future results. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Current performance may be higher or lower than the performance shown. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares. Six-month returns are cumulative; all other returns are annualized. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Nuveen Core Bond Fund
Average Annual Total Returns as of December 31, 2010 | ||||||||||||||||||||
Since Inception | ||||||||||||||||||||
6-month (Cumulative) | 1-year | 5-years | 10-years | 9/24/2001 | ||||||||||||||||
Average Annual Total Returns At Offer | ||||||||||||||||||||
Class A | -1.40% | 3.08% | 4.58% | 4.82% | — | |||||||||||||||
Average Annual Total Returns At NAV | ||||||||||||||||||||
Class A | 2.99% | 7.69% | 5.49% | 5.28% | — | |||||||||||||||
Class B w/o CDSC | 2.54% | 6.87% | 4.69% | 4.48% | — | |||||||||||||||
Class B w/CDSC | -2.46% | 1.87% | 4.53% | 4.48% | — | |||||||||||||||
Class C | 2.53% | 6.82% | 4.68% | 4.48% | — | |||||||||||||||
Class R3 | 2.85% | 7.38% | 5.27% | — | 4.69% | |||||||||||||||
Class I | 3.12% | 7.96% | 5.74% | 5.53% | — |
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 4.25% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class B Shares have a 5.00% CDSC in the first year and declines annually to 0.00% in the seventh year following purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available only to certain retirement plan clients. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Nuveen Investments | 15 |
Share Class Total Returns
Nuveen High Income Bond Fund
Average Annual Total Returns as of December 31, 2010 | ||||||||||||||||||||
Since Inception | ||||||||||||||||||||
6-month (Cumulative) | 1-year | 5-years | 8/30/2001 | 9/24/2001 | ||||||||||||||||
Average Annual Total Returns At Offer | ||||||||||||||||||||
Class A | 6.87% | 9.84% | 6.53% | 6.50% | — | |||||||||||||||
Average Annual Total Returns At NAV | ||||||||||||||||||||
Class A | 12.16% | 15.35% | 7.58% | 7.06% | — | |||||||||||||||
Class B w/o CDSC | 11.58% | 14.35% | 6.75% | 6.29% | — | |||||||||||||||
Class B w/CDSC | 6.58% | 9.35% | 6.61% | 6.29% | — | |||||||||||||||
Class C | 11.67% | 14.58% | 6.79% | 6.28% | — | |||||||||||||||
Class R3 | 11.91% | 15.03% | 7.32% | — | 7.47% | |||||||||||||||
Class I | 12.16% | 15.64% | 7.85% | 7.33% | — |
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 4.75% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class B Shares have a 5.00% CDSC in the first year and declines annually to 0.00% in the seventh year following purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available only to certain retirement plan clients. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Nuveen Inflation Protection Securities Fund
Average Annual Total Returns as of December 31, 2010 | ||||||||||||||||
Since Inception | ||||||||||||||||
6-month (Cumulative) | 1-year | 5-years | 10/1/2004 | |||||||||||||
Average Annual Total Returns At Offer | ||||||||||||||||
Class A | -2.30% | 2.36% | 3.95% | 3.95% | ||||||||||||
Average Annual Total Returns At NAV | ||||||||||||||||
Class A | 2.05% | 6.94% | 4.86% | 4.67% | ||||||||||||
Class C | 1.71% | 6.13% | 4.04% | 3.86% | ||||||||||||
Class R3 | 1.29% | 6.01% | 4.46% | 4.32% | ||||||||||||
Class I | 2.13% | 7.15% | 5.08% | 4.90% |
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 4.25% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available only to certain retirement plan clients. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
16 | Nuveen Investments |
Nuveen Intermediate Government Bond Fund
Average Annual Total Returns as of December 31, 2010 | ||||||||||||||||||||
Since Inception | ||||||||||||||||||||
6-month (Cumulative) | 1-year | 5-years | 10/25/2002 | 10/28/2009 | ||||||||||||||||
Average Annual Total Returns At Offer | ||||||||||||||||||||
Class A | -1.96% | 2.18% | 4.35% | 3.42% | — | |||||||||||||||
Average Annual Total Returns At NAV | ||||||||||||||||||||
Class A | 1.06% | 5.30% | 4.98% | 3.81% | — | |||||||||||||||
Class C | 0.63% | 4.42% | — | — | 3.10% | |||||||||||||||
Class R3 | 0.77% | 4.82% | — | — | 3.51% | |||||||||||||||
Class I | 1.14% | 5.46% | 5.14% | 3.96% | — |
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 3.00% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available only to certain retirement plan clients. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Nuveen Intermediate Term Bond Fund
Average Annual Total Returns as of December 31, 2010 | ||||||||||||||||
6-month (Cumulative) | 1-year | 5-years | 10-years | |||||||||||||
Average Annual Total Returns At Offer | ||||||||||||||||
Class A | -0.92% | 3.25% | 4.78% | 4.72% | ||||||||||||
Average Annual Total Returns At NAV | ||||||||||||||||
Class A | 2.15% | 6.42% | 5.43% | 5.05% | ||||||||||||
Class I | 2.24% | 6.61% | 5.58% | 5.21% |
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 3.00% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Nuveen Investments | 17 |
Share Class Total Returns
Nuveen Short Term Bond Fund
Average Annual Total Returns as of December 31, 2010 | ||||||||||||||||||||
Since Inception | ||||||||||||||||||||
6-month (Cumulative) | 1-year | 5-years | 10-years | 10/28/2009 | ||||||||||||||||
Average Annual Total Returns At Offer | ||||||||||||||||||||
Class A | -0.82% | 0.99% | 3.62% | 3.54% | — | |||||||||||||||
Average Annual Total Returns At NAV | ||||||||||||||||||||
Class A | 1.46% | 3.33% | 4.10% | 3.77% | — | |||||||||||||||
Class C | 1.12% | 2.45% | — | — | 2.58% | |||||||||||||||
Class I | 1.54% | 3.48% | 4.27% | 3.94% | — |
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 2.25% maximum sales charge. Class A Share purchases of $250,000 or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Nuveen Total Return Bond Fund
Average Annual Total Returns as of December 31, 2010 | ||||||||||||||||||||
Since Inception | ||||||||||||||||||||
6-month (Cumulative) | 1-year | 5-years | 10-years | 9/24/2001 | ||||||||||||||||
Average Annual Total Returns At Offer | ||||||||||||||||||||
Class A | 0.77% | 4.49% | 5.80% | 5.93% | — | |||||||||||||||
Average Annual Total Returns At NAV | ||||||||||||||||||||
Class A | 5.28% | 9.12% | 6.73% | 6.39% | — | |||||||||||||||
Class B w/o CDSC | 4.76% | 8.14% | 5.89% | 5.56% | — | |||||||||||||||
Class B w/CDSC | -0.24% | 3.14% | 5.73% | 5.56% | — | |||||||||||||||
Class C | 4.87% | 8.15% | 5.93% | 5.58% | — | |||||||||||||||
Class R3 | 5.07% | 8.69% | 6.39% | — | 5.97% | |||||||||||||||
Class I | 5.36% | 9.28% | 6.97% | 6.64% | — |
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 4.25% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within eighteen months of purchase. Class B Shares have a 5.00% CDSC in the first year and declines annually to 0.00% in the seventh year following purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available only to certain retirement plan clients. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
18 | Nuveen Investments |
Nuveen Core Bond Fund
Sector Allocation as of December 31, 20101 (% of net assets) | ||||
Corporate Bonds | 43.7 | % | ||
U.S. Government Agency Mortgage-Backed Securities | 24.9 | |||
Commercial Mortgage-Backed Securities | 9.8 | |||
Asset-Backed Securities | 8.5 | |||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 5.0 | |||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 3.7 | |||
U.S. Government & Agency Securities | 3.6 | |||
Preferred Stocks | 0.0 | |||
Short-Term Investments | 4.2 | |||
Other Assets and Liabilities, Net2 | (3.4 | ) | ||
100.0 | % |
Nuveen High Income Bond Fund
Sector Allocation as of December 31, 20101 (% of net assets) | ||||
High Yield Corporate Bonds | 84.2 | % | ||
Preferred Stocks | 4.3 | |||
Convertible Securities | 1.7 | |||
Exchange-Traded Funds | 1.7 | |||
Investment Grade Corporate Bonds | 1.5 | |||
Common Stocks | 1.1 | |||
Closed-End Funds | 1.0 | |||
Asset-Backed Securities | 0.0 | |||
Short-Term Investments | 3.3 | |||
Other Assets and Liabilities, Net2 | 1.2 | |||
100.0 | % |
Nuveen Inflation Protected Securities Fund
Sector Allocation as of December 31, 20101 (% of net assets) | ||||
U.S. Government & Agency Securities | 87.0 | % | ||
Corporate Bonds | 6.5 | |||
Commercial Mortgage-Backed Securities | 3.4 | |||
Preferred Stocks | 0.2 | |||
Exchange-Traded Funds | 0.2 | |||
Convertible Securities | 0.1 | |||
Closed-End Funds | 0.1 | |||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 0.0 | |||
Short-Term Investments | 1.8 | |||
Other Assets and Liabilities, Net2 | 0.7 | |||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of December 31, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
Nuveen Investments | 19 |
Holdings Summaries
Nuveen Intermediate Government Bond Fund
Sector Allocation as of December 31, 20101 (% of net assets) | ||||
U.S. Government & Agency Securities | 53.5 | % | ||
U.S. Government Agency Mortgage-Backed Securities | 21.2 | |||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 6.6 | |||
Commercial Mortgage-Backed Securities | 5.5 | |||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 4.0 | |||
Corporate Bonds | 3.6 | |||
Asset-Backed Securities | 3.3 | |||
Short-Term Investments | 2.1 | |||
Other Assets and Liabilities, Net2 | 0.2 | |||
100.0 | % |
Nuveen Intermediate Term Bond Fund
Sector Allocation as of December 31, 20101 (% of net assets) | ||||
Corporate Bonds | 49.1 | % | ||
Asset-Backed Securities | 14.0 | |||
Commercial Mortgage-Backed Securities | 9.7 | |||
U.S. Government & Agency Securities | 7.0 | |||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 6.9 | |||
U.S. Government Agency Mortgage-Backed Securities | 6.4 | |||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 3.7 | |||
Municipal Bonds | 0.9 | |||
Short-Term Investments | 1.8 | |||
Other Assets and Liabilities, Net2 | 0.5 | |||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of December 31, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
20 | Nuveen Investments |
Nuveen Short Term Bond Fund
Sector Allocation as of December 31, 20101 (% of net assets) | ||||
Corporate Bonds | 44.4 | % | ||
Asset-Backed Securities | 16.9 | |||
Commercial Mortgage-Backed Securities | 9.7 | |||
U.S. Government Agency Mortgage-Backed Securities | 8.4 | |||
U.S. Government & Agency Securities | 7.1 | |||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | 6.3 | |||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 3.4 | |||
Municipal Bond | 0.8 | |||
Short-Term Investments | 2.5 | |||
Other Assets and Liabilities, Net2 | 0.5 | |||
100.0 | % |
Nuveen Total Return Bond Fund
Sector Allocation as of December 31, 20101 (% of net assets) | ||||
Corporate Bonds | 59.5 | % | ||
U.S. Government Agency Mortgage-Backed Securities | 18.2 | |||
Commercial Mortgage-Backed Securities | 9.4 | |||
Asset-Backed Securities | 5.6 | |||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | 3.1 | |||
U.S. Government & Agency Securities | 2.1 | |||
Preferred Stocks | 0.5 | |||
Closed-End Funds | 0.2 | |||
Convertible Security | 0.1 | |||
Municipal Bond | 0.1 | |||
Short-Term Investments | 7.6 | |||
Other Assets and Liabilities, Net2 | (6.4 | ) | ||
100.0 | % |
1 | Sector allocations are subject to change and are not recommendations to buy or sell any security. Allocations reflect the fund’s exposure to each sector through direct investments in cash market securities and do not reflect the impact on sector allocation of holding derivative instruments. See footnote 2 below and the fund’s Schedule of Investments for derivatives held as of December 31, 2010. |
2 | Investments typically comprise substantially all of the fund’s net assets. Other assets and liabilities include receivables and payables on derivative instruments based on mark-to-market adjustments as well as receivables for items such as income earned but not yet received and payables for items such as fund expenses incurred but not yet paid. |
Nuveen Investments | 21 |
Effective January 18, 2011, former First American Fund’s Class R Shares were renamed Class R3 Shares and Class Y Shares were renamed Class I Shares.
Expense Example
As a shareholder of one or more of the funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees, and other fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the funds and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested in a fund at the beginning of the period and held for the entire period from July 1, 2010 to December 31, 2010.
Actual Expenses
For each class of each fund, two lines are presented in the table below — the first line for each class provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested in the particular fund and class, to estimate the expenses that you paid over the period. Simply divide your account value in the fund and class by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” for your fund and class to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
For each class of each fund, the second line for each class provides information about hypothetical account values and hypothetical expenses based on the respective fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the tables for each class of each fund is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Nuveen Core Bond Fund | ||||||||||||
Beginning Account Value (7/01/10) | Ending Account Value (12/31/10) | Expenses Paid During Period1 (7/01/10 to 12/31/10) | ||||||||||
Class A Actual2 | $ | 1,000.00 | $ | 1,029.90 | $ | 4.76 | ||||||
Class A Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.52 | $ | 4.74 | ||||||
Class B Actual2 | $ | 1,000.00 | $ | 1,025.40 | $ | 8.58 | ||||||
Class B Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.74 | $ | 8.54 | ||||||
Class C Actual2 | $ | 1,000.00 | $ | 1,025.30 | $ | 8.58 | ||||||
Class C Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.74 | $ | 8.54 | ||||||
Class R3 Actual2 | $ | 1,000.00 | $ | 1,028.50 | $ | 6.03 | ||||||
Class R3 Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.26 | $ | 6.01 | ||||||
Class I Actual2 | $ | 1,000.00 | $ | 1,031.20 | $ | 3.48 | ||||||
Class I Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.78 | $ | 3.47 |
1 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.93%, 1.68%, 1.68%, 1.18%, and 0.68% for Class A, Class B, Class C, Class R3, and Class I, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
2 | Based on the actual returns for the six-month period ended December 31, 2010 of 2.99%, 2.54%, 2.53%, 2.85%, and 3.12% for Class A, Class B, Class C, Class R3, and Class I, respectively. |
22 | Nuveen Investments |
Nuveen High Income Bond Fund | ||||||||||||
Beginning Account Value (7/01/10) | Ending Account Value (12/31/10) | Expenses Paid During Period1 (7/01/10 to 12/31/10) | ||||||||||
Class A Actual2 | $ | 1,000.00 | $ | 1,121.60 | $ | 5.88 | ||||||
Class A Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.66 | $ | 5.60 | ||||||
Class B Actual2 | $ | 1,000.00 | $ | 1,115.80 | $ | 9.87 | ||||||
Class B Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,015.88 | $ | 9.40 | ||||||
Class C Actual2 | $ | 1,000.00 | $ | 1,116.70 | $ | 9.87 | ||||||
Class C Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,015.88 | $ | 9.40 | ||||||
Class R3 Actual2 | $ | 1,000.00 | $ | 1,119.10 | $ | 7.16 | ||||||
Class R3 Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,018.45 | $ | 6.82 | ||||||
Class I Actual2 | $ | 1,000.00 | $ | 1,121.60 | $ | 4.55 | ||||||
Class I Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.92 | $ | 4.33 |
1 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 1.10%, 1.85%, 1.85%, 1.34%, and 0.85% for Class A, Class B, Class C, Class R3, and Class I, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
2 | Based on the actual returns for the six-month period ended December 31, 2010 of 12.16%, 11.58%, 11.67%, 11.91%, and 12.16% for Class A, Class B, Class C, Class R3, and Class I, respectively. |
Nuveen Inflation Protected Securities Fund | ||||||||||||
Beginning Account Value (7/01/10) | Ending Account Value (12/31/10) | Expenses Paid During Period3 (7/01/10 to 12/31/10) | ||||||||||
Class A Actual4 | $ | 1,000.00 | $ | 1,020.50 | $ | 4.33 | ||||||
Class A Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.92 | $ | 4.33 | ||||||
Class C Actual4 | $ | 1,000.00 | $ | 1,017.10 | $ | 8.13 | ||||||
Class C Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.14 | $ | 8.13 | ||||||
Class R3 Actual4 | $ | 1,000.00 | $ | 1,012.90 | $ | 5.58 | ||||||
Class R3 Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.66 | $ | 5.60 | ||||||
Class I Actual4 | $ | 1,000.00 | $ | 1,021.30 | $ | 3.06 | ||||||
Class I Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.18 | $ | 3.06 |
3 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.85%, 1.60%, 1.10%, and 0.60% for Class A, Class C, Class R3, and Class I, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
4 | Based on the actual returns for the six-month period ended December 31, 2010 of 2.05%, 1.71%, 1.29%, and 2.13% for Class A, Class C, Class R3, and Class I, respectively. |
Nuveen Investments | 23 |
Expense Examples
Nuveen Intermediate Government Bond Fund | ||||||||||||
Beginning Account Value (7/01/10) | Ending Account Value (12/31/10) | Expenses Paid During Period1 (7/01/10 to 12/31/10) | ||||||||||
Class A Actual2 | $ | 1,000.00 | $ | 1,010.60 | $ | 3.65 | ||||||
Class A Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.58 | $ | 3.67 | ||||||
Class C Actual2 | $ | 1,000.00 | $ | 1,006.30 | $ | 7.94 | ||||||
Class C Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.29 | $ | 7.98 | ||||||
Class R3 Actual2 | $ | 1,000.00 | $ | 1,007.70 | $ | 5.41 | ||||||
Class R3 Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.81 | $ | 5.45 | ||||||
Class I Actual2 | $ | 1,000.00 | $ | 1,011.40 | $ | 2.89 | ||||||
Class I Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.33 | $ | 2.91 |
1 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.72%, 1.57%, 1.07% and 0.57% for Class A, Class C, Class R3, and Class I, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
2 | Based on the actual returns for the six-month period ended December 31, 2010 of 1.06%, 0.63%, 0.77% and 1.14% for Class A, Class C, Class R3, and Class I, respectively. |
Nuveen Intermediate Term Bond Fund | ||||||||||||
Beginning Account Value (7/01/10) | Ending Account Value (12/31/10) | Expenses Paid During Period3 (7/01/10 to 12/31/10) | ||||||||||
Class A Actual4 | $ | 1,000.00 | $ | 1,021.50 | $ | 4.28 | ||||||
Class A Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.97 | $ | 4.28 | ||||||
Class I Actual4 | $ | 1,000.00 | $ | 1,022.40 | $ | 3.52 | ||||||
Class I Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.73 | $ | 3.52 |
3 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.84% and 0.69% for Class A and Class I, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
4 | Based on the actual returns for the six-month period ended December 31, 2010 of 2.15% and 2.24% for Class A and Class I, respectively. |
Nuveen Short Term Bond Fund | ||||||||||||
Beginning Account Value (7/01/10) | Ending Account Value (12/31/10) | Expenses Paid During Period5 (7/01/10 to 12/31/10) | ||||||||||
Class A Actual6 | $ | 1,000.00 | $ | 1,014.60 | $ | 3.81 | ||||||
Class A Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.42 | $ | 3.82 | ||||||
Class C Actual6 | $ | 1,000.00 | $ | 1,011.20 | $ | 8.11 | ||||||
Class C Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.14 | $ | 8.13 | ||||||
Class I Actual6 | $ | 1,000.00 | $ | 1,015.40 | $ | 3.05 | ||||||
Class I Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.18 | $ | 3.06 |
5 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.75%, 1.60% and 0.60% for Class A, Class C and Class I, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
6 | Based on the actual returns for the six-month period ended December 31, 2010 of 1.46%, 1.12% and 1.54% for Class A, Class C and Class I, respectively. |
24 | Nuveen Investments |
Nuveen Total Return Bond Fund | ||||||||||||
Beginning Account Value (7/01/10) | Ending Account Value (12/31/10) | Expenses Paid During Period1 (7/01/10 to 12/31/10) | ||||||||||
Class A Actual2 | $ | 1,000.00 | $ | 1,052.80 | $ | 4.55 | ||||||
Class A Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.77 | $ | 4.48 | ||||||
Class B Actual2 | $ | 1,000.00 | $ | 1,047.60 | $ | 8.98 | ||||||
Class B Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.43 | $ | 8.84 | ||||||
Class C Actual2 | $ | 1,000.00 | $ | 1,048.70 | $ | 8.99 | ||||||
Class C Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.43 | $ | 8.84 | ||||||
Class R3 Actual2 | $ | 1,000.00 | $ | 1,050.70 | $ | 6.41 | ||||||
Class R3 Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,018.95 | $ | 6.31 | ||||||
Class I Actual2 | $ | 1,000.00 | $ | 1,053.61 | $ | 3.83 | ||||||
Class I Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.48 | $ | 3.77 |
1 | Expenses are equal to the fund’s annualized expense ratio for the most recent six-month period of 0.88%, 1.74%, 1.74%, 1.24%, and 0.74% for Class A, Class B, Class C, Class R3, and Class I, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year/365 (to reflect the one-half year period). |
2 | Based on the actual returns for the six-month period ended December 31, 2010 of 5.28%, 4.76%, 4.87%, 5.07%, and 5.36% for Class A, Class B, Class C, Class R3, and Class I, respectively. |
Nuveen Investments | 25 |
A special Meeting of the funds’ shareholders was held on December 17, 2010; at this meeting the shareholders were asked to vote on the election of ten directors to the Board of Directors and the approval of the New Advisory Agreement with Nuveen Asset Management and an investment sub-advisory agreement between Nuveen Asset Management and Nuveen Asset Management, LLC.
Nuveen Core Bond Fund Common Shares | Nuveen High Income Bond Fund Common Shares | Nuveen Inflation Protected Securities Fund Common Shares | Nuveen Intermediate Government Bond Fund Common Shares | Nuveen Intermediate Term Bond Fund Common Shares | Nuveen Short Term Bond Fund Common Shares | Nuveen Total Return Bond Fund Common Shares | ||||||||||||||||||||||
Approval of the Board Members was reached as follows: | ||||||||||||||||||||||||||||
John P. Amboian | ||||||||||||||||||||||||||||
For | 90,308,630 | 42,812,258 | 14,584,473 | 15,296,054 | 54,573,090 | 56,316,726 | 53,714,191 | |||||||||||||||||||||
Withhold | 949,381 | 107,930 | 22,947 | 39,429 | 215,819 | 229,338 | 75,613 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
Robert P. Bremner | ||||||||||||||||||||||||||||
For | 90,293,138 | 42,823,479 | 14,582,087 | 15,298,205 | 54,565,920 | 56,297,504 | 53,708,705 | |||||||||||||||||||||
Withhold | 964,873 | 96,709 | 25,333 | 37,278 | 222,989 | 248,560 | 81,099 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
Jack B. Evans | ||||||||||||||||||||||||||||
For | 90,328,064 | 42,775,323 | 14,584,473 | 15,263,028 | 54,574,661 | 56,340,828 | 53,672,984 | |||||||||||||||||||||
Withhold | 929,947 | 144,865 | 22,947 | 72,455 | 214,248 | 205,236 | 116,820 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
William C. Hunter | ||||||||||||||||||||||||||||
For | 90,333,839 | 42,823,814 | 14,584,473 | 15,298,781 | 54,579,109 | 56,340,828 | 53,672,984 | |||||||||||||||||||||
Withhold | 924,172 | 96,374 | 22,947 | 36,702 | 209,800 | 205,236 | 116,820 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
David J. Kundert | ||||||||||||||||||||||||||||
For | 90,290,839 | 42,828,452 | 14,582,163 | 15,298,205 | 54,526,189 | 56,283,360 | 53,711,404 | |||||||||||||||||||||
Withhold | 967,172 | 91,736 | 25,257 | 37,278 | 262,720 | 262,704 | 78,400 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
William J. Schneider | ||||||||||||||||||||||||||||
For | 90,295,443 | 42,828,818 | 14,582,087 | 15,295,478 | 54,528,051 | 56,283,360 | 53,711,404 | |||||||||||||||||||||
Withhold | 962,568 | 91,370 | 25,333 | 40,005 | 260,858 | 262,704 | 78,400 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
Judith M. Stockdale | ||||||||||||||||||||||||||||
For | 90,363,785 | 42,831,363 | 14,586,428 | 15,298,205 | 54,572,582 | 56,340,180 | 53,674,679 | |||||||||||||||||||||
Withhold | 894,226 | 88,825 | 20,992 | 37,278 | 216,327 | 205,884 | 115,125 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
Carole E. Stone | ||||||||||||||||||||||||||||
For | 90,354,616 | 42,769,794 | 14,586,352 | 15,262,452 | 54,572,431 | 56,329,668 | 53,675,683 | |||||||||||||||||||||
Withhold | 903,395 | 150,394 | 21,068 | 73,031 | 216,478 | 216,396 | 114,121 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
Virginia L. Stringer | ||||||||||||||||||||||||||||
For | 90,071,779 | 42,825,979 | 14,584,118 | 15,298,205 | 54,203,402 | 56,272,270 | 53,711,404 | |||||||||||||||||||||
Withhold | 1,186,232 | 94,209 | 23,302 | 37,278 | 585,507 | 273,794 | 78,400 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
Terence J. Toth | ||||||||||||||||||||||||||||
For | 90,308,890 | 42,750,035 | 14,584,473 | 15,263,028 | 54,572,582 | 56,326,765 | 53,708,349 | |||||||||||||||||||||
Withhold | 949,121 | 170,153 | 22,947 | 72,455 | 216,327 | 219,299 | 81,455 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 | |||||||||||||||||||||
Approval of the investment advisory agreement with Nuveen Asset Management and an investment sub-advisory agreement between Nuveen Asset Management and Nuveen Asset Management, LLC. |
| |||||||||||||||||||||||||||
For | 84,701,158 | 39,254,456 | 13,211,937 | 14,025,405 | 52,914,467 | 50,401,541 | 50,264,660 | |||||||||||||||||||||
Against | 167,783 | 69,703 | 48,188 | 12,995 | 110,514 | 150,981 | 74,869 | |||||||||||||||||||||
Abstain | 874,527 | 68,372 | 9,817 | 15,586 | 62,269 | 86,129 | 145,615 | |||||||||||||||||||||
Non-Vote | 5,514,543 | 3,527,657 | 1,337,478 | 1,281,497 | 1,701,659 | 5,907,413 | 3,304,660 | |||||||||||||||||||||
Total | 91,258,011 | 42,920,188 | 14,607,420 | 15,335,483 | 54,788,909 | 56,546,064 | 53,789,804 |
26 | Nuveen Investments |
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Nuveen Core Bond Fund (“Core Bond Fund”) | ||||||||||
(formerly known as First American Core Bond Fund) | ||||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||||
Corporate Bonds – 43.7% | ||||||||||
Banking – 7.3% | ||||||||||
Ally Financial | ||||||||||
7.500%, 09/15/2020 n q | $ 1,650 | $ 1,730 | ||||||||
Bank of AmericaD | ||||||||||
5.875%, 01/05/2021 q | 6,130 | 6,342 | ||||||||
8.000%, 12/29/2049 D | 6,225 | 6,274 | ||||||||
Barclays Bank | ||||||||||
5.125%, 01/08/2020 ì | 3,665 | 3,743 | ||||||||
Citigroup | ||||||||||
5.375%, 08/09/2020 q | 2,650 | 2,753 | ||||||||
8.125%, 07/15/2039 q | 3,500 | 4,453 | ||||||||
Citigroup Capital XXI | ||||||||||
8.300%, 12/21/2077 D | 3,720 | 3,869 | ||||||||
First National Bank of Chicago | ||||||||||
8.080%, 01/05/2018 | 1,211 | 1,333 | ||||||||
HSBC Holdings | ||||||||||
6.800%, 06/01/2038 ì | 4,030 | 4,358 | ||||||||
JPMorgan Chase | ||||||||||
5.150%, 10/01/2015 | 3,695 | 3,908 | ||||||||
4.400%, 07/22/2020 | 4,330 | 4,262 | ||||||||
5.500%, 10/15/2040 q | 4,440 | 4,538 | ||||||||
Series 1 | ||||||||||
7.900%, 04/29/2049 D | 3,645 | 3,875 | ||||||||
JPMorgan Chase Capital XX | ||||||||||
Series T | ||||||||||
6.550%, 09/29/2066 q | 2,510 | 2,525 | ||||||||
JPMorgan Chase Capital XXII | ||||||||||
Series V | ||||||||||
6.450%, 01/15/2087 | 2,110 | 2,102 | ||||||||
KeyCorp | ||||||||||
Series MTN | ||||||||||
3.750%, 08/13/2015 q | 4,930 | 4,946 | ||||||||
Sovereign Bank | ||||||||||
8.750%, 05/30/2018 | 3,675 | 4,007 | ||||||||
UBS | ||||||||||
4.875%, 08/04/2020 ì | 4,410 | 4,487 | ||||||||
UBS Preferred Funding Trust V | ||||||||||
6.243%, 05/29/2049 D | 2,525 | 2,424 | ||||||||
Wells Fargo | ||||||||||
Series K | ||||||||||
7.980%, 03/29/2049 q D | 3,120 | 3,292 | ||||||||
Wells Fargo Bank | ||||||||||
5.950%, 08/26/2036 | 3,415 | 3,490 | ||||||||
Wells Fargo Capital X | ||||||||||
5.950%, 12/15/2086 | 2,760 | 2,664 | ||||||||
Wells Fargo Capital XIII | ||||||||||
Series GMTN | ||||||||||
7.700%, 12/29/2049 q D | 3,835 | 3,964 | ||||||||
85,339 | ||||||||||
Basic Industry – 4.5% | ||||||||||
Arcelormittal | ||||||||||
7.000%, 10/15/2039 ì | 5,500 | 5,708 | ||||||||
Celulosa Arauco y Constitucion | ||||||||||
5.625%, 04/20/2015 q ì | 3,000 | 3,186 | ||||||||
Dow Chemical | ||||||||||
4.250%, 11/15/2020 | 3,415 | 3,271 | ||||||||
Georgia-Pacific | ||||||||||
7.125%, 01/15/2017 n | 1,500 | 1,598 | ||||||||
5.400%, 11/01/2020 n | 1,820 | 1,799 | ||||||||
Incitec Pivot Finance | ||||||||||
6.000%, 12/10/2019 n | 3,830 | 3,922 | ||||||||
International Paper | ||||||||||
8.700%, 06/15/2038 | 3,015 | 3,803 | ||||||||
Nalco | ||||||||||
6.625%, 01/15/2019 n | 2,255 | 2,306 | ||||||||
Newmont Mining | ||||||||||
6.250%, 10/01/2039 | 3,500 | 3,806 | ||||||||
Plum Creek Timberlands | ||||||||||
4.700%, 03/15/2021 | 5,000 | 4,759 | ||||||||
Rio Tinto Finance U.S.A. | ||||||||||
7.125%, 07/15/2028 q ì | 2,955 | 3,627 | ||||||||
Southern Copper | ||||||||||
7.500%, 07/27/2035 | 2,550 | 2,830 | ||||||||
Teck Cominco Limited | ||||||||||
6.125%, 10/01/2035 ì | 2,785 | 2,998 | ||||||||
Vale Overseas | ||||||||||
6.875%, 11/10/2039 ì | 3,895 | 4,304 | ||||||||
Vedanta Resources | ||||||||||
9.500%, 07/18/2018 n q ì | 2,055 | 2,248 | ||||||||
Yara International | ||||||||||
7.875%, 06/11/2019 n ì | 2,500 | 2,979 | ||||||||
53,144 | ||||||||||
Brokerage – 3.1% | ||||||||||
Goldman Sachs Capital II | ||||||||||
5.793%, 12/29/2049 D | 2,415 | 2,047 | ||||||||
Goldman Sachs Group | ||||||||||
6.000%, 06/15/2020 q | 10,375 | 11,212 | ||||||||
6.750%, 10/01/2037 | 3,685 | 3,767 | ||||||||
Merrill Lynch | ||||||||||
6.050%, 05/16/2016 | 9,935 | 10,236 | ||||||||
Morgan Stanley | ||||||||||
7.300%, 05/13/2019 q | 2,450 | 2,758 | ||||||||
5.500%, 07/24/2020 q | 6,250 | 6,314 | ||||||||
36,334 | ||||||||||
Capital Goods – 0.6% | ||||||||||
GE Capital Trust I | ||||||||||
6.375%, 11/15/2067 D | 4,000 | 3,950 | ||||||||
L-3 Communications | ||||||||||
Series B | ||||||||||
6.375%, 10/15/2015 | 3,150 | 3,245 | ||||||||
7,195 | ||||||||||
Communications – 4.4% | ||||||||||
American Tower | ||||||||||
5.050%, 09/01/2020 | 3,980 | 3,914 | ||||||||
AT&T | ||||||||||
6.550%, 02/15/2039 q | 3,530 | 3,842 | ||||||||
British Sky Broadcasting | ||||||||||
6.100%, 02/15/2018 n ì | 3,450 | 3,849 | ||||||||
Comcast | ||||||||||
6.400%, 03/01/2040 q | 1,565 | 1,677 | ||||||||
DirecTV Holdings | ||||||||||
5.200%, 03/15/2020 | 6,215 | 6,443 | ||||||||
Embarq | ||||||||||
7.082%, 06/01/2016 | 2,575 | 2,848 | ||||||||
Frontier Communications | ||||||||||
8.500%, 04/15/2020 q | 3,500 | 3,824 | ||||||||
NBC Universal | ||||||||||
4.375%, 04/01/2021 n | 1,315 | 1,276 | ||||||||
6.400%, 04/30/2040 n q | 3,060 | 3,250 | ||||||||
News America | ||||||||||
6.150%, 03/01/2037 | 35 | 37 | ||||||||
6.650%, 11/15/2037 | 3,590 | 3,976 | ||||||||
Rogers Communications | ||||||||||
6.800%, 08/15/2018 q ì | 3,030 | 3,643 | ||||||||
Sprint Nextel | ||||||||||
6.000%, 12/01/2016 q | 2,000 | 1,933 | ||||||||
Time Warner Cable | ||||||||||
8.750%, 02/14/2019 | 2,000 | 2,545 | ||||||||
5.875%, 11/15/2040 q | 2,410 | 2,384 |
Nuveen Investments 27
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Core Bond Fund (continued) | ||||||||||||
DESCRIPTION | PAR | FAIR VALUE | > | |||||||||
Verizon Communications | ||||||||||||
6.900%, 04/15/2038 q | $5,870 | $ 6,846 | ||||||||||
52,287 | ||||||||||||
Consumer Cyclical – 2.3% | ||||||||||||
Ford Motor Credit | ||||||||||||
6.625%, 08/15/2017 | 2,425 | 2,549 | ||||||||||
Ingram Micro | ||||||||||||
5.250%, 09/01/2017 | 2,000 | 2,024 | ||||||||||
J.C. Penney | ||||||||||||
5.650%, 06/01/2020 | 2,585 | 2,475 | ||||||||||
Navistar International | ||||||||||||
8.250%, 11/01/2021 | 2,710 | 2,913 | ||||||||||
R.R. Donnelley & Sons | ||||||||||||
7.625%, 06/15/2020 | 1,990 | 2,132 | ||||||||||
Time Warner | ||||||||||||
6.100%, 07/15/2040 | 3,250 | 3,410 | ||||||||||
Viacom | ||||||||||||
6.875%, 04/30/2036 q | 4,105 | 4,710 | ||||||||||
Whirlpool | ||||||||||||
Series MTN | ||||||||||||
5.500%, 03/01/2013 | 4,905 | 5,209 | ||||||||||
Wyndham Worldwide | ||||||||||||
6.000%, 12/01/2016 q | 2,000 | 2,093 | ||||||||||
27,515 | ||||||||||||
Consumer Non Cyclical – 2.6% | ||||||||||||
Altria Group | ||||||||||||
9.950%, 11/10/2038 | 2,975 | 4,192 | ||||||||||
Anheuser-Busch InBev Worldwide | ||||||||||||
8.200%, 01/15/2039 n q | 3,850 | 5,223 | ||||||||||
Constellation Brands | ||||||||||||
7.250%, 05/15/2017 | 1,000 | 1,059 | ||||||||||
General Mills | ||||||||||||
5.400%, 06/15/2040 | 3,780 | 3,830 | ||||||||||
HCA | ||||||||||||
7.250%, 09/15/2020 q | 2,400 | 2,508 | ||||||||||
Kraft Foods | ||||||||||||
6.500%, 02/09/2040 | 3,855 | 4,320 | ||||||||||
Lorillard Tobacco | ||||||||||||
8.125%, 06/23/2019 | 3,350 | 3,728 | ||||||||||
UnitedHealth Group | ||||||||||||
6.875%, 02/15/2038 q | 3,185 | 3,708 | ||||||||||
Valeant Pharmaceuticals | ||||||||||||
6.875%, 12/01/2018 n ì | 2,080 | 2,064 | ||||||||||
30,632 | ||||||||||||
Electric – 2.1% | ||||||||||||
Constellation Energy Group | ||||||||||||
5.150%, 12/01/2020 | 3,305 | 3,254 | ||||||||||
FirstEnergy Solutions | ||||||||||||
6.050%, 08/15/2021 | 3,690 | 3,791 | ||||||||||
Majapahit Holding | ||||||||||||
7.750%, 01/20/2020 n ì | 1,800 | 2,074 | ||||||||||
MidAmerican Energy Holdings | ||||||||||||
6.125%, 04/01/2036 q | 5,185 | 5,601 | ||||||||||
NV Energy | ||||||||||||
6.250%, 11/15/2020 | 2,725 | 2,739 | ||||||||||
Ohio Power | ||||||||||||
Series K | ||||||||||||
6.000%, 06/01/2016 | 4,100 | 4,615 | ||||||||||
Pacific Gas & Electric | ||||||||||||
5.400%, 01/15/2040 | 3,000 | 3,030 | ||||||||||
25,104 | ||||||||||||
Energy – 4.0% | ||||||||||||
Anadarko Petroleum | ||||||||||||
6.375%, 09/15/2017 q | 2,070 | 2,255 | ||||||||||
6.200%, 03/15/2040 q | 3,230 | 3,153 | ||||||||||
Canadian Oil Sands | ||||||||||||
7.750%, 05/15/2019 nì | 3,050 | 3,605 | ||||||||||
Cloud Peak Energy Resources | ||||||||||||
8.500%, 12/15/2019 q | 2,000 | 2,190 | ||||||||||
Diamond Offshore Drilling | ||||||||||||
5.700%, 10/15/2039 | 3,280 | 3,257 | ||||||||||
El Paso Pipeline Partners | ||||||||||||
4.100%, 11/15/2015 | 1,680 | 1,663 | ||||||||||
Forest Oil | ||||||||||||
7.250%, 06/15/2019 q | 2,700 | 2,740 | ||||||||||
Lukoil International Finance | ||||||||||||
6.125%, 11/09/2020 n ì | 4,785 | 4,791 | ||||||||||
Nabors Industries | ||||||||||||
5.000%, 09/15/2020 n | 2,935 | 2,847 | ||||||||||
Nexen | ||||||||||||
6.400%, 05/15/2037 ì | 3,475 | 3,367 | ||||||||||
Petrobras International Finance | ||||||||||||
6.875%, 01/20/2040 ì | 2,495 | 2,621 | ||||||||||
Petro-Canada | ||||||||||||
6.800%, 05/15/2038 ì | 2,255 | 2,568 | ||||||||||
Pride International | ||||||||||||
8.500%, 06/15/2019 | 1,000 | 1,138 | ||||||||||
6.875%, 08/15/2020 | 1,745 | 1,810 | ||||||||||
Valero Energy | ||||||||||||
6.125%, 02/01/2020 | 4,290 | 4,556 | ||||||||||
Weatherford International | ||||||||||||
7.000%, 03/15/2038 ì | 3,740 | 4,012 | ||||||||||
46,573 | ||||||||||||
Finance – 4.2% | ||||||||||||
American Express Credit | ||||||||||||
Series C | ||||||||||||
7.300%, 08/20/2013 | 2,230 | 2,513 | ||||||||||
Anglogold Holdings | ||||||||||||
6.500%, 04/15/2040 ì | 4,530 | 4,631 | ||||||||||
Capital One Bank | ||||||||||||
8.800%, 07/15/2019 | 5,780 | 7,109 | ||||||||||
Capital One Capital III | ||||||||||||
7.686%, 08/15/2036 | 2,755 | 2,755 | ||||||||||
Countrywide Financial | ||||||||||||
6.250%, 05/15/2016 | 4,390 | 4,502 | ||||||||||
Discover Financial Services | ||||||||||||
10.250%, 07/15/2019 | 3,690 | 4,580 | ||||||||||
Fresenius U.S. Finance II | ||||||||||||
9.000%, 07/15/2015 n | 2,450 | 2,805 | ||||||||||
General Electric Capital | ||||||||||||
Series MTN | ||||||||||||
6.875%, 01/10/2039 q | 4,915 | 5,680 | ||||||||||
International Lease Finance | ||||||||||||
8.875%, 09/01/2017 q | 1,715 | 1,850 | ||||||||||
8.250%, 12/15/2020 q | 4,095 | 4,218 | ||||||||||
Rockies Express Pipeline | ||||||||||||
5.625%, 04/15/2020 n | 3,120 | 3,016 | ||||||||||
TransCapitalinvest | ||||||||||||
5.670%, 03/05/2014 n q ì | 4,995 | 5,297 | ||||||||||
48,956 | ||||||||||||
Insurance – 3.7% | ||||||||||||
Aflac | ||||||||||||
6.450%, 08/15/2040 q | 3,975 | 4,071 | ||||||||||
Allied World Assurance | ||||||||||||
7.500%, 08/01/2016 ì | 4,805 | 5,320 |
28 Nuveen Investments
Core Bond Fund (continued) DESCRIPTION | PAR | FAIR VALUE | > | |||||||||
Genworth Financial | ||||||||||||
Series MTN | ||||||||||||
6.515%, 05/22/2018 | $ | 3,940 | $ | 4,004 | ||||||||
Hartford Financial Services Group | ||||||||||||
Series MTN | ||||||||||||
6.000%, 01/15/2019 | 5,860 | 6,107 | ||||||||||
Lincoln National | ||||||||||||
8.750%, 07/01/2019 q | 4,795 | 5,998 | ||||||||||
6.050%, 04/20/2067 | 3,205 | 2,956 | ||||||||||
MetLife | ||||||||||||
6.750%, 06/01/2016 q | 3,400 | 3,944 | ||||||||||
MetLife Capital Trust IV | ||||||||||||
7.875%, 12/15/2067 n D | 3,735 | 3,950 | ||||||||||
Pacific Life Insurance | ||||||||||||
6.000%, 02/10/2020 n q | 1,640 | 1,724 | ||||||||||
Prudential Financial | ||||||||||||
5.900%, 03/17/2036 | 2,500 | 2,536 | ||||||||||
ZFS Finance USA Trust V | ||||||||||||
6.500%, 05/09/2067 n D | 2,755 | 2,686 | ||||||||||
43,296 | ||||||||||||
Natural Gas – 1.3% | ||||||||||||
Duke Energy | ||||||||||||
5.050%, 09/15/2019 | 3,430 | 3,634 | ||||||||||
Energy Transfer Equity | ||||||||||||
7.500%, 10/15/2020 | 2,450 | 2,524 | ||||||||||
Kinder Morgan Energy Partners | ||||||||||||
Series MTN | ||||||||||||
6.950%, 01/15/2038 | 3,060 | 3,325 | ||||||||||
NGPL Pipeco | ||||||||||||
7.119%, 12/15/2017 n | 2,640 | 2,890 | ||||||||||
Transocean | ||||||||||||
6.000%, 03/15/2018 q ì | 3,015 | 3,167 | ||||||||||
15,540 | ||||||||||||
Real Estate – 1.9% | ||||||||||||
Boston Properties – REIT | ||||||||||||
4.125%, 05/15/2021 | 3,000 | 2,844 | ||||||||||
Health Care Properties – REIT | ||||||||||||
Series MTN | ||||||||||||
6.300%, 09/15/2016 | 3,310 | 3,566 | ||||||||||
Prologis – REIT | ||||||||||||
6.875%, 03/15/2020 | 5,995 | 6,365 | ||||||||||
Simon Property Group – REIT | ||||||||||||
5.650%, 02/01/2020 q | 3,000 | 3,245 | ||||||||||
Vornado Realty – REIT | ||||||||||||
4.250%, 04/01/2015 | 5,700 | 5,754 | ||||||||||
21,774 | ||||||||||||
Transportation – 1.7% | ||||||||||||
Air Canada | ||||||||||||
9.250%, 08/01/2015 n q ì | 1,950 | 2,048 | ||||||||||
American Airlines | ||||||||||||
10.375%, 07/02/2019 | 2,466 | 2,909 | ||||||||||
Continental Airlines | ||||||||||||
Series 2007-1, Class C | ||||||||||||
7.339%, 04/19/2014 | 3,124 | 3,124 | ||||||||||
Delta Airlines | ||||||||||||
Series 2002-1, Class G-1 | ||||||||||||
6.718%, 07/02/2024 | 1,381 | 1,395 | ||||||||||
Norfolk Southern | ||||||||||||
5.900%, 06/15/2019 | 5,000 | 5,661 | ||||||||||
Northwest Airlines | ||||||||||||
Series 2007-1, Class A | ||||||||||||
7.027%, 11/01/2019 | 2,060 | 2,101 | ||||||||||
United Airlines | ||||||||||||
Series 2007-1, Class A | ||||||||||||
6.636%, 01/02/2024 | 2,463 | 2,469 | ||||||||||
19,707 | ||||||||||||
Total Corporate Bonds | ||||||||||||
(Cost $480,616) | 513,396 | |||||||||||
U.S. Government Agency Mortgage-Backed Securities – 24.9% | ||||||||||||
Adjustable Rate D – 2.0% | ||||||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||||||
2.580%, 05/01/2025, # 846757 | 156 | 163 | ||||||||||
2.482%, 04/01/2029, # 847190 | 850 | 890 | ||||||||||
2.636%, 03/01/2030, # 847180 | 1,135 | 1,189 | ||||||||||
2.510%, 07/01/2030, # 847240 | 1,411 | 1,473 | ||||||||||
2.166%, 06/01/2031, # 846984 | 520 | 532 | ||||||||||
5.808%, 07/01/2036, # 1K1238 | 5,263 | 5,532 | ||||||||||
Federal National Mortgage Association Pool | ||||||||||||
2.431%, 08/01/2030, # 555843 | 3,420 | 3,566 | ||||||||||
2.629%, 03/01/2031, # 545359 | 218 | 228 | ||||||||||
2.384%, 09/01/2033, # 725553 | 1,184 | 1,232 | ||||||||||
5.231%, 11/01/2034, # 735054 | 4,859 | 5,163 | ||||||||||
5.791%, 09/01/2037, # 946441 | 4,041 | 4,289 | ||||||||||
Government National Mortgage Association Pool | ||||||||||||
3.625%, 08/20/2023, # 008259 | 1 | 1 | ||||||||||
24,258 | ||||||||||||
Fixed Rate – 22.9% | ||||||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||||||
4.500%, 03/01/2018, # P10023 | 1,336 | 1,392 | ||||||||||
4.500%, 05/01/2018, # P10032 | 2,694 | 2,810 | ||||||||||
6.500%, 01/01/2028, # G00876 | 571 | 641 | ||||||||||
6.500%, 11/01/2028, # C00676 | 1,091 | 1,227 | ||||||||||
6.500%, 12/01/2028, # C00689 | 815 | �� | 917 | |||||||||
6.500%, 04/01/2029, # C00742 | 461 | 518 | ||||||||||
6.500%, 07/01/2031, # A17212 | 1,784 | 2,006 | ||||||||||
6.000%, 11/01/2033, # A15521 | 1,486 | 1,633 | ||||||||||
7.000%, 08/01/2037, # H09059 | 1,192 | 1,340 | ||||||||||
5.824%, 09/01/2037, # 1G2163 | 4,187 | 4,440 | ||||||||||
7.000%, 09/01/2037, # H01292 | 651 | 732 | ||||||||||
Federal National Mortgage Association Pool | ||||||||||||
3.790%, 07/01/2013, # 386314 | 9,975 | 10,391 | ||||||||||
5.500%, 02/01/2014, # 440780 | 565 | 608 | ||||||||||
7.000%, 02/01/2015, # 535206 | 148 | 158 | ||||||||||
7.000%, 08/01/2016, # 591038 | 293 | 323 | ||||||||||
5.500%, 12/01/2017, # 673010 | 1,715 | 1,849 | ||||||||||
6.000%, 10/01/2022, # 254513 | 1,878 | 2,063 | ||||||||||
5.500%, 01/01/2025, # 255575 | 4,661 | 5,038 | ||||||||||
7.000%, 04/01/2026, # 340798 | 156 | 178 | ||||||||||
7.000%, 05/01/2026, # 250551 | 227 | 258 | ||||||||||
6.000%, 08/01/2027, # 256852 | 4,285 | 4,660 | ||||||||||
6.500%, 02/01/2029, # 252255 | 1,062 | 1,194 | ||||||||||
6.500%, 12/01/2031, # 254169 | 2,050 | 2,270 | ||||||||||
6.000%, 04/01/2032, # 745101 | 4,471 | 4,820 | ||||||||||
7.000%, 07/01/2032, # 254379 | 1,487 | 1,689 | ||||||||||
7.000%, 07/01/2032, # 545813 | 626 | 714 | ||||||||||
7.000%, 07/01/2032, # 545815 | 385 | 450 | ||||||||||
6.000%, 09/01/2032, # 254447 | 2,092 | 2,304 | ||||||||||
6.000%, 03/01/2033, # 688330 | 3,852 | 4,244 | ||||||||||
5.500%, 04/01/2033, # 694605 | 4,132 | 4,454 | ||||||||||
6.500%, 05/01/2033, # 555798 | 2,981 | 3,352 | ||||||||||
5.500%, 07/01/2033, # 709446 | 6,053 | 6,525 | ||||||||||
5.500%, 10/01/2033, # 555800 | 3,219 | 3,470 | ||||||||||
6.000%, 11/01/2033, # 772130 | 327 | 361 | ||||||||||
6.000%, 11/01/2033, # 772256 | 631 | 695 | ||||||||||
5.000%, 03/01/2034, # 725248 | 2,066 | 2,185 | ||||||||||
5.000%, 03/01/2034, # 725250 | 3,736 | 3,952 |
Nuveen Investments 29
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Core Bond Fund (continued) DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
5.000%, 06/01/2034, # 782909 | $1 | $ 1 | ||||||||||
6.500%, 06/01/2034, # 735273 | 5,073 | 5,736 | ||||||||||
6.000%, 10/01/2034, # 781776 | 883 | 968 | ||||||||||
5.500%, 07/01/2036, # 995112 | 14,475 | 15,580 | ||||||||||
6.000%, 08/01/2036, # 885536 | 2,064 | 2,282 | ||||||||||
6.000%, 09/01/2036, # 900555 | 3,799 | 4,201 | ||||||||||
6.000%, 06/01/2037, # 944340 | 2,309 | 2,513 | ||||||||||
6.500%, 08/01/2037, # 256845 | 1,332 | 1,481 | ||||||||||
6.000%, 09/01/2037, # 256890 | 2,531 | 2,739 | ||||||||||
5.000%, 03/01/2038, # 973241 | 14,460 | 15,214 | ||||||||||
5.000%, 05/01/2038, # 983077 | 2 | 2 | ||||||||||
5.500%, 05/01/2038, # 889618 | 13,028 | 13,949 | ||||||||||
6.000%, 06/01/2038, # 889706 | 465 | 506 | ||||||||||
5.500%, 07/01/2038, # 985344 | 2 | 2 | ||||||||||
6.000%, 08/01/2038, # 257307 | 3,106 | 3,379 | ||||||||||
6.000%, 10/01/2038, # 993138 | 4,729 | 5,158 | ||||||||||
5.500%, 01/13/2039 ì | 11,045 | 11,816 | ||||||||||
4.500%, 09/01/2039, # AC1877 | 8,810 | 9,053 | ||||||||||
4.500%, 12/01/2039, # 932323 | 8,473 | 8,707 | ||||||||||
5.000%, 12/01/2039, # 932260 | 2,169 | 2,284 | ||||||||||
5.000%, 05/01/2040, # AD4375 | 13,983 | 14,710 | ||||||||||
4.000%, 11/01/2040, # AE7723 | 9,480 | 9,440 | ||||||||||
4.000%, 12/01/2040, # AB1959 | 9,686 | 9,645 | ||||||||||
4.000%, 01/15/2041 ì | 12,455 | 12,389 | ||||||||||
4.500%, 01/15/2041 ì | 34,900 | 31,259 | ||||||||||
Government National Mortgage Association Pool | ||||||||||||
7.500%, 11/15/2030, # 537699 | 264 | 306 | ||||||||||
269,181 | ||||||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||||||
(Cost $282,933) | 293,439 | |||||||||||
Commercial Mortgage-Backed Securities – 9.8% | ||||||||||||
Americold Trust | ||||||||||||
Series 2010-ARTA, Class C | ||||||||||||
6.811%, 01/14/2029 n | 6,125 | 6,113 | ||||||||||
Banc of America Commercial Mortgage | ||||||||||||
Series 2004-5, Class A3 | ||||||||||||
4.561%, 11/10/2041 D | 6,515 | 6,632 | ||||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||||||
Series 2005-PW10, Class A4 | ||||||||||||
5.405%, 12/11/2040 D | 6,640 | 7,094 | ||||||||||
Series 2007-T28, Class D | ||||||||||||
5.988%, 09/11/2042 n D ¥ | 3,165 | 1,380 | ||||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||||||
Series 2005-CD1, Class A4 | ||||||||||||
5.222%, 07/15/2044 D | 4,570 | 4,918 | ||||||||||
Series 2007-CD4, Class A2B | ||||||||||||
5.205%, 12/11/2049 | 4,700 | 4,833 | ||||||||||
Series 2007-CD5, Class A4 | ||||||||||||
5.886%, 11/15/2044 | 620 | 661 | ||||||||||
Commercial Mortgage Pass-Through Certificates | ||||||||||||
Series 2006-CN2A, Class A2FX | ||||||||||||
5.449%, 02/05/2019 n | 4,225 | 4,243 | ||||||||||
Extended Stay America Trust | ||||||||||||
Series 2010-ESHA, Class C | ||||||||||||
4.860%, 11/05/2027 n | 6,410 | 6,283 | ||||||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||||||
Series 2007-CB18, Class A4 | ||||||||||||
5.440%, 06/12/2047 | 6,280 | 6,581 | ||||||||||
Series 2010-C1, Class A1 | ||||||||||||
3.853%, 06/15/2043 n | 7,741 | 7,929 | ||||||||||
Series 2010-C2, Class A3 | ||||||||||||
4.070%, 11/15/2043 n | 8,055 | 7,660 | ||||||||||
LB-UBS Commercial Mortgage Trust | ||||||||||||
Series 2004-C2, Class A4 | ||||||||||||
4.367%, 03/15/2036 | 6,000 | 6,239 | ||||||||||
Series 2005-C7, Class A2 | ||||||||||||
5.103%, 11/15/2030 | 3,559 | 3,561 | ||||||||||
Merrill Lynch Mortgage Trust | ||||||||||||
Series 2008-C1, Class A4 | ||||||||||||
5.690%, 02/12/2051 | 7,820 | 8,163 | ||||||||||
Morgan Stanley Capital I | ||||||||||||
Series 2006-IQ12, Class A4 | ||||||||||||
5.332%, 12/15/2043 | 4,485 | 4,752 | ||||||||||
Series 2007-HQ11, Class A4 | ||||||||||||
5.447%, 02/12/2044 D | 4,400 | 4,566 | ||||||||||
Morgan Stanley Dean Witter Capital I | ||||||||||||
Series 2002-TOP7, Class A2 | ||||||||||||
5.980%, 01/15/2039 | 7,207 | 7,534 | ||||||||||
OBP Depositor Trust | ||||||||||||
Series 2010-OBP, Class A | ||||||||||||
4.646%, 07/15/2045 n | 5,590 | 5,704 | ||||||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||||||
Series 2005-C19, Class A5 | ||||||||||||
4.661%, 05/15/2044 | 9,660 | 9,996 | ||||||||||
Total Commercial Mortgage-Backed Securities | ||||||||||||
(Cost $110,473) | 114,842 | |||||||||||
Asset-Backed Securities – 8.5% | ||||||||||||
Automotive – 1.4% | ||||||||||||
Bank of America Auto Trust | ||||||||||||
Series 2010-2, Class A3 | ||||||||||||
1.310%, 07/15/2014 | 4,680 | 4,717 | ||||||||||
Chrysler Financial Lease Trust | ||||||||||||
Series 2010-A, Class A2 | ||||||||||||
1.780%, 06/15/2011 n | 3,572 | 3,577 | ||||||||||
USAA Auto Owner Trust | ||||||||||||
Series 2010-1, Class A2 | ||||||||||||
0.630%, 06/15/2012 | 2,605 | 2,606 | ||||||||||
Volkswagen Auto Lease Trust | ||||||||||||
Series 2010-A, Class A2 | ||||||||||||
0.770%, 01/22/2013 | 4,680 | 4,681 | ||||||||||
World Omni Auto Receivables Trust | ||||||||||||
Series 2010-A, Class A2 | ||||||||||||
0.700%, 05/15/2012 | 1,084 | 1,084 | ||||||||||
16,665 | ||||||||||||
Credit Cards – 1.1% | ||||||||||||
Chase Issuance Trust | ||||||||||||
Series 2008-A9, Class A9 | ||||||||||||
4.260%, 05/15/2013 | 5,000 | 5,069 | ||||||||||
Discover Card Master Trust | ||||||||||||
Series 2007-A1, Class A1 | ||||||||||||
5.650%, 03/16/2020 | 5,185 | 5,883 | ||||||||||
Discover Card Master Trust I | ||||||||||||
Series 2005-4, Class B1 | ||||||||||||
0.510%, 06/18/2013 D | 1,430 | 1,429 | ||||||||||
12,381 | ||||||||||||
Home Equity – 3.2% | ||||||||||||
Amresco Residential Security Mortgage | ||||||||||||
Series 1997-3, Class A9 | ||||||||||||
6.960%, 03/25/2027 ¥ | 29 | 29 | ||||||||||
Countrywide Asset-Backed Certificates | ||||||||||||
Series 2003-SC1, Class M2 | ||||||||||||
2.511%, 09/25/2023 D | 766 | 612 | ||||||||||
RBSSP Resecuritization Trust | ||||||||||||
Series 2009-8, Class 3A1 | ||||||||||||
0.393%, 03/26/2037 n D | 1,178 | 1,147 | ||||||||||
Series 2009-9, Class 9A1 | ||||||||||||
0.481%, 09/26/2037 n D | 4,587 | 4,409 |
30 Nuveen Investments
Core Bond Fund (continued) DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
Series 2009-10, Class 8A1 | ||||||||||||
0.411%, 05/26/2036 n D | $ 3,756 | $ 3,632 | ||||||||||
Series 2009-11, Class 4A1 | ||||||||||||
2.011%, 12/26/2037 n D | 1,334 | 1,339 | ||||||||||
Series 2010-4, Class 1A1 | ||||||||||||
0.371%, 03/26/2036 n D | 7,515 | 6,986 | ||||||||||
Series 2010-4, Class 5A1 | ||||||||||||
0.421%, 02/26/2037 n D | 5,181 | 4,916 | ||||||||||
Series 2010-8, Class 4A1 | ||||||||||||
0.591%, 07/26/2036 n D | 2,406 | 2,277 | ||||||||||
Series 2010-10, Class 2A1 | ||||||||||||
0.391%, 09/26/2036 n D | 4,361 | 3,957 | ||||||||||
Series 2010-11, Class 2A1 | ||||||||||||
0.431%, 03/26/2037 n D | 5,128 | 4,899 | ||||||||||
Renaissance Home Equity Loan Trust | ||||||||||||
Series 2005-3, Class AF4 | ||||||||||||
5.140%, 11/25/2035 | 4,365 | 3,882 | ||||||||||
38,085 | ||||||||||||
Manufactured Housing – 0.2% | ||||||||||||
Green Tree Financial | ||||||||||||
Series 2008-MH1, Class A1 | ||||||||||||
7.000%, 04/25/2038 n | 1,680 | 1,718 | ||||||||||
Other – 2.6% | ||||||||||||
AH Mortgage Advance Trust | ||||||||||||
Series 2010-ADV1, Class A1 | ||||||||||||
3.968%, 08/15/2022 n | 5,500 | 5,513 | ||||||||||
Series 2010-ADV2, Class C1 | ||||||||||||
8.830%, 05/10/2041 n | 3,000 | 2,954 | ||||||||||
Henderson Receivables | ||||||||||||
Series 2010-3A, Class A | ||||||||||||
3.820%, 12/15/2048 n | 3,680 | 3,527 | ||||||||||
Ocwen Advance Receivables Backed Notes | ||||||||||||
Series 2009-3A, Class A | ||||||||||||
4.140%, 07/15/2023 n | 3,545 | 3,563 | ||||||||||
Small Business Administration | ||||||||||||
Series 2006-P10B, Class 1 | ||||||||||||
5.681%, 08/10/2016 | 7,196 | 7,784 | ||||||||||
Series 2010-10A, Class 1 | ||||||||||||
4.108%, 03/10/2020 | 6,954 | 7,346 | ||||||||||
30,687 | ||||||||||||
Total Asset-Backed Securities | ||||||||||||
(Cost $95,814) | 99,536 | |||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities – 5.0% |
| |||||||||||
Adjustable Rate D – 2.6% | ||||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||
Series 2704, Class JF | ||||||||||||
0.810%, 05/15/2023 | 3,473 | 3,502 | ||||||||||
Series 2755, Class FN | ||||||||||||
0.710%, 04/15/2032 | 3,588 | 3,594 | ||||||||||
Series 3423, Class FA | ||||||||||||
0.760%, 06/15/2036 | 12,927 | 12,991 | ||||||||||
Series 3591, Class FP | ||||||||||||
0.860%, 06/15/2039 | 4,938 | 4,970 | ||||||||||
Federal National Mortgage Association | ||||||||||||
Series 2005-59, Class DF | ||||||||||||
0.461%, 05/25/2035 | 5,450 | 5,426 | ||||||||||
30,483 | ||||||||||||
Fixed Rate – 2.3% | ||||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||
Series 1022, Class J | ||||||||||||
6.000%, 12/15/2020 | 23 | 25 | ||||||||||
Series 162, Class F | ||||||||||||
7.000%, 05/15/2021 | 63 | 71 | ||||||||||
Series 1790, Class A | ||||||||||||
7.000%, 04/15/2022 | 37 | 40 | ||||||||||
Series 188, Class H | ||||||||||||
7.000%, 09/15/2021 | 125 | 147 | ||||||||||
Series 2763, Class TA | ||||||||||||
4.000%, 03/15/2011 | 1,073 | 1,076 | ||||||||||
Series 2901, Class UB | ||||||||||||
5.000%, 03/15/2033 | 5,000 | 5,328 | ||||||||||
Series 6, Class C | ||||||||||||
9.050%, 06/15/2019 | 12 | 14 | ||||||||||
Federal National Mortgage Association | ||||||||||||
Series 1988-24, Class G | ||||||||||||
7.000%, 10/25/2018 | 28 | 31 | ||||||||||
Series 1989-44, Class H | ||||||||||||
9.000%, 07/25/2019 | 23 | 26 | ||||||||||
Series 1989-90, Class E | ||||||||||||
8.700%, 12/25/2019 | 4 | 4 | ||||||||||
Series 1990-102, Class J | ||||||||||||
6.500%, 08/25/2020 | 24 | 27 | ||||||||||
Series 1990-105, Class J | ||||||||||||
6.500%, 09/25/2020 | 212 | 236 | ||||||||||
Series 1990-30, Class E | ||||||||||||
6.500%, 03/25/2020 | 19 | 22 | ||||||||||
Series 1990-61, Class H | ||||||||||||
7.000%, 06/25/2020 | 20 | 23 | ||||||||||
Series 1990-72, Class B | ||||||||||||
9.000%, 07/25/2020 | 18 | 21 | ||||||||||
Series 1991-56, Class M | ||||||||||||
6.750%, 06/25/2021 | 72 | 77 | ||||||||||
Series 1992-120, Class C | ||||||||||||
6.500%, 07/25/2022 | 23 | 25 | ||||||||||
Series 2002-83, Class MD | ||||||||||||
5.000%, 09/25/2016 | 2,442 | 2,486 | ||||||||||
Series 2003-30, Class AE | ||||||||||||
3.900%, 10/25/2017 | 7,389 | 7,608 | ||||||||||
Series 2003-W1, Class B1 | ||||||||||||
5.750%, 12/25/2042 | 1,537 | 1,061 | ||||||||||
Series 2005-44, Class PC | ||||||||||||
5.000%, 11/25/2027 | 4,120 | 4,191 | ||||||||||
Series 2005-62, Class JE | ||||||||||||
5.000%, 06/25/2035 | 4,029 | 4,286 | ||||||||||
26,825 | ||||||||||||
Z-Bonds x – 0.1% | ||||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||
Series 1118, Class Z | ||||||||||||
8.250%, 07/15/2021 | 41 | 47 | ||||||||||
Federal National Mortgage Association | ||||||||||||
Series 1991-134, Class Z | ||||||||||||
7.000%, 10/25/2021 | 144 | 165 | ||||||||||
Series 1996-35, Class Z | ||||||||||||
7.000%, 07/25/2026 | 657 | 739 | ||||||||||
951 | ||||||||||||
Total Collateralized Mortgage Obligation –U.S. Government Agency Mortgage-Backed Securities |
| |||||||||||
(Cost $56,989) |
| 58,259 | ||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities – 3.7% |
| |||||||||||
Adjustable Rate D – 1.6% | ||||||||||||
Arkle Master Issuer | ||||||||||||
Series 2010-1A, Class 1A | ||||||||||||
0.479%, 05/17/2011 n | 7,120 | 7,109 |
Nuveen Investments 31
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Core Bond Fund (continued) DESCRIPTION | ||||||||||||
PAR | FAIR VALUE > | |||||||||||
Countrywide Home Loans | ||||||||||||
Series 2004-2, Class 2A1 | ||||||||||||
4.986%, 02/25/2034 | $ 1,448 | $ 1,438 | ||||||||||
FDIC Structured Sale Guaranteed Notes | ||||||||||||
Series 2010-S1, Class 1A | ||||||||||||
0.806%, 02/25/2048 n | 1,595 | 1,598 | ||||||||||
Indymac Index Mortgage Loan Trust | ||||||||||||
Series 2005-AR1, Class 4A1 | ||||||||||||
2.821%, 03/25/2035 | 1,330 | 1,136 | ||||||||||
JPMorgan Alternative Loan Trust | ||||||||||||
Series 2007-S1, Class A1 | ||||||||||||
0.541%, 04/25/2047 | 3,343 | 2,523 | ||||||||||
JPMorgan Mortgage Trust | ||||||||||||
Series 2006-A7, Class 3A4 | ||||||||||||
5.962%, 01/25/2037 | 863 | 108 | ||||||||||
Structured Adjustable Rate Mortgage Loan Trust | ||||||||||||
Series 2004-11, Class A | ||||||||||||
2.789%, 08/25/2034 | 329 | 299 | ||||||||||
Wachovia Mortgage Loan Trust | ||||||||||||
Series 2005-B, Class 1A1 | ||||||||||||
2.995%, 10/20/2035 | 5,089 | 3,979 | ||||||||||
Washington Mutual | ||||||||||||
Series 2007-HY2, Class 3A2 | ||||||||||||
5.744%, 09/25/2036 | 1,639 | 264 | ||||||||||
18,454 | ||||||||||||
Fixed Rate – 2.1% | ||||||||||||
Banc of America Funding | ||||||||||||
Series 2007-4, Class 1A2 | ||||||||||||
5.500%, 06/25/2037 ¥ | 1,589 | 572 | ||||||||||
Countrywide Alternative Loan Trust | ||||||||||||
Series 2004-2CB, Class 1A1 | ||||||||||||
4.250%, 03/25/2034 | 389 | 389 | ||||||||||
Series 2004-J1, Class 1A1 | ||||||||||||
6.000%, 02/25/2034 | 434 | 440 | ||||||||||
Series 2006-19CB, Class A15 | ||||||||||||
6.000%, 08/25/2036 | 2,236 | 2,013 | ||||||||||
Credit Suisse First Boston Mortgage Securities | ||||||||||||
Series 2003-8, Class DB1 | ||||||||||||
6.252%, 04/25/2033 | 3,952 | 3,542 | ||||||||||
GMAC Mortgage Corporation Loan Trust | ||||||||||||
Series 2006-J1, Class A1 | ||||||||||||
5.750%, 04/25/2036 | 2,373 | 2,259 | ||||||||||
Series 2010-1, Class A | ||||||||||||
4.250%, 07/25/2040 n | 2,626 | 2,650 | ||||||||||
GSMPS Mortgage Loan Trust | ||||||||||||
Series 2003-1, Class B1 | ||||||||||||
6.815%, 03/25/2043 ¥ | 713 | 500 | ||||||||||
Lehman Brothers Mortgage Trust | ||||||||||||
Series 2008-6, Class 1A1 | ||||||||||||
6.183%, 07/25/2047 | 2,101 | 2,003 | ||||||||||
Master Alternative Loans Trust | ||||||||||||
Series 2004-1, Class 3A1 | ||||||||||||
7.000%, 01/25/2034 | 967 | 986 | ||||||||||
Mortgage Equity Conversion Asset Trust | ||||||||||||
Series 2010-1A, Class A | ||||||||||||
4.000%, 07/25/2060 n | 4,121 | 4,121 | ||||||||||
NCUA Guaranteed Notes | ||||||||||||
Series 2010-C1, Class A2 | ||||||||||||
2.900%, 10/29/2020 | 4,185 | 4,069 | ||||||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||||||
Series 2007-2, Class 1A8 | ||||||||||||
5.750%, 03/25/2037 | 1,945 | 1,789 | ||||||||||
Westam Mortgage Financial | ||||||||||||
Series 11, Class A | ||||||||||||
6.360%, 08/26/2020 ¥ | 35 | 37 | ||||||||||
25,370 | ||||||||||||
Total Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | ||||||||||||
(Cost $47,907) | 43,824 | |||||||||||
U.S. Government & Agency Securities – 3.6% | ||||||||||||
U.S. Treasuries – 3.6% | ||||||||||||
U.S. Treasury Bonds | ||||||||||||
2.125%, 02/15/2040 | 5,940 | 6,287 | ||||||||||
3.875%, 08/15/2040 | 2,065 | 1,902 | ||||||||||
U.S. Treasury Notes | ||||||||||||
2.375%, 02/28/2015 q | 3,650 | 3,762 | ||||||||||
1.875%, 07/15/2015 | 12,279 | 13,301 | ||||||||||
1.250%, 08/31/2015 q | 1,000 | 973 | ||||||||||
3.375%, 11/15/2019 q | 4,900 | 5,002 | ||||||||||
3.625%, 02/15/2020 q | 4,515 | 4,686 | ||||||||||
2.625%, 08/15/2020 q | 6,630 | 6,285 | ||||||||||
Total U.S. Government & Agency Securities | ||||||||||||
(Cost $42,541) | 42,198 | |||||||||||
Preferred Stock – 0.0% | ||||||||||||
Sovereign – 0.0% | ||||||||||||
Fannie Mae Series S— | ||||||||||||
(Cost $5,173) | 218,000 | 122 | ||||||||||
Short-Term Investments – 4.2% | ||||||||||||
Money Market Fund – 3.9% | ||||||||||||
First American Prime Obligations Fund, Class Z | ||||||||||||
0.084% Å W | 45,494,987 | 45,495 | ||||||||||
U.S. Treasury Obligations – 0.3% | ||||||||||||
U.S. Treasury Bills ¨ | ||||||||||||
0.121%, 02/10/2011 | $1,310 | 1,310 | ||||||||||
0.134%, 04/07/2011 | 1,760 | 1,759 | ||||||||||
0.145%, 05/05/2011 | 845 | 845 | ||||||||||
3,914 | ||||||||||||
Total Short-Term Investments | ||||||||||||
(Cost $49,408) | 49,409 | |||||||||||
Investment Purchased with Proceeds from Securities Lending – 12.8% | ||||||||||||
Mount Vernon Securities Lending Prime Portfolio | ||||||||||||
0.292% W † | ||||||||||||
(Cost $150,792) | 150,792,318 | 150,792 | ||||||||||
Total Investments – 116.2% | ||||||||||||
(Cost $1,322,646) | 1,365,817 | |||||||||||
Other Assets and Liabilities, Net – (16.2)% | (190,338) | |||||||||||
Total Net Assets – 100.0% | $1,175,479 |
> | Securities are valued in accordance with procedures described in note 1 in Notes to Financial Statements. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” |
q | This security or a portion of this security is out on loan at December 31, 2010. Total loaned securities had a fair value of $148,043 at December 31, 2010. |
D | Variable Rate Security – The rate shown is the rate in effect as of December 31, 2010. |
ì | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of |
32 Nuveen Investments
Core Bond Fund (concluded)
December 31, 2010, the fair value of foreign securities was $90,695 or 7.7% of Total Net Assets. | ||
« | Security purchased on a when-issued/delayed delivery basis. | |
¥ | Security considered illiquid. | |
x | Z-Bonds – Represents securities that pay no interest or principal during their accrual periods, but accrue additional principal at specified rates. Interest rate shown represents current yield based upon the cost basis and estimated future cash flows. | |
U.S. Treasury inflation-protection securities (TIPS) are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. | ||
· | Non-income producing security. | |
Å | Investment in affiliated security. | |
W | The rate shown is the annualized seven-day effective yield as of December 31, 2010. | |
¨ | Security has been deposited as initial margin on open futures contracts and/or swap agreements. Yield shown is the annualized effective yield as of December 31, 2010. | |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. |
Schedule of Open Futures Contracts
Description | Settlement Month | Number of Contracts Purchased (Sold) | Notional Contract Value | Unrealized Appreciation (Depreciation) | ||||
U.S. Treasury 2 Year Note Futures | March 2011 | 166 | $ 36,338 | $ (35) | ||||
U.S. Treasury 5 Year Note Futures | March 2011 | 346 | 40,731 | (111) | ||||
U.S. Treasury 10 Year Note Futures | March 2011 | 86 | 10,358 | 15 | ||||
U.S. Treasury Long Bond Futures | March 2011 | (207) | (25,280) | 882 | ||||
U.S. Treasury Ultra Bond Futures | March 2011 | (204) | (25,927) | (13) | ||||
$ 738 |
Interest Rate Swap Contracts
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Depreciation | ||||||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 1.255 | % | 11/03/2011 | $33,000 | $ (273) | |||||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 3.858 | 01/19/2020 | 8,000 | (542) | ||||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.358 | 09/25/2011 | 35,000 | (371) | ||||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.133 | 03/25/2012 | 33,000 | (358) | ||||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.048 | 06/25/2012 | 33,000 | (242) | ||||||||||||||||||
UBS | 3-Month LIBOR | Receive | 3.001 | 08/03/2014 | 14,000 | (878) | ||||||||||||||||||
$(2,664) |
See accompanying notes to financial statements.
Nuveen Investments 33
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Nuveen High Income Bond Fund (“High Income Bond Fund”) (formerly known as First American High Income Bond Fund) DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
High Yield Corporate Bonds – 84.2% | ||||||||||||
Banking – 2.3% | ||||||||||||
ABN AMRO | ||||||||||||
6.523%, 12/29/2049 n q D | $2,000 | $ 1,695 | ||||||||||
Ally Financial | ||||||||||||
8.300%, 02/12/2015 | 4,590 | 5,049 | ||||||||||
Amsouth Bank | ||||||||||||
Series AI | ||||||||||||
4.850%, 04/01/2013 | 3,800 | 3,686 | ||||||||||
Standard Bank | ||||||||||||
8.750%, 02/09/2016 D ì | 1,000 | 943 | ||||||||||
11,373 | ||||||||||||
Basic Industry – 14.9% | ||||||||||||
Aleris International | ||||||||||||
10.000%, 12/15/2016 è | 1,000 | 3 | ||||||||||
Alrosa Finance | ||||||||||||
7.750%, 11/03/2020 n q ì | 2,000 | 2,098 | ||||||||||
Appleton Papers | ||||||||||||
10.500%, 06/15/2015 n | 2,000 | 1,980 | ||||||||||
Atkore International | ||||||||||||
9.875%, 01/01/2018 n | 1,000 | �� | 1,040 | |||||||||
Berry Plastics | ||||||||||||
10.250%, 03/01/2016 q | 1,350 | 1,325 | ||||||||||
9.750%, 01/15/2021 n q | 1,000 | 990 | ||||||||||
Boise Paper Holding | ||||||||||||
9.000%, 11/01/2017 | 1,100 | 1,202 | ||||||||||
Bumi Investment | ||||||||||||
10.750%, 10/06/2017 n ì | 2,350 | 2,561 | ||||||||||
Cascades | ||||||||||||
7.750%, 12/15/2017 ì | 2,500 | 2,606 | ||||||||||
Catalyst Paper | ||||||||||||
11.000%, 12/15/2016 n ì | 1,500 | 1,414 | ||||||||||
Cleaver-Brooks | ||||||||||||
12.250%, 05/01/2016 n | 1,000 | 1,061 | ||||||||||
Consol Energy | ||||||||||||
8.250%, 04/01/2020 n | 1,750 | 1,890 | ||||||||||
Crown Cork & Seal | ||||||||||||
7.375%, 12/15/2026 | 500 | 496 | ||||||||||
Drummond | ||||||||||||
9.000%, 10/15/2014 n | 1,750 | 1,868 | ||||||||||
Edgen Murray | ||||||||||||
12.250%, 01/15/2015 q | 750 | 652 | ||||||||||
Exopack Holding | ||||||||||||
11.250%, 02/01/2014 | 1,000 | 1,037 | ||||||||||
Georgia Gulf | ||||||||||||
9.000%, 01/15/2017 n q | 1,300 | 1,411 | ||||||||||
Graham Packaging | ||||||||||||
8.250%, 10/01/2018 q | 1,750 | 1,838 | ||||||||||
Grupo Papelero Scribe | ||||||||||||
8.875%, 04/07/2020 n ì | 1,000 | 985 | ||||||||||
Hexion | ||||||||||||
9.000%, 11/15/2020 n q | 2,000 | 2,115 | ||||||||||
Hidili Industry | ||||||||||||
8.625%, 11/04/2015 n q ì | 400 | 397 | ||||||||||
Huntsman International | ||||||||||||
8.625%, 03/15/2021 n q | 1,000 | 1,080 | ||||||||||
Incitec Pivot Finance | ||||||||||||
6.000%, 12/10/2019 n | 1,800 | 1,843 | ||||||||||
Intertape Polymer Group | ||||||||||||
8.500%, 08/01/2014 | 2,615 | 2,157 | ||||||||||
Mercer International | ||||||||||||
9.500%, 12/01/2017 n | 1,000 | 1,028 | ||||||||||
Metinvest | ||||||||||||
10.250%, 05/20/2015 n ì | 1,250 | 1,331 | ||||||||||
Millar Western Forest | ||||||||||||
7.750%, 11/15/2013 ì | 2,700 | 2,558 | ||||||||||
Momentive Performance | ||||||||||||
11.500%, 12/01/2016 q | 2,000 | 2,170 | ||||||||||
Novelis | ||||||||||||
8.375%, 12/15/2017 n ì | 1,800 | 1,863 | ||||||||||
Olin | ||||||||||||
8.875%, 08/15/2019 | 1,300 | 1,440 | ||||||||||
Patriot Coal | ||||||||||||
8.250%, 04/30/2018 | 2,000 | 2,035 | ||||||||||
Ply Gem Industries | ||||||||||||
11.750%, 06/15/2013 | 1,000 | 1,070 | ||||||||||
Polypore International | ||||||||||||
7.500%, 11/15/2017 n | 2,300 | 2,346 | ||||||||||
Reynolds Group | ||||||||||||
8.500%, 05/15/2018 n | 4,050 | 4,070 | ||||||||||
Rhodia | ||||||||||||
6.875%, 09/15/2020 n ì | 1,500 | 1,521 | ||||||||||
Severstal Columbus | ||||||||||||
10.250%, 02/15/2018 n q | 1,750 | 1,846 | ||||||||||
Sinochem Overseas Capital | ||||||||||||
6.300%, 11/12/2040 n ì | 1,000 | 1,023 | ||||||||||
Solo Cup | ||||||||||||
8.500%, 02/15/2014 q | 1,250 | 1,125 | ||||||||||
Solutia | ||||||||||||
7.875%, 03/15/2020 | 2,250 | 2,407 | ||||||||||
Steel Dynamics | ||||||||||||
7.625%, 03/15/2020 n q | 1,575 | 1,685 | ||||||||||
Stora Enso | ||||||||||||
7.250%, 04/15/2036 n ì | 2,500 | 2,262 | ||||||||||
Tembec Industries | ||||||||||||
11.250%, 12/15/2018 n q ì | 2,300 | 2,409 | ||||||||||
Vedanta Resources | ||||||||||||
9.500%, 07/18/2018 n q ì | 1,750 | 1,914 | ||||||||||
Verso Paper Holdings | ||||||||||||
Series B | ||||||||||||
11.375%, 08/01/2016 q | 1,500 | 1,504 | ||||||||||
WPE International Cooperatief | ||||||||||||
10.375%, 09/30/2020 n q ì | 2,000 | 1,960 | ||||||||||
73,616 | ||||||||||||
Brokerage – 0.5% | ||||||||||||
E*Trade Financial | ||||||||||||
12.500%, 11/30/2017 | 2,093 | 2,459 | ||||||||||
Capital Goods – 4.0% | ||||||||||||
Abengoa Finance | ||||||||||||
8.875%, 11/01/2017 n q ì | 2,125 | 1,966 | ||||||||||
EnergySolutions Capital | ||||||||||||
10.750%, 08/15/2018 n | 750 | 819 | ||||||||||
Hawker Beechcraft Acquisition | ||||||||||||
9.750%, 04/01/2017 q | 700 | 397 | ||||||||||
Kratos Defense & Security Solutions | ||||||||||||
10.000%, 06/01/2017 | 1,500 | 1,661 | ||||||||||
Liberty Tire Recycling | ||||||||||||
11.000%, 10/01/2016 n | 1,000 | 1,073 | ||||||||||
Manitowoc | ||||||||||||
9.500%, 02/15/2018 q | 1,750 | 1,916 | ||||||||||
Navistar International | ||||||||||||
8.250%, 11/01/2021 q | 3,550 | 3,816 | ||||||||||
Spirit Aerosystems | ||||||||||||
7.500%, 10/01/2017 q | 1,300 | 1,352 | ||||||||||
Titan International | ||||||||||||
7.875%, 10/01/2017 n q | 1,750 | 1,846 | ||||||||||
TransDigm | ||||||||||||
7.750%, 12/15/2018 n q | 2,000 | 2,070 | ||||||||||
United Rentals North America | ||||||||||||
8.375%, 09/15/2020 q | 1,250 | 1,272 |
34 Nuveen Investments
High Income Bond Fund (continued) | ||||||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
Wyle Services | ||||||||||||
10.500%, 04/01/2018 n | $1,500 | $ 1,459 | ||||||||||
19,647 | ||||||||||||
Communications – 10.2% | ||||||||||||
Aspect Software | ||||||||||||
10.625%, 05/15/2017 n | 1,250 | 1,283 | ||||||||||
Belo | ||||||||||||
7.250%, 09/15/2027 | 1,950 | 1,692 | ||||||||||
Citizens Communications | ||||||||||||
9.000%, 08/15/2031 | 1,450 | 1,490 | ||||||||||
Clear Channel Communications | ||||||||||||
10.750%, 08/01/2016 q | 3,600 | 3,222 | ||||||||||
Clearwire Communications | ||||||||||||
12.000%, 12/01/2017 n q | 750 | 776 | ||||||||||
CSC Holdings | ||||||||||||
8.625%, 02/15/2019 q | 1,000 | 1,130 | ||||||||||
Digicel Group | ||||||||||||
10.500%, 04/15/2018 n qì | 2,800 | 3,080 | ||||||||||
Digicel Limited | ||||||||||||
8.250%, 09/01/2017 n ì | 1,500 | 1,538 | ||||||||||
Fairpoint Communications | ||||||||||||
Series I | ||||||||||||
13.125%, 04/02/2018 q è | 1,043 | 94 | ||||||||||
Frontier Communications | ||||||||||||
8.500%, 04/15/2020 | 1,842 | 2,012 | ||||||||||
Gannett | ||||||||||||
9.375%, 11/15/2017 | 2,000 | 2,230 | ||||||||||
Gray Television | ||||||||||||
10.500%, 06/29/2015 q | 1,650 | 1,662 | ||||||||||
Intelsat Bermuda | ||||||||||||
11.250%, 02/04/2017 ì | 4,000 | 4,360 | ||||||||||
Intelsat Jackson Holdings | ||||||||||||
8.500%, 11/01/2019 n q ì | 1,500 | 1,631 | ||||||||||
Level 3 Financing | ||||||||||||
4.344%, 02/15/2015 D | 1,350 | 1,168 | ||||||||||
McClatchy | ||||||||||||
11.500%, 02/15/2017 | 2,100 | 2,360 | ||||||||||
Media General | ||||||||||||
11.750%, 02/15/2017 q | 2,350 | 2,470 | ||||||||||
MetroPCS Wireless | ||||||||||||
7.875%, 09/01/2018 q | 1,550 | 1,608 | ||||||||||
Nextel Communications | ||||||||||||
Series D | ||||||||||||
7.375%, 08/01/2015 | 2,000 | 2,002 | ||||||||||
Sinclair Television Group | ||||||||||||
9.250%, 11/01/2017 n | 2,400 | 2,598 | ||||||||||
Syniverse Holdings, Inc. | ||||||||||||
9.125%, 01/15/2019 n | 1,500 | 1,549 | ||||||||||
Trilogy International Partners | ||||||||||||
10.250%, 08/15/2016 n q | 1,500 | 1,485 | ||||||||||
Unitymedia Hessen | ||||||||||||
8.125%, 12/01/2017 n ì | 2,500 | 2,612 | ||||||||||
UPC Holding | ||||||||||||
9.875%, 04/15/2018 n q ì | 2,300 | 2,519 | ||||||||||
Windstream | ||||||||||||
8.125%, 09/01/2018 q | 1,750 | 1,838 | ||||||||||
XM Satellite Radio | ||||||||||||
7.625%, 11/01/2018 n | 2,000 | 2,065 | ||||||||||
Young Broadcasting | ||||||||||||
10.000%, 03/01/2011 è § | 500 | — | ||||||||||
50,474 | ||||||||||||
Consumer Cyclical – 11.9% | ||||||||||||
Arvinmeritor | ||||||||||||
10.625%, 03/15/2018 q | 1,250 | 1,406 | ||||||||||
Beazer Homes USA | ||||||||||||
9.125%, 06/15/2018 | 1,750 | 1,698 | ||||||||||
Burlington Coat Factory | ||||||||||||
14.500%, 10/15/2014 | 250 | 263 | ||||||||||
Chukchansi Economic | ||||||||||||
8.000%, 11/15/2013 n | 1,000 | 665 | ||||||||||
CKE Restaurants | ||||||||||||
11.375%, 07/15/2018 q | 2,500 | 2,769 | ||||||||||
Corporativo Javer | ||||||||||||
13.000%, 08/04/2014 n ì | 1,150 | 1,300 | ||||||||||
Diamond Resorts | ||||||||||||
12.000%, 08/15/2018 n | 2,000 | 2,000 | ||||||||||
Fontainebleau Las Vegas | ||||||||||||
10.250%, 06/15/2015 n è | 1,000 | 4 | ||||||||||
Ford Motor | ||||||||||||
7.450%, 07/16/2031 q | 2,000 | 2,143 | ||||||||||
Ford Motor Credit | ||||||||||||
8.000%, 12/15/2016 | 1,000 | 1,117 | ||||||||||
Giti Tire | ||||||||||||
12.250%, 01/26/2012 ì | 1,200 | 1,187 | ||||||||||
Goodyear Tire & Rubber | ||||||||||||
10.500%, 05/15/2016 q | 2,000 | 2,280 | ||||||||||
Hanesbrands | ||||||||||||
8.000%, 12/15/2016 q | 1,000 | 1,072 | ||||||||||
Harrahs | ||||||||||||
12.750%, 04/15/2018 n q | 1,500 | 1,507 | ||||||||||
Hertz | ||||||||||||
8.875%, 01/01/2014 | 2,000 | 2,045 | ||||||||||
7.375%, 01/15/2021 n q | 2,000 | 2,020 | ||||||||||
Hilton Hotels | ||||||||||||
4.936%, 11/15/2013 n D | 3,000 | 2,715 | ||||||||||
InVentiv Health Capital | ||||||||||||
10.000%, 08/15/2018 n | 1,500 | 1,504 | ||||||||||
Lear | ||||||||||||
7.875%, 03/15/2018 | 2,500 | 2,675 | ||||||||||
Macys Retail Holdings | ||||||||||||
7.000%, 02/15/2028 | 1,000 | 992 | ||||||||||
Marina District Finance | ||||||||||||
9.875%, 08/15/2018 n q | 2,700 | 2,659 | ||||||||||
MGM Mirage | ||||||||||||
7.625%, 01/15/2017 q | 1,000 | 935 | ||||||||||
MGM Resorts International | ||||||||||||
10.000%, 11/01/2016 n q | 2,000 | 2,055 | ||||||||||
Mohegan Tribal Gaming | ||||||||||||
6.125%, 02/15/2013 q | 750 | 622 | ||||||||||
MTR Gaming Group | ||||||||||||
12.625%, 07/15/2014 | 1,500 | 1,556 | ||||||||||
Oxford Industries | ||||||||||||
11.375%, 07/15/2015 | 1,000 | 1,123 | ||||||||||
Pinnacle Entertainment | ||||||||||||
8.625%, 08/01/2017 | 1,750 | 1,907 | ||||||||||
Realogy | ||||||||||||
11.000%, 04/15/2014 | 2,875 | 2,825 | ||||||||||
Regal Entertainment Group | ||||||||||||
9.125%, 08/15/2018 q | 2,500 | 2,663 | ||||||||||
Rite Aid | ||||||||||||
9.750%, 06/12/2016 | 2,000 | 2,203 | ||||||||||
8.000%, 08/15/2020 q | 1,000 | 1,041 | ||||||||||
Snoqualmie Entertainment | ||||||||||||
9.125%, 02/01/2015 n | 750 | 713 | ||||||||||
Sonic Automotive | ||||||||||||
9.000%, 03/15/2018 | 1,500 | 1,579 | ||||||||||
Standard Pacific | ||||||||||||
8.375%, 05/15/2018 | 1,500 | 1,500 | ||||||||||
Tower Automotive Holdings | ||||||||||||
10.625%, 09/01/2017 n | 1,749 | 1,880 | ||||||||||
Trimas | ||||||||||||
9.750%, 12/15/2017 | 1,000 | 1,095 |
Nuveen Investments 35
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
High Income Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
William Lyon Homes | ||||||||
10.750%, 04/01/2013 | $1,000 | $ 862 | ||||||
58,580 | ||||||||
Consumer Non Cyclical – 8.9% | ||||||||
Alere | ||||||||
9.000%, 05/15/2016 | 1,800 | 1,854 | ||||||
Cardinal Health | ||||||||
9.500%, 04/15/2015 | 829 | 837 | ||||||
Central Garden & Pet Company | ||||||||
8.250%, 03/01/2018 | 1,250 | 1,266 | ||||||
Darling International | ||||||||
8.500%, 12/15/2018 n | 1,100 | 1,147 | ||||||
Davita | ||||||||
6.375%, 11/01/2018 | 2,000 | 1,990 | ||||||
Dyncorp International | ||||||||
10.375%, 07/01/2017 n | 1,250 | 1,281 | ||||||
Endo Pharmaceuticals Holdings | ||||||||
7.000%, 12/15/2020 n | 250 | 255 | ||||||
Fage Dairy | ||||||||
9.875%, 02/01/2020 n ì | 1,350 | 1,350 | ||||||
HCA | ||||||||
8.500%, 04/15/2019 q | 2,500 | 2,738 | ||||||
HCA Holdings | ||||||||
7.750%, 05/15/2021 n q | 2,500 | 2,500 | ||||||
HealthSouth Capital | ||||||||
8.125%, 02/15/2020 q | 1,000 | 1,075 | ||||||
7.750%, 09/15/2022 q | 1,000 | 1,033 | ||||||
Icon Health & Fitness | ||||||||
11.875%, 10/15/2016 n | 1,500 | 1,515 | ||||||
Ingles Markets | ||||||||
8.875%, 05/15/2017 | 2,250 | 2,408 | ||||||
JBS Finance II | ||||||||
8.250%, 01/29/2018 n q ì | 1,250 | 1,256 | ||||||
Land O Lakes Capital Trust I | ||||||||
7.450%, 03/15/2028 n | 2,000 | 1,790 | ||||||
Marfrig Overseas | ||||||||
9.500%, 05/04/2020 n ì | 1,500 | 1,553 | ||||||
Merge Healthcare | ||||||||
11.750%, 05/01/2015 q | 1,500 | 1,597 | ||||||
MHP | ||||||||
10.250%, 04/29/2015 n ì | 1,250 | 1,317 | ||||||
National Mentor Holdings | ||||||||
11.250%, 07/01/2014 | 1,000 | 1,015 | ||||||
Novasep Holding | ||||||||
9.750%, 12/15/2016 n ì | 2,000 | 1,410 | ||||||
Pilgrim’s Pride | ||||||||
7.875%, 12/15/2018 n | 2,050 | 2,040 | ||||||
Pinnacle Foods | ||||||||
8.250%, 09/01/2017 | 2,550 | 2,607 | ||||||
Radiation Therapy Services | ||||||||
9.875%, 04/15/2017 n | 750 | 748 | ||||||
Res-Care | ||||||||
10.750%, 01/15/2019 n q | 1,850 | 1,905 | ||||||
Rotech Healthcare | ||||||||
10.750%, 10/15/2015 n q | 1,750 | 1,803 | ||||||
Symbion | ||||||||
11.000%, 08/23/2015 | — | — | ||||||
Tenet Healthcare | ||||||||
8.000%, 08/01/2020 n | 1,750 | 1,776 | ||||||
Valeant Pharmaceuticals | ||||||||
6.875%, 12/01/2018 n q ì | 2,000 | 1,985 | ||||||
44,051 | ||||||||
Electric – 3.9% | ||||||||
AES | ||||||||
8.000%, 10/15/2017 | 2,100 | 2,221 | ||||||
Calpine | ||||||||
7.875%, 07/31/2020 n | 2,025 | 2,050 | ||||||
CMS Energy | ||||||||
5.050%, 02/15/2018 | 2,000 | 1,978 | ||||||
Dynegy Holdings | ||||||||
7.750%, 06/01/2019 | 3,250 | 2,169 | ||||||
Edison Mission Energy | ||||||||
7.750%, 06/15/2016 q | 3,050 | 2,623 | ||||||
Energy Future Holdings | ||||||||
9.750%, 10/15/2019 | 2,000 | 2,017 | ||||||
Mirant Americas Generation | ||||||||
8.500%, 10/01/2021 | 1,800 | 1,800 | ||||||
NRG Energy | ||||||||
8.250%, 09/01/2020 n | 2,000 | 2,050 | ||||||
PPL Capital Funding | ||||||||
Series A | ||||||||
6.700%, 03/30/2067 D | 2,300 | 2,254 | ||||||
19,162 | ||||||||
Energy – 10.7% | ||||||||
Aquilex Holdings | ||||||||
11.125%, 12/15/2016 | 1,600 | 1,620 | ||||||
Black Elk Energy | ||||||||
13.750%, 12/01/2015 n | 1,500 | 1,493 | ||||||
Bluewater Holding | ||||||||
3.289%, 07/17/2014 D ì | 2,000 | 1,465 | ||||||
Calfrac Holdings | ||||||||
7.500%, 12/01/2020 n q | 2,250 | 2,278 | ||||||
Carrizo Oil & Gas | ||||||||
8.625%, 10/15/2018 n | 2,000 | 2,060 | ||||||
Chesapeake Energy | ||||||||
9.500%, 02/15/2015 q | 1,350 | 1,522 | ||||||
Cloud Peak Energy Resources | ||||||||
8.250%, 12/15/2017 q | 1,520 | 1,632 | ||||||
Concho Resources | ||||||||
8.625%, 10/01/2017 | 1,550 | 1,689 | ||||||
Floatel Superior | ||||||||
13.000%, 09/02/2015 ì | 1,500 | 1,605 | ||||||
Frac Tech Services | ||||||||
7.125%, 11/15/2018 n | 2,000 | 2,030 | ||||||
Golden Close Marit | ||||||||
11.000%, 12/09/2015 | 2,000 | 2,070 | ||||||
Headwaters | ||||||||
11.375%, 11/01/2014 q | 1,250 | 1,367 | ||||||
Holly | ||||||||
9.875%, 06/15/2017 | 1,550 | 1,689 | ||||||
Linn Energy | ||||||||
8.625%, 04/15/2020 n | 2,125 | 2,290 | ||||||
Northern Tier Energy | ||||||||
10.500%, 12/01/2017 n q | 1,000 | 1,020 | ||||||
Opti Canada | ||||||||
9.750%, 08/15/2013 n ì | 1,300 | 1,300 | ||||||
Panoro Energy | ||||||||
12.000%, 11/15/2018 n | 2,000 | 2,000 | ||||||
Petrohawk Energy | ||||||||
7.250%, 08/15/2018 | 2,000 | 2,020 | ||||||
Petroplus Finance | ||||||||
9.375%, 09/15/2019 n ì | 1,500 | 1,387 | ||||||
Polarcus Alima | ||||||||
12.500%, 10/29/2015 ì | 2,200 | 2,244 | ||||||
Pride International | ||||||||
7.875%, 08/15/2040 | 1,600 | 1,732 | ||||||
RAAM Global Energy | ||||||||
12.500%, 10/01/2015 n | 1,750 | 1,796 | ||||||
Range Resources | ||||||||
8.000%, 05/15/2019 | 2,500 | 2,722 |
36 Nuveen Investments
High Income Bond Fund (continued) DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
RDS Ultra-Deepwater | ||||||||||||
11.875%, 03/15/2017 n ì | $2,000 | $ 2,085 | ||||||||||
Sandridge Energy | ||||||||||||
8.625%, 04/01/2015 q | 2,825 | 2,892 | ||||||||||
Seadrill | ||||||||||||
6.500%, 10/05/2015 ì | 3,000 | 2,918 | ||||||||||
Sevan Marine | ||||||||||||
12.000%, 08/10/2015 ì | 2,000 | 2,110 | ||||||||||
Stone Energy | ||||||||||||
8.625%, 02/01/2017 | 1,850 | 1,878 | ||||||||||
52,914 | ||||||||||||
Finance – 5.5% | ||||||||||||
AGFC Capital Trust I | ||||||||||||
6.000%, 01/15/2067 n D | 2,000 | 920 | ||||||||||
American General Finance | ||||||||||||
Series MTN | ||||||||||||
5.850%, 06/01/2013 | 1,300 | 1,180 | ||||||||||
CIT Group | ||||||||||||
7.000%, 05/01/2016 | 4,150 | 4,165 | ||||||||||
Credit Acceptance | ||||||||||||
9.125%, 02/01/2017 n | 3,000 | 3,150 | ||||||||||
Glen Meadow | ||||||||||||
6.505%, 02/12/2067 n D | 2,000 | 1,660 | ||||||||||
Harbinger Group | ||||||||||||
10.625%, 11/15/2015 n | 1,000 | 1,005 | ||||||||||
Icahn Enterprises | ||||||||||||
7.750%, 01/15/2016 | 1,500 | 1,500 | ||||||||||
International Lease Finance | ||||||||||||
8.625%, 09/15/2015 n q | 1,800 | 1,935 | ||||||||||
8.250%, 12/15/2020 q | 2,500 | 2,575 | ||||||||||
National Money Mart | ||||||||||||
10.375%, 12/15/2016 q ì | 2,100 | 2,268 | ||||||||||
Offshore Group Investment | ||||||||||||
11.500%, 08/01/2015 n q ì | 2,000 | 2,170 | ||||||||||
PHH | ||||||||||||
9.250%, 03/01/2016 n | 1,800 | 1,899 | ||||||||||
Rare Restaurant Group | ||||||||||||
9.250%, 05/15/2014 n | 2,000 | 1,740 | ||||||||||
Squaretwo Financial | ||||||||||||
11.625%, 04/01/2017 n | 1,000 | 985 | ||||||||||
27,152 | ||||||||||||
Insurance – 2.2% | ||||||||||||
American International Group | ||||||||||||
6.250%, 03/15/2087 D | 2,800 | 2,476 | ||||||||||
CNO Financial Group | ||||||||||||
9.000%, 01/15/2018 n | 2,000 | 2,080 | ||||||||||
Genworth Financial | ||||||||||||
6.150%, 11/15/2066 D | 1,700 | 1,339 | ||||||||||
Liberty Mutual Group | ||||||||||||
10.750%, 06/15/2088 n D | 1,075 | 1,301 | ||||||||||
Provincia De Cordoba | ||||||||||||
12.375% 08/17/2017 n ì | 1,300 | 1,352 | ||||||||||
XL Capital | ||||||||||||
Series E | ||||||||||||
6.500%, 12/29/2049 D | 2,500 | 2,150 | ||||||||||
10,698 | ||||||||||||
Natural Gas – 1.7% | ||||||||||||
Crosstex Energy | ||||||||||||
8.875%, 02/15/2018 q | 1,300 | 1,393 | ||||||||||
Holly Energy Partners | ||||||||||||
6.250%, 03/01/2015 q | 1,950 | 1,930 | ||||||||||
Inergy LP | ||||||||||||
7.000%, 10/01/2018 n q | 1,400 | 1,410 | ||||||||||
Sabine Pass LNG | ||||||||||||
7.500%, 11/30/2016 | 2,245 | 2,105 | ||||||||||
Southern Union | ||||||||||||
7.200%, 11/01/2066 D | 1,600 | 1,474 | ||||||||||
8,312 | ||||||||||||
Real Estate – 1.3% | ||||||||||||
Central China Real Estate | ||||||||||||
12.250%, 10/20/2015 n ì | 875 | 950 | ||||||||||
Country Garden Holding | ||||||||||||
11.750%, 09/10/2014 n ì | 1,500 | 1,657 | ||||||||||
Evergrande Real Estate Group | ||||||||||||
13.000%, 01/27/2015 n ì | 400 | 436 | ||||||||||
Neo-China Group Holdings | ||||||||||||
9.750%, 07/23/2014 n ì | 2,000 | 2,167 | ||||||||||
Sigma Capital | ||||||||||||
9.000%, 04/30/2015 ì | 1,029 | 1,094 | ||||||||||
6,304 | ||||||||||||
Sovereign – 0.2% | ||||||||||||
Republic of Argentina | ||||||||||||
8.750%, 06/02/2017 ì | 1,000 | 1,030 | ||||||||||
Technology – 2.6% | ||||||||||||
CDW | ||||||||||||
8.000%, 12/15/2018 n q | 1,450 | 1,479 | ||||||||||
Coleman Cable | ||||||||||||
9.000%, 02/15/2018 | 1,000 | 1,035 | ||||||||||
First Data | ||||||||||||
8.250%, 01/15/2021 n q | 673 | 646 | ||||||||||
12.625%, 01/15/2021 n | 1,349 | 1,288 | ||||||||||
8.750%, 01/15/2022 n q | 1,675 | 1,621 | ||||||||||
Freescale Semiconductor | ||||||||||||
10.750%, 08/01/2020 n q | 2,000 | 2,180 | ||||||||||
NXP Funding | ||||||||||||
9.750%, 08/01/2018 n ì | 1,500 | 1,687 | ||||||||||
Seagate | ||||||||||||
6.875%, 05/01/2020 n ì | 2,850 | 2,722 | ||||||||||
12,658 | ||||||||||||
Transportation – 3.4% | ||||||||||||
Air Canada | ||||||||||||
12.000%, 02/01/2016 n q ì | 2,500 | $2,619 | ||||||||||
Avis Budget Car Rental | ||||||||||||
7.625%, 05/15/2014 | 1,176 | 1,205 | ||||||||||
BLT Finance BV | ||||||||||||
7.500%, 05/15/2014 n ì | 700 | 549 | ||||||||||
CHC Helicopter | ||||||||||||
9.250%, 10/15/2020 n q ì | 1,850 | 1,915 | ||||||||||
Greenbrier | ||||||||||||
8.375%, 05/15/2015 | 2,540 | 2,572 | ||||||||||
Hapag-Lloyd | ||||||||||||
9.750%, 10/15/2017 n ì | 2,125 | 2,300 | ||||||||||
Marquette Transportation | ||||||||||||
10.875%, 01/15/2017 n | 1,000 | 1,020 | ||||||||||
Martin Midstream Partners | ||||||||||||
8.875%, 04/01/2018 | 2,500 | 2,575 | ||||||||||
Navios Maritime Acquisition | ||||||||||||
8.625%, 11/01/2017 n ì | 1,540 | 1,575 | ||||||||||
Western Express | ||||||||||||
12.500%, 04/15/2015 n | 750 | 664 | ||||||||||
16,994 | ||||||||||||
Total High Yield Corporate Bonds | ||||||||||||
(Cost $403,431) | 415,424 |
Nuveen Investments 37
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
High Income Bond Fund (continued) DESCRIPTION | SHARES/PAR | FAIR VALUE | > | |||||||||||||
Preferred Stocks – 4.3% | ||||||||||||||||
Banking – 0.7% | ||||||||||||||||
Bank of America | ||||||||||||||||
Series MER | 58,000 | $ 1,486 | ||||||||||||||
JPM Chase Capital XXVI | 65,000 | 1,749 | ||||||||||||||
3,235 | ||||||||||||||||
Consumer Cyclical – 0.1% | ||||||||||||||||
M/I Homes | ||||||||||||||||
Series A l | 25,000 | 405 | ||||||||||||||
Finance – 2.8% | ||||||||||||||||
Ally Financial | ||||||||||||||||
Series G | 2,000 | 1,890 | ||||||||||||||
Bank of America | ||||||||||||||||
Series 5 q | 142,000 | 2,530 | ||||||||||||||
Citigroup Capital XII | 75,000 | 1,985 | ||||||||||||||
Citigroup Capital XIII l | 52,000 | 1,399 | ||||||||||||||
Cogdell Spencer – REIT | ||||||||||||||||
Series A q l | 45,000 | 1,123 | ||||||||||||||
Freddie Mac l | 46,000 | 26 | ||||||||||||||
Goldman Sachs Group Series A | 62,000 | 1,312 | ||||||||||||||
Morgan Stanley | 85,000 | 1,639 | ||||||||||||||
National Bank Greece | ||||||||||||||||
Series A ì | 31,000 | 550 | ||||||||||||||
Royal Bank Scotland Group ì | 50,000 | 872 | ||||||||||||||
Royal Bank Scotland Group | ||||||||||||||||
Series N ì | 19,000 | 276 | ||||||||||||||
13,602 | ||||||||||||||||
Insurance – 0.2% | ||||||||||||||||
Aspen Insurance Holdings | ||||||||||||||||
Series A ì l | 45,000 | 1,089 | ||||||||||||||
Real Estate – 0.2% | ||||||||||||||||
American Home Mortgage Investments – REIT | ||||||||||||||||
Series B + l ¥ | 10,000 | — | ||||||||||||||
Ashford Hospitality Trust – REIT | 47,000 | 1,112 | ||||||||||||||
1,112 | ||||||||||||||||
Technology – 0.3% | ||||||||||||||||
Dupont Fabros – REIT | 65,000 | 1,622 | ||||||||||||||
Total Preferred Stocks | ||||||||||||||||
(Cost $20,688) | 21,065 | |||||||||||||||
Convertible Securities – 1.7% | ||||||||||||||||
Consumer Discretionary – 0.1% | ||||||||||||||||
General Motors q l | 7,000 | 379 | ||||||||||||||
Consumer Non Cyclical – 0.3% | ||||||||||||||||
Archer Daniels Midland q | 33,000 | 1,281 | ||||||||||||||
Energy – 0.3% | ||||||||||||||||
Chesapeake Energy | ||||||||||||||||
Series 2005 B | 15,000 | 1,387 | ||||||||||||||
Finance – 0.6% | ||||||||||||||||
Prospect Capital | ||||||||||||||||
6.250%, 12/15/2015 n | $ 3,000 | 3,034 | ||||||||||||||
Industrial Other – 0.1% | ||||||||||||||||
Evergreen Solar | ||||||||||||||||
13.000%, 04/15/2015 n | 1,000 | 773 | ||||||||||||||
Technology – 0.3% | ||||||||||||||||
Hutchinson Technology | ||||||||||||||||
3.250%, 01/15/2026 | 2,000 | 1,432 | ||||||||||||||
Total Convertible Securities | ||||||||||||||||
(Cost $8,444) | 8,286 | |||||||||||||||
Exchange-Traded Funds – 1.7% | ||||||||||||||||
iShares iBoxx $ High Yield Corporate Bond Fund q | 47,000 | 4,244 | ||||||||||||||
SPDR DB International Government Inflation-Protected Bond Fund | 29,100 | 1,691 | ||||||||||||||
SPDR S&P Dividend q | 43,500 | 2,261 | ||||||||||||||
Total Exchange-Traded Funds | ||||||||||||||||
(Cost $7,952) | 8,196 | |||||||||||||||
Investment Grade Corporate Bonds – 1.5% | ||||||||||||||||
Basic Industry – 0.9% | ||||||||||||||||
Vale Overseas Limited | ||||||||||||||||
8.250%, 01/17/2034 ì | $ 2,100 | 2,612 | ||||||||||||||
VTB Capital | ||||||||||||||||
6.551%, 10/13/2020 n q ì | 2,000 | 1,965 | ||||||||||||||
4,577 | ||||||||||||||||
Energy – 0.2% | ||||||||||||||||
Valero Energy | ||||||||||||||||
6.625%, 06/15/2037 q | 1,000 | 1,016 | ||||||||||||||
Sovereign – 0.4% | ||||||||||||||||
Republic of Poland | ||||||||||||||||
6.375%, 07/15/2019 ì | 1,950 | 2,184 | ||||||||||||||
Total Investment Grade Corporate Bonds | ||||||||||||||||
(Cost $7,799) | 7,777 | |||||||||||||||
Common Stocks – 1.1% | ||||||||||||||||
Basic Industry – 0.5% | ||||||||||||||||
AbitibiBowater q l | 61,000 | 1,441 | ||||||||||||||
Bowater Canada Escrow q l | 4,000 | 185 | ||||||||||||||
Georgia Gulf l ¥ | 14,000 | 327 | ||||||||||||||
Nortek l | 9,000 | 324 | ||||||||||||||
2,277 | ||||||||||||||||
Communications – 0.1% | ||||||||||||||||
Vodafone Group ì | 12,000 | 317 | ||||||||||||||
Consumer Cyclical – 0.0% | ||||||||||||||||
Greektown l ¥ | 30,000 | — | ||||||||||||||
Greektown Superholdings q l | — | — | ||||||||||||||
— | ||||||||||||||||
Consumer Discretionary – 0.1% | ||||||||||||||||
Target | 12,000 | 698 | ||||||||||||||
Energy – 0.2% | ||||||||||||||||
Pace Oil and Gas ì l | 4,000 | 35 | ||||||||||||||
Pengrowth Energy Trust ì | 49,000 | 630 | ||||||||||||||
Provident Energy Trust ì | 35,000 | 279 | ||||||||||||||
944 | ||||||||||||||||
Finance – 0.1% | ||||||||||||||||
Citigroup l | 51,000 | 242 | ||||||||||||||
Lincoln National | 4,500 | 125 | ||||||||||||||
367 | ||||||||||||||||
Real Estate – 0.1% | ||||||||||||||||
Macerich – REIT q | 5,000 | 237 | ||||||||||||||
Mid-America Apartment Communities – REIT | 6,000 | 381 | ||||||||||||||
618 | ||||||||||||||||
Technology – 0.0% | ||||||||||||||||
Magnachip Semiconductor Escrow l | 23,000 | 22 | ||||||||||||||
Transportation – 0.0% | ||||||||||||||||
Delta Air Lines l | 19,000 | 241 | ||||||||||||||
Total Common Stocks | ||||||||||||||||
(Cost $6,486) | 5,484 |
38 Nuveen Investments
High Income Bond Fund (continued) DESCRIPTION | SHARES/PAR | FAIR VALUE > | ||||||||||
Closed-End Funds – 1.0% |
| |||||||||||
Blackrock Credit Allocation Income Trust | 81,000 | $ | 980 | |||||||||
Blackrock Global Opportunities Equity Trust | 34,000 | 624 | ||||||||||
First Trust/Aberdeen Global Opportunities Income Fund | 114,000 | 1,979 | ||||||||||
Gabelli Global Gold Natural Resources & Income Trust q D | 25,000 | 482 | ||||||||||
ING Clarion Global Real Estate Income Fund | 60,600 | 469 | ||||||||||
Pimco Income Strategy Fund q | 34,000 | 391 | ||||||||||
Total Closed-End Funds | ||||||||||||
(Cost $4,640) | 4,925 | |||||||||||
Asset-Backed Security – 0.0% | ||||||||||||
Manufactured Housing – 0.0% | ||||||||||||
Green Tree Financial | ||||||||||||
Series 1998-1, Class A4 | ||||||||||||
6.040% 11/01/2029 ¥ | ||||||||||||
(Cost $5) | $ | 5,000 | 5 | |||||||||
Short-Term Investments – 3.3% | ||||||||||||
Money Market Fund – 3.3% | ||||||||||||
First American Prime Obligations Fund, Class Z | ||||||||||||
0.084% Å W | 16,166,738 | 16,167 | ||||||||||
U.S. Treasury Obligations – 0.0% | ||||||||||||
U.S. Treasury Bill ¨ | ||||||||||||
0.175%, 02/10/2011 | $ | 190 | 190 | |||||||||
Total Short-Term Investments | ||||||||||||
(Cost $16,357) | 16,357 | |||||||||||
Investment Purchased with Proceeds from Securities Lending – 23.8% |
| |||||||||||
Mount Vernon Securities Lending Prime Portfolio | ||||||||||||
0.292% W † | ||||||||||||
(Cost $117,338) | 117,337,612 | 117,338 | ||||||||||
Total Investments – 122.6% | ||||||||||||
(Cost $593,140) | 604,857 | |||||||||||
Other Assets and Liabilities, Net – (22.6)% | (111,237 | ) | ||||||||||
Total Net Assets – 100.0% | $ | 493,620 |
> | Securities are valued in accordance with procedures described in note 1 in Notes to Financial Statements. | |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” | |
q | This security or a portion of this security is out on loan at December 31, 2010. Total loaned securities had a fair value of $114,657 at December 31, 2010. | |
D | Variable Rate Security – The rate shown is the rate in effect as of December 31, 2010. | |
ì | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of December 31, 2010, the fair value of foreign securities was $106,406 or 21.6% of total net assets. | |
+ | Security in default at December 31, 2010. | |
— | Non-income producing security. | |
¥ | Security considered illiquid. | |
Å | Investment in affiliated security. | |
W | The rate shown is the annualized seven-day effective yield as of December 31, 2010. | |
¨ | Security has been deposited as initial margin on open futures contracts. Yield shown is the annualized effective yield as of December 31, 2010. |
High Income Bond Fund (concluded)
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. |
REIT – Real Estate Investment Trust
Schedule of Open Futures Contracts
Description | Settlement Month | Number of Contracts Purchased (Sold) | Notional Contract Value | Unrealized Depreciation | ||||||||||||
U.S. Treasury 5 Year Note Futures | March 2011 | 42 | $ 4,944 | $(96 | ) | |||||||||||
U.S. Treasury 10 Year Note Futures | March 2011 | (30 | ) | (3,613 | ) | (1 | ) | |||||||||
$(97 | ) |
See accompanying notes to financial statements.
Nuveen Investments 39
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Nuveen Inflation Protected Securities Fund (“Inflation Protected Securities Fund”) (formerly known as First American Inflation Protected Securities Fund) DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
U.S. Government & Agency Securities – 87.0% | ||||||||||||
U.S. Treasuries – 85.4% | ||||||||||||
U.S. Treasury Bonds | ||||||||||||
2.375%, 01/15/2025 | $ | 11,098 | $ | 12,350 | ||||||||
2.000%, 01/15/2026 | 5,317 | 5,646 | ||||||||||
2.375%, 01/15/2027 | 6,019 | 6,689 | ||||||||||
1.750%, 01/15/2028 | 3,184 | 3,241 | ||||||||||
3.625%, 04/15/2028 | 7,370 | 9,513 | ||||||||||
2.500%, 01/15/2029 | 2,801 | 3,179 | ||||||||||
3.875%, 04/15/2029 | 8,282 | 11,107 | ||||||||||
2.125%, 02/15/2040 | 6,299 | 6,667 | ||||||||||
4.625%, 02/15/2040 | 100 | 105 | ||||||||||
U.S. Treasury Notes | ||||||||||||
2.000%, 04/15/2012 | 1,617 | 1,675 | ||||||||||
3.000%, 07/15/2012 | 3,710 | 3,941 | ||||||||||
1.875%, 07/15/2013 | 4,704 | 5,016 | ||||||||||
2.000%, 01/15/2014 q | 4,510 | 4,842 | ||||||||||
1.250%, 04/15/2014 | 4,134 | 4,347 | ||||||||||
2.000%, 07/15/2014 | 4,525 | 4,891 | ||||||||||
1.625%, 01/15/2015 | 6,472 | 6,901 | ||||||||||
0.500%, 04/15/2015 | 8,684 | 8,877 | ||||||||||
1.875%, 07/15/2015 | 7,635 | 8,271 | ||||||||||
2.000%, 01/15/2016 | 6,887 | 7,499 | ||||||||||
2.500%, 07/15/2016 | 6,568 | 7,372 | ||||||||||
2.375%, 01/15/2017 | 6,811 | 7,590 | ||||||||||
2.625%, 07/15/2017 | 6,305 | 7,176 | ||||||||||
1.625%, 01/15/2018 | 4,698 | 5,027 | ||||||||||
3.500%, 02/15/2018 | 500 | 526 | ||||||||||
1.375%, 07/15/2018 | 3,443 | 3,629 | ||||||||||
2.125%, 01/15/2019 | 3,993 | 4,419 | ||||||||||
1.875%, 07/15/2019 | 4,425 | 4,811 | ||||||||||
3.75%, 11/15/2019 q | 1,775 | 1,812 | ||||||||||
1.375%, 01/15/2020 | 5,725 | 5,949 | ||||||||||
1.250%, 07/15/2020 | 10,911 | 11,172 | ||||||||||
174,240 | ||||||||||||
U.S. Agency Debentures – 1.6% | ||||||||||||
Federal Home Loan Bank | ||||||||||||
1.500%, 01/16/2013 | 760 | 772 | ||||||||||
Federal National Mortgage Association | ||||||||||||
5.250%, 08/01/2012 | 890 | 951 | ||||||||||
1.750%, 02/22/2013 | 720 | 735 | ||||||||||
4.375%, 10/15/2015 q | 735 | 809 | ||||||||||
3,267 | ||||||||||||
Total U.S. Government & Agency Securities | 177,507 | |||||||||||
Corporate Bonds – 6.5% | ||||||||||||
Banking – 0.1% | ||||||||||||
Banco Do Nordeste Brasil | ||||||||||||
3.625%, 11/09/2015 q n ì | 200 | 195 | ||||||||||
Basic Industry – 1.3% | ||||||||||||
Alrosa Finance | ||||||||||||
7.750%, 11/03/2020 q n ì | 150 | 157 | ||||||||||
Georgia-Pacific | ||||||||||||
7.125%, 01/15/2017 n | 150 | 160 | ||||||||||
Incitec Pivot Finance | ||||||||||||
6.000%, 12/10/2019 n | 200 | 205 | ||||||||||
Reynolds Group | ||||||||||||
7.125%, 04/15/2019 n | 175 | 178 | ||||||||||
Sinochem Overseas Capital | ||||||||||||
4.500%, 11/12/2020 q n ì | 150 | 148 | ||||||||||
Southern Copper | ||||||||||||
7.500%, 07/27/2035 | 1,000 | 1,110 | ||||||||||
Steel Dynamics | ||||||||||||
7.625%, 03/15/2020 q n | 175 | 187 | ||||||||||
Vedanta Resources | ||||||||||||
9.500%, 07/18/2018 q n ì | 400 | 437 | ||||||||||
2,582 | ||||||||||||
Consumer Non Cyclical – 0.2% | ||||||||||||
HCA | ||||||||||||
7.250%, 09/15/2020 q | 360 | 376 | ||||||||||
Electric – 0.3% | ||||||||||||
AES | ||||||||||||
8.000%, 10/15/2017 | 150 | 159 | ||||||||||
Calpine | ||||||||||||
7.875%, 07/31/2020 n | 250 | 253 | ||||||||||
Majapahit Holding | ||||||||||||
7.750%, 01/20/2020 n ì | 200 | 230 | ||||||||||
642 | ||||||||||||
Energy – 0.8% | ||||||||||||
Carrizo Oil & Gas | ||||||||||||
8.625%, 10/15/2018 n | 130 | 134 | ||||||||||
Cloud Peak Energy | ||||||||||||
8.250%, 12/15/2017 q | 200 | 215 | ||||||||||
Concho Resources | ||||||||||||
8.625%, 10/01/2017 | 200 | 218 | ||||||||||
Holly Energy Partners | ||||||||||||
6.250%, 03/01/2015 q | 200 | 198 | ||||||||||
Linn Energy | ||||||||||||
8.625%, 04/15/2020 n | 175 | 189 | ||||||||||
Pride International | ||||||||||||
6.875%, 08/15/2020 | 160 | 166 | ||||||||||
Range Resources | ||||||||||||
8.000%, 05/15/2019 | 250 | 272 | ||||||||||
Seadrill | ||||||||||||
6.500%, 10/05/2015 | 200 | 194 | ||||||||||
1,586 | ||||||||||||
Finance – 0.1% | ||||||||||||
CIT Group | ||||||||||||
7.000%, 05/01/2016 | 150 | 151 | ||||||||||
Insurance – 0.5% | ||||||||||||
Pacific Life Global Funding | ||||||||||||
3.330%, 02/06/2016 n D | 1,000 | 991 | ||||||||||
Natural Gas – 0.2% | ||||||||||||
Energy Transfer Equity | ||||||||||||
7.500%, 10/15/2020 | 350 | 361 | ||||||||||
Sovereigns – 2.9% | ||||||||||||
Australian Government | ||||||||||||
5.750%, 04/15/2012 ì | AUD 800 | 826 | ||||||||||
Canadian Government | ||||||||||||
1.500%, 03/01/2012 ì | CAD 800 | 805 | ||||||||||
3.500%, 06/01/2020 ì | CAD 750 | 778 | ||||||||||
Norwegian Government | ||||||||||||
6.000%, 05/16/2011 ì | NOK 5,000 | 868 | ||||||||||
6.500%, 05/15/2013 ì | NOK 3,300 | 617 | ||||||||||
Republic of Germany | ||||||||||||
2.250%, 04/10/2015 ì | EUR 1,300 | 1,777 | ||||||||||
Republic of Poland | ||||||||||||
6.375%, 07/15/2019 ì | $ | 300 | 336 | |||||||||
6,007 |
40 Nuveen Investments
Inflation Protected Securities Fund (continued) DESCRIPTION | PAR/SHARES | FAIR VALUE> | ||||||||||
Transportation – 0.1% | ||||||||||||
Avis Budget Car Rental | ||||||||||||
7.750%, 05/15/2016 | $ 150 | $ 153 | ||||||||||
Navios Maritime Acquisition | ||||||||||||
8.625%, 11/01/2017 n ì | 150 | 153 | ||||||||||
306 | ||||||||||||
Total Corporate Bonds | ||||||||||||
(Cost $12,598) | 13,197 | |||||||||||
Commercial Mortgage-Backed Securities – 3.4% | ||||||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||||||
Series 2005-CD1, Class A4 | ||||||||||||
5.222%, 07/15/2044 D | 1,255 | 1,351 | ||||||||||
Extended Stay America Trust | ||||||||||||
Series 2010-ESHA, Class C | ||||||||||||
4.860%, 11/05/2027 n | 1,040 | 1,019 | ||||||||||
Greenwich Capital Commercial Funding | ||||||||||||
Series 2007-GG11, Class A4 | ||||||||||||
5.736%, 12/10/2049 | 2,300 | 2,430 | ||||||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||||||
Series 2010-C1, Class A1 | ||||||||||||
3.853%, 06/15/2043 n | 1,010 | 1,035 | ||||||||||
Merrill Lynch Mortgage Trust | ||||||||||||
Series 2008-C1, Class A4 | ||||||||||||
5.690%, 02/12/2051 | 380 | 397 | ||||||||||
OBP Depositor Trust | ||||||||||||
Series 2010-OBP, Class A | ||||||||||||
4.646%, 07/15/2045 n | 700 | 714 | ||||||||||
Total Commercial Mortgage-Backed Securities | ||||||||||||
(Cost $6,844) | 6,946 | |||||||||||
Preferred Stocks – 0.2% | ||||||||||||
Banking – 0.1% | ||||||||||||
Goldman Sachs Group | ||||||||||||
Series A | 11,000 | 231 | ||||||||||
Finance – 0.1% | ||||||||||||
Bank of America | ||||||||||||
Series 5 q | 13,000 | 232 | ||||||||||
Sovereign – 0.0% | ||||||||||||
Fannie Mae | ||||||||||||
Series S | 16,000 | 9 | ||||||||||
Total Preferred Stocks | ||||||||||||
(Cost $812) | 472 | |||||||||||
Exchange-Traded Fund – 0.2% iShares iBoxx $ High Yield Corporate Bond Fund q l | ||||||||||||
(Cost $293) | 3,500 | 316 | ||||||||||
Convertible Security – 0.1% | ||||||||||||
Energy – 0.1% | ||||||||||||
Chesapeake Energy | ||||||||||||
Series 2005 B | ||||||||||||
(Cost $170) | 2,000 | 185 | ||||||||||
Closed-End Fund – 0.1% | ||||||||||||
Blackrock Credit Allocation Income Trust | ||||||||||||
(Cost $125) | 11,000 | 127 | ||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Security – 0.0% | ||||||||||||
Fixed Rate – 0.0% | ||||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||
Series 2763, Class TA | ||||||||||||
4.000% 03/15/2011 | ||||||||||||
(Cost $37) | 37 | 38 | ||||||||||
Short-Term Investments – 1.8% | ||||||||||||
Money Market Fund – 1.7% | ||||||||||||
First American Prime Obligations Fund, Class Z | ||||||||||||
0.084% Å W | 3,508,036 | 3,508 | ||||||||||
U.S. Treasury Obligations – 0.1% | ||||||||||||
U.S. Treasury Bills ¨ | ||||||||||||
0.178%, 02/10/2011 | $ 140 | 140 | ||||||||||
0.290%, 04/07/2011 | 65 | 65 | ||||||||||
205 | ||||||||||||
Total Short-Term Investments | ||||||||||||
(Cost $3,713) | 3,713 | |||||||||||
Investment Purchased with Proceeds from Securities Lending – 5.0% | ||||||||||||
Mount Vernon Securities Lending Prime Portfolio | ||||||||||||
0.282% W † | ||||||||||||
(Cost $10,188) | 10,188,371 | 10,188 | ||||||||||
Total Investments – 104.3% | ||||||||||||
(Cost $206,660) | 212,689 | |||||||||||
Other Assets and Liabilities, Net – (4.3)% | (8,732 ) | |||||||||||
Total Net Assets – 100.0% | $203,957 |
> | Securities are valued in accordance with procedures described in note 1 in Notes to Financial Statements. | |||
t | U.S. Treasury inflation-protection securities (TIPS) are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. | |||
q | This security or a portion of this security is out on loan at December 31, 2010. Total loaned securities had a fair value of $9,237 at December 31, 2010. | |||
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” | |||
ì | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of December 31, 2010, the fair value of foreign securities was $7,327 or 3.6% of total net assets. | |||
D | Variable Rate Security – The rate shown is the rate in effect as of December 31, 2010. | |||
l | Non-income producing security. | |||
Å | Investment in affiliated security. | |||
W | The rate shown is the annualized seven-day effective yield as of December 31, 2010. | |||
¨ | Security has been deposited as initial margin on open futures contracts. Yield shown is the annualized effective yield as of December 31, 2010. | |||
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. |
Nuveen Investments 41
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Inflation Protected Securities Fund (concluded)
Schedule of Open Futures Contracts
Number of | Notional | Unrealized | ||||||||||||||
Settlement | Contracts | Contract | Appreciation | |||||||||||||
Description | Month | Sold | Value | (Depreciation) | ||||||||||||
Canadian Dollar Futures | March 2011 | 5 | $ | 502 | $ 9 | |||||||||||
U.S. Treasury 2 Year Note Futures | March 2011 | 59 | 12,915 | 36 | ||||||||||||
U.S. Treasury 5 Year Note Futures | March 2011 | 7 | 824 | 1 | ||||||||||||
U.S. Treasury 10 Year Note Futures | March 2011 | 8 | 964 | 5 | ||||||||||||
U.S. Treasury Ultra Bond Futures | March 2011 | (6 | ) | (763 | ) | (15 | ) | |||||||||
$ 36 |
Schedule of Open Forward Foreign Currency Exchange Contracts
Currency | Amount | Amount | ||||||||||||||||||
Contracts to | (Local | In Exchange | (Local | Settlement | Unrealized | |||||||||||||||
Deliver | Currency) | For Currency | Currency) | Date | Depreciation | |||||||||||||||
Euro | 1,350 | U.S. Dollar | 1,786 | 01/14/2011 | $(18 | ) |
Interest Rate Swap Contracts
Pay/ | ||||||||||||||||||||||
Floating | Receive | |||||||||||||||||||||
Rate | Floating | Expiration | Notional | Unrealized | ||||||||||||||||||
Counterparty | Index | Rate | Fixed Rate | Date | Amount | Depreciation | ||||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 1.255% | 11/03/2011 | $4,000 | $ (33 | ) | |||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 3.858% | 01/19/2020 | 1,000 | (68 | ) | |||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.358% | 09/25/2011 | 4,000 | (42 | ) | |||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.133% | 03/25/2012 | 2,000 | (22 | ) | |||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.048% | 06/25/2012 | 4,000 | (29 | ) | |||||||||||||||
UBS | 3-Month LIBOR | Receive | 3.001% | 08/03/2014 | 2,000 | (126 | ) | |||||||||||||||
$(320 | ) |
See accompanying notes to financial statements.
42 Nuveen Investments
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Nuveen Intermediate Government Bond Fund (“Intermediate Government Bond Fund”) (formerly known as First American Intermediate Government Bond Fund) DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
U.S. Government & Agency Securities – 53.5% | ||||||||||||
U.S. Agency Debentures – 43.6% | ||||||||||||
Federal Farm Credit Bank | ||||||||||||
5.750%, 01/18/2011 | $1,800 | $ 1,804 | ||||||||||
4.875%, 02/18/2011 | 1,000 | 1,006 | ||||||||||
3.875%, 08/25/2011 | 3,600 | 3,681 | ||||||||||
2.125%, 06/18/2012 | 1,130 | 1,156 | ||||||||||
4.500%, 10/17/2012 | 1,565 | 1,673 | ||||||||||
1.375%, 06/25/2013 | 1,705 | 1,727 | ||||||||||
3.875%, 10/07/2013 | 1,350 | 1,455 | ||||||||||
2.625%, 04/17/2014 | 1,400 | 1,461 | ||||||||||
3.000%, 09/22/2014 q | 700 | 738 | ||||||||||
1.500%, 11/16/2015 | 845 | 820 | ||||||||||
Federal Home Loan Bank | ||||||||||||
4.250%, 06/10/2011 | 1,500 | 1,525 | ||||||||||
1.625%, 09/26/2012 | 515 | 524 | ||||||||||
1.500%, 01/16/2013 | 2,000 | 2,032 | ||||||||||
1.625%, 03/20/2013 | 850 | 865 | ||||||||||
3.125%, 12/13/2013 | 1,865 | 1,968 | ||||||||||
0.875%, 12/27/2013 | 1,710 | 1,695 | ||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||
1.400%, 07/26/2013 | 1,725 | 1,726 | ||||||||||
2.000%, 04/07/2014 | 1,715 | 1,722 | ||||||||||
2.500%, 04/23/2014 | 1,825 | 1,891 | ||||||||||
1.750%, 09/10/2015 | 1,925 | 1,892 | ||||||||||
0.750%, 07/05/2016 | 2,000 | 1,983 | ||||||||||
3.750%, 03/27/2019 q | 1,200 | 1,242 | ||||||||||
Federal National Mortgage Association | ||||||||||||
5.250%, 08/01/2012 | 785 | 839 | ||||||||||
1.750%, 05/07/2013 q | 1,150 | 1,175 | ||||||||||
2.375%, 07/28/2015 q | 1,650 | 1,673 | ||||||||||
1.875%, 10/15/2015 | 1,700 | 1,683 | ||||||||||
4.375%, 10/15/2015 q | 1,600 | 1,761 | ||||||||||
1.600%, 11/23/2015 | 1,735 | 1,682 | ||||||||||
5.375%, 07/15/2016 q | 1,085 | 1,246 | ||||||||||
Tennessee Valley Authority | ||||||||||||
5.625%, 01/18/2011 | 2,000 | 2,004 | ||||||||||
6.790%, 05/23/2012 | 3,175 | 3,446 | ||||||||||
6.000%, 03/15/2013 | 2,725 | 3,030 | ||||||||||
53,125 | ||||||||||||
U.S. Treasuries – 9.9% | ||||||||||||
U.S. Treasury Bonds | ||||||||||||
8.750%, 05/15/2017 q | 905 | 1,243 | ||||||||||
9.000%, 11/15/2018 q | 635 | 916 | ||||||||||
8.125%, 08/15/2019 q | 1,105 | 1,539 | ||||||||||
8.500%, 02/15/2020 q | 430 | 615 | ||||||||||
8.750%, 08/15/2020 q | 1,480 | 2,162 | ||||||||||
8.000%, 11/15/2021 q | 435 | 615 | ||||||||||
U.S. Treasury Notes | ||||||||||||
3.500%, 01/15/2011 t | 1,571 | 1,572 | ||||||||||
1.875%, 07/15/2015 t | 1,153 | 1,249 | ||||||||||
2.625%, 04/30/2016 | 65 | 67 | ||||||||||
7.500%, 11/15/2016 q | 665 | 855 | ||||||||||
1.250%, 07/15/2020 t | 1,208 | 1,237 | ||||||||||
12,070 | ||||||||||||
Total U.S. Government & Agency Securities | ||||||||||||
(Cost $63,886) | 65,195 | |||||||||||
U.S. Government Agency Mortgage-Backed Securities – 21.2% | ||||||||||||
Adjustable Rate D – 7.4% | ||||||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||||||
2.573%, 09/01/2033, # 780836 | 929 | 968 | ||||||||||
3.725%, 03/01/2036, # 848193 | 705 | 733 | ||||||||||
5.531%, 05/01/2037, # 1H1396 | 1,132 | 1,193 | ||||||||||
Federal National Mortgage Association Pool | ||||||||||||
2.596%, 04/01/2034, # AD0486 | 1,717 | 1,793 | ||||||||||
2.773%, 03/01/2035, # 819652 | 600 | 624 | ||||||||||
2.179%, 12/01/2035, # 848390 | 290 | 297 | ||||||||||
2.878%, 07/01/2036, # 886034 | 509 | 534 | ||||||||||
2.685%, 09/01/2036, # 995949 | 387 | 406 | ||||||||||
5.399%, 03/01/2037, # 914224 | 1,085 | 1,146 | ||||||||||
5.657%, 04/01/2037, # 913187 | 912 | 969 | ||||||||||
2.566%, 03/01/2038, # AD0706 | 366 | 382 | ||||||||||
9,045 | ||||||||||||
Fixed Rate – 13.8% | ||||||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||||||
7.000%, 07/01/2011, # E20252 | 1 | 1 | ||||||||||
7.500%, 09/01/2012, # G10735 | 17 | 18 | ||||||||||
6.000%, 10/01/2013, # E72802 | 51 | 55 | ||||||||||
7.000%, 09/01/2014, # E00746 | 37 | 40 | ||||||||||
6.500%, 01/01/2028, # G00876 | 182 | 204 | ||||||||||
7.500%, 01/01/2030, # C35768 | 25 | 29 | ||||||||||
6.500%, 03/01/2031, # G01244 | 324 | 364 | ||||||||||
Federal National Mortgage Association Pool | ||||||||||||
7.000%, 11/01/2011, # 250738 | 1 | 1 | ||||||||||
7.000%, 11/01/2011, # 351122 | 1 | 1 | ||||||||||
6.000%, 04/01/2013, # 425550 | 30 | 32 | ||||||||||
6.500%, 08/01/2013, # 251901 | 24 | 27 | ||||||||||
6.000%, 11/01/2013, # 556195 | 47 | 52 | ||||||||||
7.000%, 10/01/2014, # 252799 | 27 | 29 | ||||||||||
3.120%, 01/01/2015, # 464158 | 1,882 | 1,944 | ||||||||||
5.500%, 04/01/2016, # 580516 | 234 | 252 | ||||||||||
6.500%, 07/01/2017, # 254373 | 346 | 379 | ||||||||||
7.000%, 07/01/2017, # 254414 | 361 | 398 | ||||||||||
5.500%, 12/01/2017, # 673010 | 240 | 259 | ||||||||||
5.500%, 04/01/2018, # 695765 | 342 | 369 | ||||||||||
4.500%, 05/01/2018, # 254720 | 659 | 698 | ||||||||||
5.500%, 09/01/2019, # 725793 | 752 | 811 | ||||||||||
6.000%, 01/01/2022, # 254179 | 302 | 332 | ||||||||||
6.500%, 06/01/2022, # 254344 | 297 | 329 | ||||||||||
7.000%, 09/01/2031, # 596680 | 335 | 377 | ||||||||||
6.500%, 12/01/2031, # 254169 | 410 | 454 | ||||||||||
6.000%, 04/01/2032, # 745101 | 1,396 | 1,505 | ||||||||||
6.500%, 06/01/2032, # 596712 | 1,062 | 1,179 | ||||||||||
6.000%, 08/01/2032, # 656269 | 292 | 315 | ||||||||||
6.000%, 03/01/2034, # 745324 | 1,342 | 1,478 | ||||||||||
6.500%, 08/01/2036, # 887017 | 672 | 749 | ||||||||||
7.000%, 06/01/2037, # 928519 | 933 | 1,056 | ||||||||||
4.000%, 12/01/2040, # AB1959 | 999 | 994 | ||||||||||
Government National Mortgage Association Pool | ||||||||||||
7.500%, 12/15/2022, # 347332 | 51 | 59 | ||||||||||
7.000%, 09/15/2027, # 455304 | 8 | 9 | ||||||||||
6.500%, 07/15/2028, # 780825 | 341 | 387 | ||||||||||
6.500%, 08/20/2031, # 003120 | 125 | 141 | ||||||||||
7.500%, 12/15/2031, # 570134 | 145 | 168 | ||||||||||
6.000%, 09/15/2034, # 633605 | 1,158 | 1,299 | ||||||||||
16,794 | ||||||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||||||
(Cost $24,471) | 25,839 |
Nuveen Investments 43
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Intermediate Government Bond Fund (continued) DESCRIPTION | PAR | FAIR VALUE > | ||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities – 6.6% | ||||||||
Fixed Rate – 6.6% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
Series 2629, Class BO | ||||||||
3.250%, 03/15/2018 | $ 704 | $ 726 | ||||||
Series 2843, Class BH | ||||||||
4.000%, 01/15/2018 | 622 | 637 | ||||||
Federal National Mortgage Association | ||||||||
Series 2002-W1, Class 2A | ||||||||
7.365%, 02/25/2042 | 552 | 635 | ||||||
Series 2009-M1, Class A1 | ||||||||
3.400%, 07/25/2019 | 927 | 958 | ||||||
Series 2010-M1, Class A1 | ||||||||
3.305%, 06/25/2019 | 1,509 | 1,555 | ||||||
Series 2010-M4, Class A1 | ||||||||
2.520%, 06/25/2020 | 1,499 | 1,492 | ||||||
FHLMC Multifamily Structured Pass-Through Securities | ||||||||
Series K008, Class A1 | ||||||||
2.746%, 12/25/2019 | 1,012 | 995 | ||||||
FHLMC Structured Pass-Through Securities | ||||||||
Series T-45, Class A4 | ||||||||
4.520%, 08/27/2012 | 984 | 1,024 | ||||||
Total Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Security | ||||||||
(Cost $7,903) | 8,022 | |||||||
Commercial Mortgage-Backed Securities – 5.5% | ||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||
Series 2005-T20, Class A4A | ||||||||
5.144%, 10/12/2042 D | 550 | 592 | ||||||
Commercial Mortgage Pass-Through Certificates | ||||||||
Series 2005-LP5, Class A4 | ||||||||
4.982%, 05/10/2043 D | 550 | 585 | ||||||
Greenwich Capital Commercial Funding | ||||||||
Series 2007-GG11, Class A4 | ||||||||
5.736%, 12/10/2049 | 1,000 | 1,057 | ||||||
Series 2007-GG9, Class A4 | ||||||||
5.444%, 03/10/2039 | 1,000 | 1,053 | ||||||
GS Mortgage Securities Trust | ||||||||
Series 2007-GG10, Class A4 | ||||||||
5.807%, 08/10/2045 q D | 1,117 | 1,168 | ||||||
JPMorgan Chase Commercial Mortgage Securities Trust | ||||||||
Series 2010-C2, Class A1 | ||||||||
2.749%, 07/15/2017 n | 966 | 955 | ||||||
Morgan Stanley Capital I | ||||||||
Series 2006-IQ12, Class A4 | ||||||||
5.332%, 12/15/2043 | 1,150 | 1,219 | ||||||
Total Commercial Mortgage-Backed Securities | ||||||||
(Cost $6,111) | 6,629 | |||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities – 4.0% | ||||||||
Fixed Rate – 4.0% | ||||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
Series 2010-S1, Class 2A | ||||||||
3.250%, 04/25/2038 n | 1,224 | 1,239 | ||||||
GSMPS Mortgage Loan Trust | ||||||||
Series 2003-1, Class B1 | ||||||||
6.815%, 03/25/2043 ¥ | 839 | 588 | ||||||
GSR Mortgage Loan Trust | ||||||||
Series 2005-4F, Class B1 | ||||||||
5.742%, 05/25/2035 ¥ | 1,272 | 736 | ||||||
Impac Secured Assets | ||||||||
Series 2000-3, Class M1 | ||||||||
8.000%, 10/25/2030 ¥ | 384 | 339 | ||||||
Lehman Mortgage Trust | ||||||||
Series 2008-6, Class 1A1 | ||||||||
6.183%, 07/25/2047 D | 506 | 482 | ||||||
NCUA Guaranteed Notes | ||||||||
Series 2010-C1, Class A1 | ||||||||
1.600%, 02/01/2017 | 1,117 | 1,094 | ||||||
Residential Accredit Loans | ||||||||
Series 2003-QS12, Class M1 | ||||||||
5.000%, 06/25/2018 ¥ | 577 | 455 | ||||||
Total Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | ||||||||
(Cost $5,740) | 4,933 | |||||||
Corporate Bonds – 3.6% | ||||||||
Banking – 1.6% | ||||||||
Bank of America | ||||||||
Series MTN | ||||||||
2.100%, 04/30/2012 | 630 | 643 | ||||||
Citibank | ||||||||
1.750%, 12/28/2012 | 625 | 638 | ||||||
JPMorgan Chase | ||||||||
2.200%, 06/15/2012 | 625 | 639 | ||||||
1,920 | ||||||||
Brokerage – 1.0% | ||||||||
Goldman Sachs | ||||||||
3.250%, 06/15/2012 | 615 | 638 | ||||||
Morgan Stanley | ||||||||
2.250%, 03/13/2012 q | 630 | 643 | ||||||
1,281 | ||||||||
Finance – 1.0% | ||||||||
GMAC | ||||||||
1.750%, 10/30/2012 | 630 | 641 | ||||||
Private Export Funding | ||||||||
3.050%, 10/15/2014 | 550 | 580 | ||||||
1,221 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $4,348) | 4,422 | |||||||
Asset-Backed Securities – 3.3% | ||||||||
Automotive – 0.0% | ||||||||
Ford Credit Auto Owner Trust | ||||||||
Series 2009-D, Class A2 | ||||||||
1.210%, 01/15/2012 | 40 | 40 | ||||||
Equipment Leases – 0.1% | ||||||||
CNH Equipment Trust | ||||||||
Series 2009-C, Class A2 | ||||||||
0.950%, 08/15/2012 | 46 | 45 | ||||||
Home Equity – 0.0% | ||||||||
GRMT Mortgage Loan Trust | ||||||||
Series 2001-1A, Class M1 | ||||||||
8.272%, 07/20/2031 n ¥ | 37 | 35 | ||||||
Manufactured Housing – 0.6% | ||||||||
Origen Manufactured Housing | ||||||||
Series 2005-B, Class M1 | ||||||||
5.990%, 01/15/2037 D | 750 | 756 |
44 Nuveen Investments
Intermediate Government Bond Fund (continued) DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||||||
Other – 2.6% |
| |||||||||||
Small Business Administration | ||||||||||||
Series 2005-P10A, Class 1 | ||||||||||||
4.638%, 02/10/2015 | $ | 454 | $ | 476 | ||||||||
Series 2005-P10B, Class 1 | ||||||||||||
4.940%, 08/10/2015 | 346 | 366 | ||||||||||
Series 2008-P10A, Class 1 | ||||||||||||
5.902%, 02/10/2018 | 1,183 | 1,318 | ||||||||||
Series 2010-10A, Class 1 | ||||||||||||
4.108%, 03/10/2020 | 993 | 1,049 | ||||||||||
3,209 | ||||||||||||
Total Asset-Backed Securities | ||||||||||||
(Cost $3,984) | 4,085 | |||||||||||
Short-Term Investments – 2.1% | ||||||||||||
Money Market Funds – 1.9% | ||||||||||||
First American Government Obligations Fund, Class Z | ||||||||||||
0.000% Å W | 1,293,865 | 1,294 | ||||||||||
First American U.S. Treasury Money Market Fund, Class Z | ||||||||||||
0.000% Å W | 932,040 | 932 | ||||||||||
2,226 | ||||||||||||
U.S. Treasury Obligations – 0.2% | ||||||||||||
U.S. Treasury Bills ¨ | ||||||||||||
0.164%, 02/03/2011 | $ | 20 | 20 | |||||||||
0.137%, 02/10/2011 | 250 | 250 | ||||||||||
270 | ||||||||||||
Total Short-Term Investments | ||||||||||||
(Cost $2,496) | 2,496 | |||||||||||
Investment Purchased with Proceeds from Securities Lending – 14.9% | ||||||||||||
Mount Vernon Securities Lending Prime Portfolio | ||||||||||||
0.292% W † | ||||||||||||
(Cost $18,108) | 18,108,379 | 18,108 | ||||||||||
Total Investments – 114.7% | ||||||||||||
(Cost $137,047) | 139,729 | |||||||||||
Other Assets and Liabilities, Net – (14.7)% | (17,928 | ) | ||||||||||
Total Net Assets – 100.0% | $121,801 |
> | Securities are valued in accordance with procedures described in note 1 in Notes to Financial Statements. | |
q | This security or a portion of this security is out on loan at December 31, 2010. Total loaned securities had a fair value of $17,789 at December 31, 2010. | |
U.S. Treasury inflation-protection securities (TIPS) are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. | ||
D | Variable Rate Security – The rate shown is the rate in effect as of December 31, 2010. | |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” | |
¥ | Security considered illiquid. | |
Å | Investment in affiliated security. | |
W | The rate shown is the annualized seven-day effective yield as of December 31, 2010. | |
¨ | Security has been deposited as initial margin on open futures contracts. Yield shown is effective yield as of December 31, 2010. | |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of |
Intermediate Government Bond Fund (concluded)
the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. |
Schedule of Open Futures Contracts
Description | Settlement Month | Number of Contracts Purchased | Notional Contract Value | Unrealized Appreciation (Depreciation) | ||||||||||||
U.S. Treasury 2 Year Note Futures | March 2011 | 73 | $ | 15,980 | $ 3 | |||||||||||
U.S. Treasury 5 Year Note Futures | March 2011 | 70 | 8,240 | (89) | ||||||||||||
U.S. Treasury 10 Year Note Futures | March 2011 | 53 | 6,383 | (101) | ||||||||||||
U.S. Treasury Long Bond Futures | March 2011 | (4) | (489) | (12) | ||||||||||||
$(199) |
See accompanying notes to financial statements.
Nuveen Investments 45
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Nuveen Intermediate Term Bond Fund (“Intermediate Term Bond Fund”) (formerly known as First American Intermediate Term Bond Fund) DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
Corporate Bonds – 49.1% | ||||||||||||
Banking – 9.3% | ||||||||||||
Bank of America | ||||||||||||
5.625%, 07/01/2020 | $4,080 | $ 4,159 | ||||||||||
5.875%, 01/05/2021 q | 3,975 | 4,113 | ||||||||||
Barclays Bank | ||||||||||||
5.125%, 01/08/2020 ì | 3,630 | 3,707 | ||||||||||
Citigroup | ||||||||||||
4.587%, 12/15/2015 q | 2,000 | 2,085 | ||||||||||
6.125%, 11/21/2017 q | 4,590 | 5,031 | ||||||||||
5.375%, 08/09/2020 q | 2,540 | 2,639 | ||||||||||
Comerica Bank | ||||||||||||
5.750%, 11/21/2016 | 3,245 | 3,500 | ||||||||||
Deutsche Bank | ||||||||||||
3.875%, 08/18/2014 ì | 3,205 | 3,364 | ||||||||||
Fifth Third Bancorp | ||||||||||||
6.250%, 05/01/2013 | 1,495 | 1,620 | ||||||||||
JPMorgan Chase | ||||||||||||
5.150%, 10/01/2015 | 3,290 | 3,480 | ||||||||||
4.250%, 10/15/2020 q | 4,950 | 4,834 | ||||||||||
Series 1 | ||||||||||||
7.900%, 04/29/2049 D | 1,825 | 1,940 | ||||||||||
JPMorgan Chase Capital XXII | ||||||||||||
Series V | ||||||||||||
6.450%, 01/15/2087 | 1,750 | 1,743 | ||||||||||
KeyCorp | ||||||||||||
Series MTN | ||||||||||||
3.750%, 08/13/2015 q | 2,960 | 2,970 | ||||||||||
Lloyds TSB Bank | ||||||||||||
4.375%, 01/12/2015 ì n | 4,145 | 4,145 | ||||||||||
North Fork Bancorp | ||||||||||||
5.875%, 08/15/2012 | 3,130 | 3,298 | ||||||||||
PNC Funding | ||||||||||||
3.625%, 02/08/2015 q | 3,300 | 3,412 | ||||||||||
Royal Bank of Scotland | ||||||||||||
6.400%, 10/21/2019 q ì | 1,000 | 1,006 | ||||||||||
Sovereign Bank | ||||||||||||
8.750%, 05/30/2018 | 2,040 | 2,225 | ||||||||||
UBS | ||||||||||||
4.875%, 08/04/2020 ì | 2,640 | 2,686 | ||||||||||
UBS Preferred Funding Trust V | ||||||||||||
6.243%, 05/29/2049 D | 1,170 | 1,123 | ||||||||||
Wachovia | ||||||||||||
5.750%, 06/15/2017 q | 1,450 | 1,605 | ||||||||||
Wells Fargo | ||||||||||||
Series K | ||||||||||||
7.980%, 03/29/2049 qD | 3,365 | 3,551 | ||||||||||
Wells Fargo Capital XIII | ||||||||||||
Series GMTN | ||||||||||||
7.700%, 12/29/2049 qD | 2,315 | 2,393 | ||||||||||
70,629 | ||||||||||||
Basic Industry – 2.9% | ||||||||||||
Arcelormittal | ||||||||||||
5.250%, 08/05/2020 q ì | 3,260 | 3,223 | ||||||||||
Celulosa Arauco Constitucion | ||||||||||||
5.625%, 04/20/2015 q ì | 2,000 | 2,124 | ||||||||||
Dow Chemical | ||||||||||||
2.500%, 02/15/2016 | �� | 2,680 | 2,574 | |||||||||
Incitec Pivot Finance | ||||||||||||
6.000%, 12/10/2019 n | 2,255 | 2,309 | ||||||||||
Newmont Mining | ||||||||||||
5.125%, 10/01/2019 q | 3,720 | 4,090 | ||||||||||
Rio Tinto Finance | ||||||||||||
3.500%, 11/02/2020 ì | 1,970 | 1,870 | ||||||||||
Southern Copper | ||||||||||||
5.375%, 04/16/2020 q | 2,000 | 2,022 | ||||||||||
Teck Resources | ||||||||||||
3.850%, 08/15/2017 q ì | 1,825 | 1,851 | ||||||||||
Vale Overseas | ||||||||||||
4.625%, 09/15/2020 ì | 1,940 | 1,921 | ||||||||||
21,984 | ||||||||||||
Brokerage – 2.3% | ||||||||||||
Goldman Sachs Capital II | ||||||||||||
5.793%, 12/29/2049 D | 1,165 | 987 | ||||||||||
Goldman Sachs Group | ||||||||||||
6.150%, 04/01/2018 | 3,845 | 4,234 | ||||||||||
Merrill Lynch | ||||||||||||
6.050%, 05/16/2016 | 4,625 | 4,765 | ||||||||||
Morgan Stanley | ||||||||||||
5.375%, 10/15/2015 | 3,335 | 3,503 | ||||||||||
5.500%, 07/24/2020 q | 3,750 | 3,789 | ||||||||||
17,278 | ||||||||||||
Capital Goods – 1.1% | ||||||||||||
John Deere Capital | ||||||||||||
2.800%, 09/18/2017 | 2,295 | 2,228 | ||||||||||
L-3 Communications | ||||||||||||
4.750%, 07/15/2020 | 1,885 | 1,852 | ||||||||||
Tyco International | ||||||||||||
3.375%, 10/15/2015 ì | 4,405 | 4,502 | ||||||||||
8,582 | ||||||||||||
Communications – 6.8% | ||||||||||||
American Tower | ||||||||||||
5.050%, 09/01/2020 | 2,405 | 2,365 | ||||||||||
AT&T | ||||||||||||
2.500%, 08/15/2015 q | 2,250 | 2,242 | ||||||||||
5.800%, 02/15/2019 q | 3,350 | 3,771 | ||||||||||
British Sky Broadcasting | ||||||||||||
6.100%, 02/15/2018 ì n | 1,845 | 2,058 | ||||||||||
CBS | ||||||||||||
5.750%, 04/15/2020 q | 3,125 | 3,321 | ||||||||||
Comcast | ||||||||||||
5.150%, 03/01/2020 q | 1,930 | 2,027 | ||||||||||
Deutsche Telekom | ||||||||||||
5.875%, 08/20/2013 ì | 6,560 | 7,225 | ||||||||||
DirecTV Holdings | ||||||||||||
3.550%, 03/15/2015 | 2,850 | 2,895 | ||||||||||
5.200%, 03/15/2020 | 2,800 | 2,903 | ||||||||||
Discovery Communications | ||||||||||||
5.050%, 06/01/2020 q | 1,460 | 1,544 | ||||||||||
Embarq | ||||||||||||
7.082%, 06/01/2016 | 1,170 | 1,294 | ||||||||||
NBC Universal | ||||||||||||
5.150%, 04/30/2020 n | 3,895 | 4,038 | ||||||||||
News America | ||||||||||||
5.650%, 08/15/2020 q | 2,000 | 2,243 | ||||||||||
Rogers Communications | ||||||||||||
6.800%, 08/15/2018 q ì | 1,390 | 1,671 | ||||||||||
Telecom Italia Capital | ||||||||||||
7.175%, 06/18/2019 q ì | 2,570 | 2,750 | ||||||||||
Time Warner Cable | ||||||||||||
8.250%, 02/14/2014 q | 2,000 | 2,322 | ||||||||||
6.750%, 07/01/2018 | 2,025 | 2,360 |
46 Nuveen Investments
Intermediate Term Bond Fund (continued) DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
Verizon Communications | ||||||||||||
8.750%, 11/01/2018 | $3,755 | $ 4,903 | ||||||||||
51,932 | ||||||||||||
Consumer Cyclical – 2.2% | ||||||||||||
American Honda Finance | ||||||||||||
Series MTN | ||||||||||||
4.625%, 04/02/2013 n | 3,660 | 3,899 | ||||||||||
Home Depot | ||||||||||||
3.950%, 09/15/2020 q | 1,000 | 975 | ||||||||||
Ingram Micro | ||||||||||||
5.250%, 09/01/2017 | 1,205 | 1,219 | ||||||||||
R.R. Donnelley & Sons | ||||||||||||
7.625%, 06/15/2020 q | 1,195 | 1,280 | ||||||||||
Time Warner | ||||||||||||
4.700%, 01/15/2021 q | 3,000 | 3,055 | ||||||||||
Whirlpool | ||||||||||||
Series MTN | ||||||||||||
5.500%, 03/01/2013 | 3,165 | 3,361 | ||||||||||
Yum! Brands | ||||||||||||
8.875%, 04/15/2011 | 2,740 | 2,801 | ||||||||||
16,590 | ||||||||||||
Consumer Non Cyclical – 5.4% | ||||||||||||
Altria Group | ||||||||||||
9.700%, 11/10/2018 | 3,000 | 3,958 | ||||||||||
Anheuser-Busch InBev | ||||||||||||
7.750%, 01/15/2019 n | 3,450 | 4,293 | ||||||||||
Baxter International | ||||||||||||
4.500%, 08/15/2019 | 1,500 | 1,573 | ||||||||||
C.R. Bard | ||||||||||||
4.400%, 01/15/2021 | 2,820 | 2,865 | ||||||||||
ConAgra Foods | ||||||||||||
5.875%, 04/15/2014 | 2,595 | 2,873 | ||||||||||
Covidien International | ||||||||||||
5.450%, 10/15/2012 ì | 2,240 | 2,414 | ||||||||||
Genentech | ||||||||||||
4.750%, 07/15/2015 | 1,650 | 1,817 | ||||||||||
Kellogg | ||||||||||||
4.450%, 05/30/2016 | 2,620 | 2,820 | ||||||||||
Kraft Foods | ||||||||||||
6.500%, 08/11/2017 | 1,225 | 1,426 | ||||||||||
5.375%, 02/10/2020 | 3,500 | 3,767 | ||||||||||
Lorillard Tobacco | ||||||||||||
8.125%, 06/23/2019 | 1,815 | 2,020 | ||||||||||
Merck | ||||||||||||
2.250%, 01/15/2016 | 3,330 | 3,288 | ||||||||||
Reynolds American | ||||||||||||
6.750%, 06/15/2017 q | 3,000 | 3,353 | ||||||||||
Roche Holdings | ||||||||||||
6.000%, 03/01/2019 n | 2,100 | 2,442 | ||||||||||
UnitedHealth Group | ||||||||||||
4.875%, 02/15/2013 | 1,155 | 1,230 | ||||||||||
3.875%, 10/15/2020 q | 1,295 | 1,235 | ||||||||||
41,374 | ||||||||||||
Electric – 1.8% | ||||||||||||
Constellation Energy Group | ||||||||||||
5.150%, 12/01/2020 | 2,275 | 2,240 | ||||||||||
FirstEnergy Solutions | ||||||||||||
6.050%, 08/15/2021 | 2,220 | 2,281 | ||||||||||
National Rural Utilities | ||||||||||||
10.375%, 11/01/2018 | 3,100 | 4,276 | ||||||||||
Ohio Power | ||||||||||||
Series K | ||||||||||||
6.000%, 06/01/2016 | 2,100 | 2,364 | ||||||||||
PPL Energy Supply | ||||||||||||
6.300%, 07/15/2013 | 2,000 | 2,203 | ||||||||||
13,364 | ||||||||||||
Energy – 3.2% | ||||||||||||
Anadarko Petroleum | ||||||||||||
5.950%, 09/15/2016 q | 1,515 | 1,628 | ||||||||||
6.375%, 09/15/2017 q | 1,245 | 1,356 | ||||||||||
EOG Resources | ||||||||||||
4.100%, 02/01/2021 | 2,500 | 2,458 | ||||||||||
Hess | ||||||||||||
8.125%, 02/15/2019 | 2,750 | 3,474 | ||||||||||
Nabors Industries | ||||||||||||
5.000%, 09/15/2020 n | 1,735 | 1,683 | ||||||||||
Nexen | ||||||||||||
5.650%, 05/15/2017 q ì | 4,135 | 4,412 | ||||||||||
Petroleos Mexicanos | ||||||||||||
4.875%, 03/15/2015 q ì | 1,000 | 1,053 | ||||||||||
Suncor Energy | ||||||||||||
6.100%, 06/01/2018 ì | 1,275 | 1,466 | ||||||||||
Valero Energy | ||||||||||||
4.500%, 02/01/2015 q | 1,315 | 1,368 | ||||||||||
Weatherford Bermuda | ||||||||||||
5.125%, 09/15/2020 ì | 3,810 | 3,791 | ||||||||||
Woodside Finance | ||||||||||||
4.500%, 11/10/2014 q ì n | 1,880 | 1,976 | ||||||||||
24,665 | ||||||||||||
Finance – 6.1% | ||||||||||||
American Express | ||||||||||||
7.250%, 05/20/2014 q | 1,725 | 1,965 | ||||||||||
American Express Centurion | ||||||||||||
Series BKNT | ||||||||||||
5.550%, 10/17/2012 | 2,035 | 2,177 | ||||||||||
American Express Credit | ||||||||||||
Series C | ||||||||||||
7.300%, 08/20/2013 | 2,405 | 2,710 | ||||||||||
Ameriprise Financial | ||||||||||||
5.300%, 03/15/2020 | 3,330 | 3,503 | ||||||||||
Capital One Bank | ||||||||||||
8.800%, 07/15/2019 | 3,140 | �� | 3,862 | |||||||||
Capital One Financial | ||||||||||||
6.150%, 09/01/2016 | 1,775 | 1,922 | ||||||||||
Countrywide Financial | ||||||||||||
6.250%, 05/15/2016 | 2,395 | 2,456 | ||||||||||
Discover Financial Services | ||||||||||||
10.250%, 07/15/2019 | 2,245 | 2,786 | ||||||||||
General Electric Capital | ||||||||||||
4.800%, 05/01/2013 | 6,235 | 6,666 | ||||||||||
Series A | ||||||||||||
3.750%, 11/14/2014 q | 2,500 | 2,584 | ||||||||||
Series MTN | ||||||||||||
5.625%, 09/15/2017 q | 3,955 | 4,337 | ||||||||||
Goldman Sachs Group | ||||||||||||
6.000%, 06/15/2020 q | 6,835 | 7,386 | ||||||||||
Private Export Funding | ||||||||||||
3.050%, 10/15/2014 | 575 | 606 | ||||||||||
Transcapitalinvest | ||||||||||||
5.670%, 03/05/2014 ì n | 2,990 | 3,171 | ||||||||||
46,131 | ||||||||||||
Industrial Other – 0.2% | ||||||||||||
Thermo Fisher Scientific | ||||||||||||
3.200%, 05/01/2015 | 1,265 | 1,294 | ||||||||||
Insurance – 3.8% | ||||||||||||
Aflac | ||||||||||||
8.500%, 05/15/2019 | 3,000 | 3,710 |
Nuveen Investments 47
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Intermediate Term Bond Fund (continued) |
| |||||||||||
DESCRIPTION | PAR | FAIR VALUE | > | |||||||||
Allied World Assurance | ||||||||||||
7.500%, 08/01/2016 ì | $ | 2,860 | $ 3,167 | |||||||||
American International Group | ||||||||||||
8.250%, 08/15/2018 q | 3,000 | 3,456 | ||||||||||
Hartford Financial Services Group | ||||||||||||
Series MTN | ||||||||||||
6.000%, 01/15/2019 | 3,055 | 3,184 | ||||||||||
Lincoln National | ||||||||||||
8.750%, 07/01/2019 q | 2,720 | 3,402 | ||||||||||
Met Life Global Funding I | ||||||||||||
5.125%, 04/10/2013 n | 3,730 | 4,016 | ||||||||||
Pacific Life Global Funding | ||||||||||||
5.150%, 04/15/2013 q n | 2,205 | 2,357 | ||||||||||
Pacific Life Insurance | ||||||||||||
6.000%, 02/10/2020 q n | 965 | 1,014 | ||||||||||
Prudential Financial | ||||||||||||
5.100%, 09/20/2014 | 3,235 | 3,475 | ||||||||||
ZFS Finance USA Trust V | ||||||||||||
6.500%, 05/09/2067 D n | 1,530 | 1,492 | ||||||||||
29,273 | ||||||||||||
Natural Gas – 0.4% | ||||||||||||
Kinder Morgan Energy Partners | ||||||||||||
5.000%, 12/15/2013 | 1,135 | 1,233 | ||||||||||
Transocean | ||||||||||||
6.000%, 03/15/2018 ì | 1,820 | 1,912 | ||||||||||
3,145 | ||||||||||||
Real Estate – 1.8% | ||||||||||||
Health Care – REIT | ||||||||||||
5.875%, 05/15/2015 | 1,875 | 2,043 | ||||||||||
Health Care Properties – REIT | ||||||||||||
Series MTN | ||||||||||||
6.300%, 09/15/2016 | 1,960 | 2,111 | ||||||||||
Prologis – REIT | ||||||||||||
6.875%, 03/15/2020 | 3,545 | 3,764 | ||||||||||
Simon Property Group – REIT | ||||||||||||
5.650%, 02/01/2020 q | 2,000 | 2,163 | ||||||||||
Vornado Realty – REIT | ||||||||||||
4.250%, 04/01/2015 | 3,385 | 3,418 | ||||||||||
13,499 | ||||||||||||
Sovereign – 0.2% | ||||||||||||
United Mexican States | ||||||||||||
5.625%, 01/15/2017 q ì | 1,400 | 1,548 | ||||||||||
Transportation – 1.6% | ||||||||||||
AEP Texas Central | ||||||||||||
Series A-2 | ||||||||||||
4.980%, 07/01/2013 | 8,038 | 8,410 | ||||||||||
Union Pacific | ||||||||||||
5.750%, 11/15/2017 q | 3,320 | 3,728 | ||||||||||
12,138 | ||||||||||||
Total Corporate Bonds | ||||||||||||
(Cost $348,670) | 373,426 | |||||||||||
Asset-Backed Securities – 14.0% | ||||||||||||
Automotive – 3.9% | ||||||||||||
Bank of America Auto Trust | ||||||||||||
Series 2010-2, Class A3 | ||||||||||||
1.310%, 07/15/2014 | 2,750 | 2,771 | ||||||||||
Chrysler Financial Lease Trust | ||||||||||||
Series 2010-A, Class A2 | ||||||||||||
1.780%, 06/15/2011 n | 2,107 | 2,110 | ||||||||||
Ford Credit Auto Lease Trust | ||||||||||||
Series 2010-B, Class A3 | ||||||||||||
0.910%, 07/15/2013 n | 4,015 | 4,009 | ||||||||||
Ford Credit Auto Owner Trust | ||||||||||||
Series 2009-A, Class A3A | ||||||||||||
3.960%, 05/15/2013 | 2,762 | 2,810 | ||||||||||
Hertz Vehicle Financing | ||||||||||||
Series 2009-2A, Class A1 | ||||||||||||
4.260%, 03/25/2014 n | 5,000 | 5,232 | ||||||||||
Nissan Auto Receivables Owner Trust | ||||||||||||
Series 2007-B, Class A4 | ||||||||||||
5.160%, 03/15/2014 | 3,583 | 3,678 | ||||||||||
Santander Drive Auto Receivables Trust | ||||||||||||
Series 2010-1, Class A2 | ||||||||||||
1.360%, 03/15/2013 | 6,445 | 6,452 | ||||||||||
World Omni Auto Receivables Trust | ||||||||||||
Series 2010-A, Class A2 | ||||||||||||
0.700%, 06/15/2012 | 2,759 | 2,760 | ||||||||||
29,822 | ||||||||||||
Credit Cards – 4.8% | ||||||||||||
Bank of America Credit Card Trust | ||||||||||||
Series 2007-A8, Class A8 | ||||||||||||
5.590%, 11/17/2014 | 5,855 | 6,259 | ||||||||||
Cabela’s Master Credit Card Trust | ||||||||||||
Series 2010-1A, Class A2 | ||||||||||||
1.706%, 01/15/2018 D n | 4,030 | 4,153 | ||||||||||
Series 2010-2A, Class A1 | ||||||||||||
2.290%, 09/17/2018 n | 4,340 | 4,262 | ||||||||||
Capital One Multi-Asset Execution Trust | ||||||||||||
Series 2008-A3, Class A3 | ||||||||||||
5.050%, 02/15/2016 | 4,795 | 5,193 | ||||||||||
Chase Issuance Trust | ||||||||||||
Series 2008-A9, Class A9 | ||||||||||||
4.260%, 05/15/2013 | 3,000 | 3,041 | ||||||||||
Citibank Credit Card Issuance Trust | ||||||||||||
Series 2006-A4, Class A4 | ||||||||||||
5.450%, 05/10/2013 | 9,195 | 9,355 | ||||||||||
Discover Card Master Trust | ||||||||||||
Series 2007-A1, Class A1 | ||||||||||||
5.650%, 03/16/2020 | 3,530 | 4,005 | ||||||||||
36,268 | ||||||||||||
Home Equity – 2.5% | ||||||||||||
Amresco Residential Security Mortgage | ||||||||||||
Series 1997-3, Class A9 | ||||||||||||
6.960%, 03/25/2027 ¥ | 20 | 20 | ||||||||||
Contimortgage Home Equity Loan Trust | ||||||||||||
Series 1997-2, Class A9 | ||||||||||||
7.900%, 04/15/2028 ¥ | 12 | 12 | ||||||||||
RBSSP Resecuritization Trust | ||||||||||||
Series 2009-11, Class 4A1 | ||||||||||||
2.011%, 12/26/2037 n D | 785 | 788 | ||||||||||
Series 2009-13, Class 5A1 | ||||||||||||
0.355%, 11/26/2036 n D | 3,769 | 3,711 | ||||||||||
Series 2009-8, Class 3A1 | ||||||||||||
0.393%, 03/26/2037 n D | 645 | 628 | ||||||||||
Series 2009-9, Class 9A1 | ||||||||||||
0.481%, 09/26/2037 n D | 2,487 | 2,390 | ||||||||||
Series 2010-10, Class 2A1 | ||||||||||||
0.385%, 09/26/2036 n D | 2,583 | 2,343 | ||||||||||
Series 2010-4, Class 1A1 | ||||||||||||
0.371%, 03/26/2036 n D | 4,515 | 4,198 | ||||||||||
Series 2010-8, Class 4A1 | ||||||||||||
0.591%, 07/26/2036 n D | 2,599 | 2,459 | ||||||||||
Renaissance Home Equity Loan Trust | ||||||||||||
Series 2005-3, Class AF4 | ||||||||||||
5.140%, 11/25/2035 | 2,590 | 2,304 | ||||||||||
18,853 |
48 Nuveen Investments
Intermediate Term Bond Fund (continued) |
| |||||||||||
DESCRIPTION | PAR | FAIR VALUE | > | |||||||||
Manufactured Housing – 0.1% |
| |||||||||||
Green Tree Financial | ||||||||||||
Series 1996-9, Class A5 | ||||||||||||
7.200%, 01/15/2028 ¥ | $65 | $ 66 | ||||||||||
Series 2008-MH1, Class A1 | ||||||||||||
7.000%, 04/25/2038 n | 902 | 923 | ||||||||||
Origen Manufactured Housing | ||||||||||||
Series 2005-A, Class A2 | ||||||||||||
4.490%, 05/15/2018 | 46 | 46 | ||||||||||
1,035 | ||||||||||||
Other – 2.0% | ||||||||||||
AH Mortgage Advance Trust | ||||||||||||
Series 2010-ADV1, Class A1 | ||||||||||||
3.968%, 08/15/2022 n | 2,795 | 2,802 | ||||||||||
Henderson Receivables | ||||||||||||
Series 2010-3A, Class A | ||||||||||||
3.820%, 12/15/2048 n | 2,245 | 2,151 | ||||||||||
Ocwen Advance Receivables Backed Notes | ||||||||||||
Series 2009-3A, Class A | ||||||||||||
4.140%, 07/15/2023 n | 1,960 | 1,970 | ||||||||||
Small Business Administration | ||||||||||||
Series 2006-P10A, Class 1 | ||||||||||||
5.408%, 02/10/2016 | 2,638 | 2,841 | ||||||||||
Series 2010-10B, Class A | ||||||||||||
3.215%, 09/10/2020 | 5,295 | 5,196 | ||||||||||
14,960 | ||||||||||||
Utilities – 0.7% | ||||||||||||
CenterPoint Energy Transition | ||||||||||||
Series 2008-A, Class A1 | ||||||||||||
4.192%, 02/01/2020 | 4,940 | 5,307 | ||||||||||
Total Asset-Backed Securities | ||||||||||||
(Cost $102,650) | 106,245 | |||||||||||
Commercial Mortgage-Backed Securities – 9.7% | ||||||||||||
Americold LLC Trust | ||||||||||||
Series 2010-ARTA, Class A2FL | ||||||||||||
2.500%, 01/17/2029 D n | 4,415 | 4,435 | ||||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||||||
Series 2005-PW10, Class A4 | ||||||||||||
5.405%, 12/11/2040 D | 4,000 | 4,274 | ||||||||||
Series 2007-PW15, Class A2 | ||||||||||||
5.205%, 02/11/2044 | 3,605 | 3,681 | ||||||||||
Series 2007-T28, Class D | ||||||||||||
5.991%, 09/11/2042 ¥ n D | 1,470 | 641 | ||||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||||||
Series 2005-CD1, Class A4 | ||||||||||||
5.396%, 07/15/2044 D | 5,800 | 6,242 | ||||||||||
Series 2007-CD4, Class A2B | ||||||||||||
5.205%, 12/11/2049 | 2,340 | 2,406 | ||||||||||
Commercial Mortgage Pass-Through Certificates | ||||||||||||
Series 2006-CN2A, Class A2FX | ||||||||||||
5.449%, 02/05/2019 n | 2,430 | 2,440 | ||||||||||
Extended Stay America Trust | ||||||||||||
Series 2010-ESHA, Class A | ||||||||||||
2.951%, 11/05/2027 n | 7,283 | 7,163 | ||||||||||
Federal National Mortgage Association | ||||||||||||
Series 2010-M6, Class A1 | ||||||||||||
2.210%, 09/25/2020 | 5,308 | 5,137 | ||||||||||
GS Mortgage Securities II | ||||||||||||
Series 2006-GG6, Class A2 | ||||||||||||
5.506%, 04/10/2038 | 3,397 | 3,414 | ||||||||||
Series 2010-C1, Class A1 | ||||||||||||
3.679%, 08/12/2043 n | 6,224 | 6,352 | ||||||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||||||
Series 2010-C1, Class A1 | ||||||||||||
3.853%, 06/15/2043 n | 4,670 | 4,784 | ||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust | ||||||||||||
Series 2010-C2, Class A1 | ||||||||||||
2.749%, 07/15/2017 n | 4,019 | 3,973 | ||||||||||
OBP Depositor Trust | ||||||||||||
Series 2010-OBP, Class A | ||||||||||||
4.646%, 07/15/2045 n | 3,200 | 3,265 | ||||||||||
Vornado DP | ||||||||||||
Series 2010-VN0, Class A2FX | ||||||||||||
4.004%, 09/14/2028 n | 6,000 | 5,817 | ||||||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||||||
Series 2007-C30, Class A3 | ||||||||||||
5.246%, 12/15/2043 | 5,940 | 6,038 | ||||||||||
Series 2007-C34, Class A2 | ||||||||||||
5.569%, 05/15/2046 | 3,830 | 3,951 | ||||||||||
Total Commercial Mortgage-Backed Securities | ||||||||||||
(Cost $74,243) | 74,013 | |||||||||||
U.S. Government & Agency Securities – 7.0% | ||||||||||||
U.S. Agency Debentures – 2.9% | ||||||||||||
Federal Agricultural Mortgage Corporation | ||||||||||||
5.500%, 07/15/2011 n | 13,900 | 14,275 | ||||||||||
Federal National Mortgage Association | ||||||||||||
2.375%, 07/28/2015 q | 7,595 | 7,702 | ||||||||||
21,977 | ||||||||||||
U.S. Treasuries – 4.1% | ||||||||||||
U.S. Treasury Note | ||||||||||||
1.375%, 10/15/2012 q | 3,950 | 4,008 | ||||||||||
1.375%, 01/15/2013 q | 2,505 | 2,543 | ||||||||||
2.625%, 06/30/2014 | 3,090 | 3,234 | ||||||||||
2.375%, 08/31/2014 | 1,905 | 1,973 | ||||||||||
2.375%, 02/28/2015 q | 1,375 | 1,417 | ||||||||||
1.875%, 07/15/2015 t | 7,275 | 7,882 | ||||||||||
1.875%, 10/31/2017 q | 540 | 513 | ||||||||||
1.250%, 07/15/2020 t | 7,366 | 7,542 | ||||||||||
2.625%, 11/15/2020 q | 2,620 | 2,471 | ||||||||||
31,583 | ||||||||||||
Total U.S. Government & Agency Securities | ||||||||||||
(Cost $53,313) | 53,560 | |||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities – 6.9% | ||||||||||||
Adjustable Rate D – 1.5% | ||||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||
Series 2755, Class FO | ||||||||||||
0.710%, 04/15/2032 | 4,724 | 4,732 | ||||||||||
Series 2863 | ||||||||||||
0.760%, 02/15/2019 | 2,772 | 2,795 | ||||||||||
Federal National Mortgage Association | ||||||||||||
Series 2003-52, Class NF | ||||||||||||
0.656%, 06/25/2023 | 3,651 | 3,674 | ||||||||||
11,201 | ||||||||||||
Fixed Rate – 5.4% | ||||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||
Series 1167, Class E | ||||||||||||
7.500%, 11/15/2021 | 14 | 17 |
Nuveen Investments 49
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Intermediate Term Bond Fund (continued) | ||||||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||||||
Series 1286, Class A | ||||||||||||
6.000%, 05/15/2022 | $ 36 | $ 40 | ||||||||||
Series 2750, Class HE | ||||||||||||
5.000%, 02/15/2019 | 5,567 | 5,941 | ||||||||||
Series 2763, Class TA | ||||||||||||
4.000%, 03/15/2011 | 727 | 729 | ||||||||||
Series 2780, Class QC | ||||||||||||
4.500%, 03/15/2017 | 1,953 | 1,971 | ||||||||||
Series 2795, Class CL | ||||||||||||
4.500%, 07/15/2017 | 3,833 | 3,919 | ||||||||||
Series 3555, Class DA | ||||||||||||
4.000%, 12/15/2014 | 4,399 | 4,550 | ||||||||||
Series 3555, Class EA | ||||||||||||
4.000%, 12/15/2014 | 3,116 | 3,223 | ||||||||||
Series T-47, Class A6 | ||||||||||||
4.159%, 08/27/2012 | 5,806 | 5,916 | ||||||||||
Federal National Mortgage Association | ||||||||||||
Series 1990-89, Class K | ||||||||||||
6.500%, 07/25/2020 | 12 | 13 | ||||||||||
Series 2003-30, Class AE | ||||||||||||
3.900%, 10/25/2017 | 4,439 | 4,570 | ||||||||||
Series 2009-M1, Class A1 | ||||||||||||
3.400%, 07/25/2019 | 3,709 | 3,832 | ||||||||||
Series 2010-M1, Class A1 | ||||||||||||
3.305%, 06/25/2019 | 6,187 | 6,377 | ||||||||||
41,098 | ||||||||||||
Total Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | ||||||||||||
(Cost $51,404) | 52,299 | |||||||||||
U.S. Government Agency Mortgage-Backed Securities – 6.4% | ||||||||||||
Adjustable Rate D – 4.0% | ||||||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||||||
2.741%, 01/01/2028, # 786281 | 699 | 733 | ||||||||||
2.545%, 04/01/2029, # 847190 | 796 | 833 | ||||||||||
2.538%, 10/01/2030, # 847209 | 2,254 | 2,356 | ||||||||||
2.594%, 05/01/2031, # 847161 | 717 | 750 | ||||||||||
2.601%, 09/01/2033, # 847210 | 1,863 | 1,952 | ||||||||||
2.688%, 01/01/2038, # 848282 | 3,374 | 3,522 | ||||||||||
Federal National Mortgage Association Pool | ||||||||||||
2.577%, 09/01/2033, # 725111 | 1,044 | 1,095 | ||||||||||
2.978%, 10/01/2033, # 879906 | 4,537 | 4,762 | ||||||||||
2.773%, 03/01/2035, # 819652 | 3,990 | 4,147 | ||||||||||
2.179%, 12/01/2035, # 848390 | 774 | 791 | ||||||||||
2.599%, 07/01/2036, # AE0058 | 3,246 | 3,390 | ||||||||||
2.878%, 07/01/2036, # 886034 | 1,810 | 1,901 | ||||||||||
2.685%, 09/01/2036, # 995949 | 1,476 | 1,550 | ||||||||||
2.566%, 03/01/2038, # AD0706 | 2,731 | 2,852 | ||||||||||
30,634 | ||||||||||||
Fixed Rate – 2.4% | ||||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||
Series K001, Class A3 | ||||||||||||
5.469%, 01/25/2012 | 1,124 | 1,149 | ||||||||||
Federal National Mortgage Association Pool | ||||||||||||
3.131%, 01/01/2015, # 464373 | 2,600 | 2,674 | ||||||||||
4.000%, 07/01/2018, # 357414 | 4,562 | 4,762 | ||||||||||
4.000%, 05/01/2020, # AD0107 | 4,534 | 4,727 | ||||||||||
4.000%, 03/01/2022, # 890134 | 4,419 | 4,607 | ||||||||||
17,919 | ||||||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||||||
(Cost $47,738) | 48,553 | |||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities – 3.7% | ||||||||||||
Adjustable Rate D – 1.9% | ||||||||||||
Arkle Master Issuer | ||||||||||||
Series 2010-1A, Class 1A | ||||||||||||
0.479%, 05/17/2011 n | 4,240 | 4,234 | ||||||||||
NCUA Guaranteed Notes | ||||||||||||
Series 2010-R2, Class 1A | ||||||||||||
0.623%, 11/06/2017 | 1,458 | 1,458 | ||||||||||
Series 2010-R3, Class 2A | ||||||||||||
0.825%, 12/08/2020 | 6,025 | 6,017 | ||||||||||
Structured Mortgage Loan Trust | ||||||||||||
Series 2004-11, Class A | ||||||||||||
5.329%, 08/25/2034 | 227 | 207 | ||||||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||||||
Series 2003-J, Class 2A5 | ||||||||||||
4.451%, 10/25/2033 | 2,453 | 2,497 | ||||||||||
14,413 | ||||||||||||
Fixed Rate – 1.8% | ||||||||||||
Countrywide Alternative Loan Trust | ||||||||||||
Series 2004-2CB, Class 1A1 | ||||||||||||
4.250%, 03/25/2034 | 264 | 264 | ||||||||||
FDIC Structured Sale Guaranteed Notes | ||||||||||||
Series 2010-S1, Class 2A | ||||||||||||
3.250%, 04/25/2038 n | 3,951 | 3,997 | ||||||||||
GMAC Mortgage Corporation Loan Trust | ||||||||||||
Series 2010-1, Class A | ||||||||||||
4.250%, 07/25/2040 n | 1,568 | 1,583 | ||||||||||
Mortgage Equity Conversion Asset Trust | ||||||||||||
Series 2010-1A, Class A | ||||||||||||
4.000%, 07/25/2060 n | 2,649 | 2,649 | ||||||||||
NCUA Guaranteed Notes | ||||||||||||
Series 2010-C1, Class A1 | ||||||||||||
1.600%, 10/29/2020 | 5,088 | 4,984 | ||||||||||
Westam Mortgage Financial | ||||||||||||
Series 11, Class A | ||||||||||||
6.360%, 08/26/2020 ¥ | 14 | 15 | ||||||||||
13,492 | ||||||||||||
Total Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | ||||||||||||
(Cost $27,806) | 27,905 | |||||||||||
Municipal Bond – 0.9% | ||||||||||||
Louisiana Local Government Environmental Facilities, Community Development Authority | ||||||||||||
Series A1 | ||||||||||||
1.520% 02/01/2018 | ||||||||||||
(Cost $6,499) | 6,500 | 6,511 | ||||||||||
Short-Term Investments – 1.8% | ||||||||||||
Money Market Fund – 1.5% | ||||||||||||
First American Prime Obligations Fund, Class Z, 0.084% Å W | 11,567,361 | 11,567 | ||||||||||
U.S. Treasury Obligations – 0.3% | ||||||||||||
U.S. Treasury Bill ¨ | ||||||||||||
0.145%, 02/10/2011 | $ 640 | 640 | ||||||||||
0.134%, 04/07/2011 | 1,175 | 1,175 | ||||||||||
0.145%, 05/05/2011 | 640 | 640 | ||||||||||
2,455 | ||||||||||||
Total Short-Term Investments | ||||||||||||
(Cost $14,022) | 14,022 |
50 Nuveen Investments
Intermediate Term Bond Fund (continued) |
| |||||||||||
DESCRIPTION | SHARES | FAIR VALUE | > | |||||||||
Investment Purchased with Proceeds from Securities Lending – 14.4% |
| |||||||||||
Mount Vernon Securities Lending Prime Portfolio 0.292% W n | ||||||||||||
(Cost $109,487) | 109,486,591 | $ 109,487 | ||||||||||
Total Investments – 113.9% | ||||||||||||
(Cost $835,832) | 866,021 | |||||||||||
Other Assets and Liabilities, Net – (13.9)% | (105,854 | ) | ||||||||||
Total Net Assets – 100.0% | $ 760,167 |
> | Securities are valued in accordance with procedures described in note 1 in Notes to Financial Statements. |
ì | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of December 31, 2010, the fair value of foreign securities was $69,013 or 9.1% of Total Net Assets. |
q | This security or a portion of this security is out on loan at December 31, 2010. Total loaned securities had a fair value of $107,346 at December 31, 2010. |
D | Variable Rate Security – The rate shown is the rate in effect as of December 31, 2010. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” |
¥ | Security considered illiquid. |
t | U.S. Treasury inflation-protection securities (TIPS) are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. |
Å | Investment in affiliated security. |
W | The rate shown is the annualized seven-day effective yield as of December 31, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts and/or swap agreements. Yield shown is the annualized effective yield as of December 31, 2010. |
Intermediate Term Bond Fund (concluded)
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker- dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. |
REIT –Real Estate Investment Trust
Schedule of Open Futures Contracts
Description | Settlement Month | Number of Purchased | Notional Contract Value | Unrealized Depreciation | ||||||||||||
U.S. Treasury 2 Year Note Futures | March 2011 | 191 | $41,811 | $ (47 | ) | |||||||||||
U.S. Treasury 5 Year Note Futures | March 2011 | 597 | 70,278 | (822 | ) | |||||||||||
U.S. Treasury 10 Year Note Futures | March 2011 | (29 | ) | (3,493 | ) | (43 | ) | |||||||||
U.S. Treasury Long Bond Futures | March 2011 | (20 | ) | (2,443 | ) | (22 | ) | |||||||||
U.S. Treasury Ultra Bond Futures | March 2011 | (5 | ) | (635 | ) | (7 | ) | |||||||||
$(941 | ) |
Interest Rate Swap Contracts
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Depreciation | ||||||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 1.255 | % | 11/03/2011 | $20,000 | $ (165 | ) | ||||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 3.858 | 01/19/2020 | 5,000 | (339 | ) | |||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.358 | 09/25/2011 | 19,000 | (201 | ) | |||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.133 | 03/25/2012 | 19,000 | (206 | ) | |||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.048 | 06/25/2012 | 20,000 | (147 | ) | |||||||||||||||||
UBS | 3-Month LIBOR | Receive | 3.001 | 08/03/2014 | 8,000 | (502 | ) | |||||||||||||||||
$(1,560 | ) |
See accompanying notes to financial statements.
Nuveen Investments 51
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Nuveen Short Term Bond Fund (“Short Term Bond Fund”) |
| |||||||||||
(formerly known as First American Short Term Bond Fund) |
| |||||||||||
DESCRIPTION | PAR | FAIR VALUE | > | |||||||||
Corporate Bonds – 44.4% | ||||||||||||
Banking – 8.7% | ||||||||||||
Ally Financial | ||||||||||||
8.300%, 02/12/2015 | $ 1,000 | $ 1,100 | ||||||||||
Banco do Nordeste | ||||||||||||
3.625%, 11/09/2015 n q ì | 800 | 781 | ||||||||||
Bank of America | ||||||||||||
4.875%, 01/15/2013 | 2,000 | 2,084 | ||||||||||
4.750%, 08/15/2013 | 1,500 | 1,560 | ||||||||||
Series MTN | ||||||||||||
2.100%, 04/30/2012 | 1,500 | 1,531 | ||||||||||
Bank of Nova Scotia | ||||||||||||
1.450%, 07/26/2013 n ì | 4,000 | 4,000 | ||||||||||
BB&T | ||||||||||||
5.700%, 04/30/2014 | 1,000 | 1,100 | ||||||||||
Series MTN | ||||||||||||
3.850%, 07/27/2012 | 260 | 271 | ||||||||||
Citigroup | ||||||||||||
2.125%, 04/30/2012 | 1,500 | 1,530 | ||||||||||
5.850%, 07/02/2013 | 1,000 | 1,079 | ||||||||||
6.375%, 08/12/2014 | 4,500 | 4,973 | ||||||||||
4.587%, 12/15/2015 q | 3,000 | 3,128 | ||||||||||
Credit Suisse New York | ||||||||||||
5.500%, 05/01/2014 ì | 1,000 | 1,097 | ||||||||||
Deutsche Bank | ||||||||||||
2.375%, 01/11/2013 ì | 2,000 | 2,030 | ||||||||||
3.875%, 08/18/2014 ì | 2,000 | 2,099 | ||||||||||
European Investment Bank | ||||||||||||
1.750%, 09/14/2012 ì | 5,000 | 5,090 | ||||||||||
Fifth Third Bancorp | ||||||||||||
6.250%, 05/01/2013 | 1,755 | 1,902 | ||||||||||
HSBC Finance | ||||||||||||
6.750%, 05/15/2011 | 2,345 | 2,396 | ||||||||||
JPMorgan Chase | ||||||||||||
2.200%, 06/15/2012 | 1,500 | 1,535 | ||||||||||
5.125%, 09/15/2014 | 2,000 | 2,128 | ||||||||||
3.700%, 01/20/2015 q | 2,000 | 2,070 | ||||||||||
Key Bank | ||||||||||||
3.200%, 06/15/2012 q | 1,500 | 1,556 | ||||||||||
Keycorp | ||||||||||||
Series MTN | ||||||||||||
6.500%, 05/14/2013 | 1,000 | 1,086 | ||||||||||
KFW | ||||||||||||
Series GMTN | ||||||||||||
4.750%, 05/15/2012 ì | 5,000 | 5,276 | ||||||||||
Lloyds TSB Bank | ||||||||||||
4.375%, 01/12/2015 n ì | 3,000 | 2,999 | ||||||||||
National City | ||||||||||||
4.000%, 02/01/2011 | 1,000 | 1,001 | ||||||||||
PNC Funding | ||||||||||||
3.625%, 02/08/2015 | 1,500 | 1,551 | ||||||||||
Rabobank Nederland | ||||||||||||
3.200%, 03/11/2015 n ì | 1,400 | 1,425 | ||||||||||
Royal Bank of Scotland | ||||||||||||
4.875%, 08/25/2014 n ì | 1,900 | 1,946 | ||||||||||
Santander | ||||||||||||
2.485%, 01/18/2013 n ì | 2,000 | 1,935 | ||||||||||
Societe Generale | ||||||||||||
2.500%, 01/15/2014 n ì | 2,000 | 1,998 | ||||||||||
UBS | ||||||||||||
3.875%, 01/15/2015 ì | 1,000 | 1,031 | ||||||||||
Series BKNT | ||||||||||||
2.250%, 08/12/2013 q ì | 2,650 | 2,672 | ||||||||||
Wells Fargo | ||||||||||||
Series AI | ||||||||||||
4.750%, 02/09/2015 | 2,000 | 2,122 | ||||||||||
Series I | ||||||||||||
3.750%, 10/01/2014 | 2,000 | 2,088 | ||||||||||
72,170 | ||||||||||||
Basic Industry – 2.9% | ||||||||||||
Anglo American Capital | ||||||||||||
2.150%, 09/27/2013 n ì | 1,000 | 1,009 | ||||||||||
Arcelormittal | ||||||||||||
5.375%, 06/01/2013 q ì | 1,900 | 2,020 | ||||||||||
BHP Billiton Finance | ||||||||||||
5.500%, 04/01/2014 ì | 1,000 | 1,107 | ||||||||||
Codelco | ||||||||||||
5.500%, 10/15/2013 n ì | 2,400 | 2,603 | ||||||||||
Dow Chemical | ||||||||||||
4.850%, 08/15/2012 | 1,000 | 1,054 | ||||||||||
2.500%, 02/15/2016 | 2,630 | 2,526 | ||||||||||
Georgia-Pacific | ||||||||||||
8.125%, 05/15/2011 | 500 | 516 | ||||||||||
Incitec Pivot | ||||||||||||
4.000%, 12/07/2015 n ì | 2,000 | 1,949 | ||||||||||
Noble Holding International | ||||||||||||
3.450%, 08/01/2015 ì | 1,825 | 1,864 | ||||||||||
Noranda | ||||||||||||
7.250%, 07/15/2012 ì | 2,000 | 2,147 | ||||||||||
Potash Corporation of Saskatchewan | ||||||||||||
3.750%, 09/30/2015 ì | 1,500 | 1,551 | ||||||||||
PPG | ||||||||||||
1.900%, 01/15/2016 | 1,000 | 949 | ||||||||||
Rio Tinto Financial | ||||||||||||
8.950%, 05/01/2014 ì | 1,000 | 1,211 | ||||||||||
Rockies Express Pipeline | ||||||||||||
3.900%, 04/15/2015 n | 2,000 | 1,978 | ||||||||||
United States Steel | ||||||||||||
5.650%, 06/01/2013 q | 1,000 | 1,035 | ||||||||||
Vedanta Resources | ||||||||||||
9.500%, 07/18/2018 n q ì | 420 | 459 | ||||||||||
23,978 | ||||||||||||
Brokerage – 1.8% | ||||||||||||
Goldman Sachs Group | ||||||||||||
6.875%, 01/15/2011 q | 3,000 | 3,005 | ||||||||||
1.625%, 07/15/2011 | 1,580 | 1,591 | ||||||||||
3.625%, 08/01/2012 q | 1,625 | 1,677 | ||||||||||
3.700%, 08/01/2015 | 2,000 | 2,038 | ||||||||||
Merrill Lynch | ||||||||||||
5.450%, 02/05/2013 | 1,250 | 1,318 | ||||||||||
Morgan Stanley | ||||||||||||
2.250%, 03/13/2012 q | 1,525 | 1,555 | ||||||||||
4.200%, 11/20/2014 | 2,000 | 2,043 | ||||||||||
Series GMTN | ||||||||||||
4.100%, 01/26/2015 | 1,645 | 1,669 | ||||||||||
14,896 | ||||||||||||
Capital Goods – 1.0% | ||||||||||||
Case New Holland | ||||||||||||
7.750%, 09/01/2013 | 1,000 | 1,075 | ||||||||||
Caterpillar Financial Services | ||||||||||||
Series MTN | ||||||||||||
4.900%, 08/15/2013 | 2,490 | 2,715 | ||||||||||
ITT | ||||||||||||
4.900%, 05/01/2014 | 1,779 | 1,910 | ||||||||||
L-3 Communications | ||||||||||||
Series B | ||||||||||||
6.375%, 10/15/2015 | 1,000 | 1,030 | ||||||||||
Northrop Grumman | ||||||||||||
3.700%, 08/01/2014 | 1,707 | 1,793 | ||||||||||
8,523 |
52 Nuveen Investments
Short Term Bond Fund (continued) DESCRIPTION | ||||||||||
PAR | FAIR VALUE > | |||||||||
Communications – 4.8% |
| |||||||||
American Tower | ||||||||||
4.625%, 04/01/2015 | $2,000 | $2,089 | ||||||||
AT&T | ||||||||||
7.300%, 11/15/2011 | 1,500 | 1,585 | ||||||||
6.700%, 11/15/2013 | 2,000 | 2,272 | ||||||||
2.500%, 08/15/2015 q | 2,250 | 2,242 | ||||||||
British Telecom | ||||||||||
5.150%, 01/15/2013 ì | 2,000 | 2,129 | ||||||||
CenturyLink | ||||||||||
Series L | ||||||||||
7.875%, 08/15/2012 | 1,900 | 2,055 | ||||||||
Comcast | ||||||||||
5.300%, 01/15/2014 | 1,000 | 1,090 | ||||||||
Deutsche Telekom | ||||||||||
5.875%, 08/20/2013 ì | 2,000 | 2,203 | ||||||||
DirecTV Holdings | ||||||||||
3.550%, 03/15/2015 | 1,700 | 1,727 | ||||||||
7.625%, 05/15/2016 | 2,000 | 2,218 | ||||||||
NBC Universal | ||||||||||
3.650%, 04/30/2015 n q | 2,000 | 2,051 | ||||||||
News America | ||||||||||
5.300%, 12/15/2014 | 1,000 | 1,105 | ||||||||
Sprint Capital | ||||||||||
8.375%, 03/15/2012 | 2,000 | 2,115 | ||||||||
TCM Sub | ||||||||||
3.550%, 01/15/2015 n q | 1,000 | 1,021 | ||||||||
Telecom Italia Capital | ||||||||||
4.950%, 09/30/2014 ì | 1,540 | 1,578 | ||||||||
Telefonica Emisiones | ||||||||||
2.582%, 04/26/2013 q ì | 1,450 | 1,451 | ||||||||
Telefonica Moviles | ||||||||||
2.875%, 11/09/2015 n ì | 1,000 | 960 | ||||||||
Time Warner Cable | ||||||||||
5.400%, 07/02/2012 | 1,250 | 1,327 | ||||||||
8.250%, 02/14/2014 q | 1,025 | 1,190 | ||||||||
Verizon Communications | ||||||||||
5.250%, 04/15/2013 | 900 | 979 | ||||||||
Verizon New England | ||||||||||
6.500%, 09/15/2011 | 1,500 | 1,558 | ||||||||
Verizon Wireless | ||||||||||
5.550%, 02/01/2014 q | 2,000 | 2,205 | ||||||||
Vodafone Group | ||||||||||
5.000%, 09/15/2015 ì | 2,500 | 2,731 | ||||||||
39,881 | ||||||||||
Consumer Cyclical – 2.0% | ||||||||||
American Axle & Manufacturing | ||||||||||
5.250%, 02/11/2014 q | 1,000 | 983 | ||||||||
Best Buy | ||||||||||
6.750%, 07/15/2013 | 1,000 | 1,106 | ||||||||
eBay | ||||||||||
0.875%, 10/15/2013 q | 1,000 | 990 | ||||||||
Ford Motor Credit | ||||||||||
7.000%, 10/01/2013 | 1,500 | 1,608 | ||||||||
Home Depot | ||||||||||
5.250%, 12/16/2013 | 2,000 | 2,195 | ||||||||
Interpublic Group | ||||||||||
6.250%, 11/15/2014 | 1,800 | 1,942 | ||||||||
Macy’s Retail Holdings | ||||||||||
5.350%, 03/15/2012 | 1,700 | 1,755 | ||||||||
Staples | ||||||||||
9.750%, 01/15/2014 q | 1,000 | 1,212 | ||||||||
Target | ||||||||||
4.000%, 06/15/2013 | 1,000 | 1,068 | ||||||||
Viacom | ||||||||||
4.375%, 09/15/2014 | 1,000 | 1,064 | ||||||||
Whirlpool | ||||||||||
8.000%, 05/01/2012 | 1,000 | 1,078 | ||||||||
Yum! Brands | ||||||||||
8.875%, 04/15/2011 | 1,260 | 1,288 | ||||||||
16,289 | ||||||||||
Consumer Non Cyclical – 7.2% | ||||||||||
Anheuser-Busch InBev Worldwide | ||||||||||
2.500%, 03/26/2013 | 5,105 | 5,224 | ||||||||
7.200%, 01/15/2014 n | 1,000 | 1,144 | ||||||||
Boston Scientific | ||||||||||
4.500%, 01/15/2015 | 2,000 | 2,042 | ||||||||
Bunge Limited Finance | ||||||||||
5.875%, 05/15/2013 | 2,000 | 2,141 | ||||||||
Cardinal Health | ||||||||||
5.500%, 06/15/2013 q | 915 | 991 | ||||||||
Carefusion | ||||||||||
4.125%, 08/01/2012 | 600 | 625 | ||||||||
Cargill | ||||||||||
4.375%, 06/01/2013 n | 2,000 | 2,133 | ||||||||
ConAgra Foods | ||||||||||
5.875%, 04/15/2014 | 1,950 | 2,159 | ||||||||
Constellation Brands | ||||||||||
8.375%, 12/15/2014 | 1,500 | 1,639 | ||||||||
Covidien International | ||||||||||
1.875%, 06/15/2013 ì | 3,750 | 3,795 | ||||||||
Dr. Pepper Snapple Group | ||||||||||
2.350%, 12/21/2012 q | 2,000 | 2,046 | ||||||||
Genentech | ||||||||||
4.750%, 07/15/2015 | 2,000 | 2,202 | ||||||||
HCA | ||||||||||
6.750%, 07/15/2013 | 1,500 | 1,541 | ||||||||
Kraft Foods | ||||||||||
5.625%, 11/01/2011 | 193 | 200 | ||||||||
6.000%, 02/11/2013 q | 1,500 | 1,643 | ||||||||
Kroger | ||||||||||
5.500%, 02/01/2013 | 2,000 | 2,164 | ||||||||
Life Technologies | ||||||||||
3.375%, 03/01/2013 | 1,000 | 1,022 | ||||||||
McKesson | ||||||||||
6.500%, 02/15/2014 | 2,105 | 2,365 | ||||||||
MedcoHealth Solutions | ||||||||||
6.125%, 03/15/2013 | 1,845 | 2,010 | ||||||||
Merck | ||||||||||
2.250%, 01/15/2016 | 3,600 | 3,555 | ||||||||
Miller Brewing | ||||||||||
5.500%, 08/15/2013 n ì | 2,000 | 2,171 | ||||||||
Novartis Capital | ||||||||||
2.900%, 04/24/2015 | 1,000 | 1,028 | ||||||||
Omnicare | ||||||||||
6.875%, 12/15/2015 | 1,000 | 1,018 | ||||||||
Reynolds American | ||||||||||
7.250%, 06/01/2013 | 2,615 | 2,909 | ||||||||
St. Jude Medical | ||||||||||
2.200%, 09/15/2013 | 2,000 | 2,032 | ||||||||
3.750%, 07/15/2014 | 690 | 729 | ||||||||
Teva Pharmaceutical | ||||||||||
1.500%, 06/15/2012 q | 2,500 | 2,523 | ||||||||
UnitedHealth Group | ||||||||||
4.875%, 02/15/2013 | 1,500 | 1,597 | ||||||||
Watson Pharmaceuticals | ||||||||||
5.000%, 08/15/2014 | 2,000 | 2,149 | ||||||||
Wyeth | ||||||||||
5.500%, 02/01/2014 | 2,455 | 2,729 | ||||||||
59,526 |
Nuveen Investments 53
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Short Term Bond Fund (continued) DESCRIPTION | PAR | FAIR VALUE > | ||||||||
Electric – 1.2% | ||||||||||
Arizona Public Service | ||||||||||
6.375%, 10/15/2011 | $ 2,000 | $ 2,083 | ||||||||
MidAmerican Energy | ||||||||||
4.650%, 10/01/2014 | 3,275 | 3,539 | ||||||||
National Rural Utilities Cooperative Finance | ||||||||||
1.900%, 11/01/2015 | 2,970 | 2,867 | ||||||||
Nevada Power | ||||||||||
6.500%, 04/15/2012 | 1,000 | 1,064 | ||||||||
9,553 | ||||||||||
Energy – 2.9% | ||||||||||
Anadarko Petroleum | ||||||||||
5.950%, 09/15/2016 q | 755 | 811 | ||||||||
Apache | ||||||||||
6.000%, 09/15/2013 | 2,800 | 3,144 | ||||||||
Chesapeake Energy | ||||||||||
9.500%, 02/15/2015 q | 1,000 | 1,127 | ||||||||
ConocoPhillips | ||||||||||
4.750%, 02/01/2014 | 900 | 978 | ||||||||
El Paso Pipeline | ||||||||||
4.100%, 11/15/2015 | 2,000 | 1,980 | ||||||||
Encana | ||||||||||
4.750%, 10/15/2013 ì | 3,000 | 3,239 | ||||||||
Forest Oil | ||||||||||
8.500%, 02/15/2014 | 1,500 | 1,639 | ||||||||
Husky Energy | ||||||||||
5.900%, 06/15/2014 ì | 1,000 | 1,099 | ||||||||
Marathon Global Funding | ||||||||||
6.000%, 07/01/2012 ì | 1,000 | 1,069 | ||||||||
Marathon Oil | ||||||||||
6.125%, 03/15/2012 | 500 | 528 | ||||||||
8.375%, 05/01/2012 ì | 1,000 | 1,088 | ||||||||
Nabors Industries | ||||||||||
5.375%, 08/15/2012 | 1,850 | 1,953 | ||||||||
Petroleos Mexicanos | ||||||||||
4.875%, 03/15/2015 q ì | 2,000 | 2,105 | ||||||||
Shell International Finance | ||||||||||
3.250%, 09/22/2015 q ì | 1,180 | 1,212 | ||||||||
Valero Energy | ||||||||||
6.875%, 04/15/2012 | 1,000 | 1,064 | ||||||||
Weatherford International | ||||||||||
5.150%, 03/15/2013 ì | 31 | 33 | ||||||||
Woodside Finance | ||||||||||
4.500%, 11/10/2014 n ì | 1,250 | 1,314 | ||||||||
24,383 | ||||||||||
Finance – 4.2% | ||||||||||
American Express Travel | ||||||||||
5.250%, 11/21/2011 n | 2,450 | 2,528 | ||||||||
Capital One Bank | ||||||||||
6.500%, 06/13/2013 | 1,500 | 1,642 | ||||||||
Fresenius U.S. Finance II | ||||||||||
9.000%, 07/15/2015 n | 1,000 | 1,145 | ||||||||
General Electric Capital | ||||||||||
4.800%, 05/01/2013 q | 1,000 | 1,069 | ||||||||
1.875%, 09/16/2013 | 3,500 | 3,502 | ||||||||
Series A | ||||||||||
3.750%, 11/14/2014 q | 3,000 | 3,101 | ||||||||
Series GMTN | ||||||||||
5.250%, 10/19/2012 | 3,000 | 3,207 | ||||||||
Series MTN | ||||||||||
2.200%, 06/08/2012 q | 1,510 | 1,544 | ||||||||
GMAC | ||||||||||
1.750%, 10/30/2012 | 3,680 | 3,745 | ||||||||
2.200%, 12/19/2012 | 1,750 | 1,800 | ||||||||
Household Finance | ||||||||||
4.750%, 07/15/2013 | 2,000 | 2,109 | ||||||||
International Lease Finance | ||||||||||
6.500%, 09/01/2014 n | 1,000 | 1,060 | ||||||||
Nissan Motor Acceptance | ||||||||||
3.250%, 01/30/2013 n | 1,000 | 1,020 | ||||||||
TransCapitalInvest | ||||||||||
7.700%, 08/07/2013 n ì | 2,500 | 2,778 | ||||||||
Volkswagen International Finance | ||||||||||
1.625%, 08/12/2013 n ì | 4,335 | 4,333 | ||||||||
34,583 | ||||||||||
Industrial Other – 1.3% | ||||||||||
Agilent Technologies | ||||||||||
2.500%, 07/15/2013 | 2,000 | 2,023 | ||||||||
Arrow Electronics | ||||||||||
6.875%, 07/01/2013 | 1,990 | 2,187 | ||||||||
Briggs & Stratton | ||||||||||
8.875%, 03/15/2011 | 870 | 887 | ||||||||
Thermo Fisher Scientific | ||||||||||
3.250%, 11/20/2014 | 1,625 | 1,671 | ||||||||
3.200%, 05/01/2015 | 1,250 | 1,279 | ||||||||
Tyco Electronics | ||||||||||
6.000%, 10/01/2012 ì | 2,430 | 2,613 | ||||||||
10,660 | ||||||||||
Insurance – 2.9% | ||||||||||
Aflac | ||||||||||
3.450%, 08/15/2015 | 2,835 | 2,880 | ||||||||
Allstate Life Global Funding Trust | ||||||||||
Series MTN | ||||||||||
5.375%, 04/30/2013 | 1,500 | 1,633 | ||||||||
American International Group | ||||||||||
3.650%, 01/15/2014 | 1,000 | 1,017 | ||||||||
Berkshire Hathaway | ||||||||||
Series 0001 | ||||||||||
2.125%, 02/11/2013 q | 2,355 | 2,405 | ||||||||
Hartford Financial Services Group | ||||||||||
5.250%, 10/15/2011 | 1,000 | 1,029 | ||||||||
4.000%, 03/30/2015 q | 1,000 | 1,003 | ||||||||
Indianapolis Life Insurance | ||||||||||
8.660%, 04/01/2011 n | 5,000 | 5,049 | ||||||||
Lincoln National | ||||||||||
4.300%, 06/15/2015 q | 1,000 | 1,030 | ||||||||
Metropolitan Life Global Funding I | ||||||||||
2.875%, 09/17/2012 n | 1,900 | 1,947 | ||||||||
2.500%, 01/11/2013 n | 1,000 | 1,022 | ||||||||
Prudential Financial | ||||||||||
Series MTN | ||||||||||
3.625%, 09/17/2012 | 2,600 | 2,699 | ||||||||
2.750%, 01/14/2013 | 1,600 | 1,629 | ||||||||
Series MTNB | ||||||||||
4.500%, 07/15/2013 | 1,000 | 1,060 | ||||||||
24,403 | ||||||||||
Natural Gas – 0.6% | ||||||||||
Consolidated Natural Gas | ||||||||||
Series C | ||||||||||
6.250%, 11/01/2011 | 1,575 | 1,642 | ||||||||
Duke Energy | ||||||||||
3.950%, 09/15/2014 | 1,500 | 1,572 | ||||||||
Kinder Morgan | ||||||||||
6.500%, 09/01/2012 | 1,000 | 1,053 | ||||||||
Ras Laffan | ||||||||||
4.500%, 09/30/2012 n ì | 500 | 525 | ||||||||
4,792 | ||||||||||
Real Estate – 0.8% | ||||||||||
Boston Properties – REIT | ||||||||||
6.250%, 01/15/2013 | 243 | 265 |
54 Nuveen Investments
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
HCP – REIT | ||||||||
5.625%, 02/28/2013 q | $ | 1,000 | $ | 1,049 | ||||
Nationwide Health Properties – REIT | ||||||||
6.250%, 02/01/2013 | 2,000 | 2,145 | ||||||
Simon Property Group – REIT | ||||||||
4.200%, 02/01/2015 q | 2,000 | 2,092 | ||||||
Vornado Realty – REIT | ||||||||
4.250%, 04/01/2015 | 1,500 | 1,514 | ||||||
7,065 | ||||||||
Technology – 0.8% | ||||||||
Analog Devices | ||||||||
5.000%, 07/01/2014 | 1,000 | 1,078 | ||||||
Broadcom | ||||||||
1.500%, 11/01/2013 n | 1,000 | 993 | ||||||
Corning | ||||||||
5.900%, 03/15/2014 q | 228 | 252 | ||||||
Motorola | ||||||||
8.000%, 11/01/2011 | 1,200 | 1,264 | ||||||
National Semiconductor | ||||||||
3.950%, 04/15/2015 | 1,000 | 1,019 | ||||||
Seagate Technology International | ||||||||
10.000%, 05/01/2014 n ¬ | 2,000 | 2,345 | ||||||
6,951 | ||||||||
Transportation – 1.3% | ||||||||
Air Canada | ||||||||
9.250%, 08/01/2015 n q ¬ | 1,180 | 1,239 | ||||||
Continental Airlines | ||||||||
7.339%, 04/19/2014 | 771 | 771 | ||||||
CSX | ||||||||
5.750%, 03/15/2013 | 1,500 | 1,636 | ||||||
Delta Airlines | ||||||||
7.711%, 03/18/2013 | 900 | 922 | ||||||
FedEx | ||||||||
7.375%, 01/15/2014 | 2,000 | 2,294 | ||||||
GATX | ||||||||
4.750%, 05/15/2015 | 1,000 | 1,047 | ||||||
Navios Maritime Holdings | ||||||||
9.500%, 12/15/2014 ¬ | 750 | 780 | ||||||
United Airlines | ||||||||
10.400%, 05/01/2018 | 944 | 1,091 | ||||||
United Parcel Service | ||||||||
3.875%, 04/01/2014 | 1,000 | 1,065 | ||||||
10,845 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $359,314) | 368,498 | |||||||
Asset-Backed Securities – 16.9% | ||||||||
Automotive – 5.3% | ||||||||
Ally Auto Receivables Trust | ||||||||
2.330%, 06/17/2013 n | 2,500 | 2,540 | ||||||
Bank of America Auto Trust | ||||||||
Series 2008-1A, Class A3A | ||||||||
4.970%, 09/20/2012 n | 2,299 | 2,330 | ||||||
Series 2010-2, Class A3 | ||||||||
1.310%, 07/15/2014 | 2,525 | 2,545 | ||||||
Capital Auto Receivables Asset Trust | ||||||||
Series 2007-3, Class A4 | ||||||||
5.210%, 03/17/2014 | 1,905 | 1,947 | ||||||
Series 2008-1, Class A3A | ||||||||
3.860%, 08/15/2012 | 287 | 290 | ||||||
Capital One Prime Auto Receivables Trust | ||||||||
5.060%, 06/15/2014 | 1,946 | 1,982 | ||||||
Chrysler Financial Lease Trust | ||||||||
1.780%, 06/15/2011 n | 1,630 | 1,632 | ||||||
DaimlerChrysler Auto Trust | ||||||||
Series 2006-C, Class A4 | ||||||||
4.980%, 11/08/2011 | 50 | 50 | ||||||
Series 2008-A, Class A3A | ||||||||
3.700%, 06/08/2012 | 252 | 253 | ||||||
Ford Credit Auto Lease Trust | ||||||||
0.910%, 07/15/2013 n | 3,985 | 3,979 | ||||||
Ford Credit Auto Owner Trust | ||||||||
3.960%, 05/15/2013 | 1,209 | 1,229 | ||||||
Harley-Davidson Motorcycle Trust | ||||||||
5.040%, 10/15/2012 n | 365 | 366 | ||||||
Hertz Vehicle Financing | ||||||||
4.260%, 03/25/2014 n | 3,000 | 3,139 | ||||||
Honda Auto Receivables Owner Trust | ||||||||
0.820%, 06/18/2012 | 2,000 | 2,003 | ||||||
JPMorgan Auto Receivables Trust | ||||||||
5.140%, 12/15/2014 n | 623 | 624 | ||||||
Nissan Auto Lease Trust | ||||||||
2.070%, 01/15/2015 | 1,585 | 1,596 | ||||||
Nissan Auto Receivables Owner Trust | ||||||||
4.460%, 04/15/2012 | 414 | 417 | ||||||
Santander Drive Auto Receivables Trust | ||||||||
1.360%, 03/15/2013 | 5,755 | 5,761 | ||||||
Toyota Auto Receivables Owner Trust | ||||||||
1.040%, 02/18/2014 | 3,735 | 3,751 | ||||||
USAA Auto Owner Trust | ||||||||
0.630%, 06/15/2012 | 2,605 | 2,606 | ||||||
Volkswagen Auto Lease Trust | ||||||||
3.410%, 04/16/2012 | 2,554 | 2,581 | ||||||
World Omni Auto Receivables Trust | ||||||||
0.700%, 06/15/2012 | 2,072 | 2,073 | ||||||
43,694 | ||||||||
Credit Cards – 4.1% | ||||||||
Bank of America Credit Card Trust | ||||||||
0.300%, 11/15/2014 q r | 4,500 | 4,486 | ||||||
Cabela’s Master Credit Card Trust | ||||||||
Series 2010-1A, Class A2 | ||||||||
1.710%, 01/16/2018 n r | 3,970 | 4,091 | ||||||
Series 2010-2A, Class A1 | ||||||||
2.290%, 09/17/2018 n | 4,290 | 4,213 | ||||||
Capital One Multi-Asset Execution Trust | ||||||||
Series 2008-A3, Class A3 | ||||||||
5.050%, 02/15/2016 | 2,750 | 2,978 | ||||||
Series 2008-A5, Class A5 | ||||||||
4.850%, 02/18/2014 | 2,400 | 2,430 |
Nuveen Investments | 55 |
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Chase Issuance Trust | ||||||||
4.260%, 05/15/2013 | $ | 2,000 | $ | 2,027 | ||||
Citibank Credit Card Issuance Trust | ||||||||
5.450%, 05/10/2013 | 5,245 | 5,337 | ||||||
Discover Card Master Trust | ||||||||
5.100%, 10/15/2013 | 7,535 | 7,635 | ||||||
Discover Card Master Trust I | ||||||||
0.510%, 06/18/2013 r | 380 | 380 | ||||||
33,577 | ||||||||
Equipment Leases – 0.2% | ||||||||
CNH Equipment Trust | ||||||||
4.930%, 08/15/2014 | 1,810 | 1,856 | ||||||
Home Equity – 3.8% | ||||||||
Countrywide Asset-Backed Certificates | ||||||||
5.382%, 05/25/2036 r | 818 | 699 | ||||||
Equivantage Home Equity Loan Trust | ||||||||
7.250%, 01/25/2028 ¥ | 142 | 131 | ||||||
GMAC Mortgage Servicer Advance Funding | ||||||||
4.250%, 01/15/2022 n | 2,145 | 2,156 | ||||||
IMC Home Equity Loan Trust | ||||||||
7.220%, 08/20/2029 r ¥ | 1,172 | 1,112 | ||||||
Morgan Stanley Capital | ||||||||
0.371%, 02/25/2037 r | 3,888 | 3,611 | ||||||
Novastar Home Equity Loan Trust | ||||||||
0.361%, 03/25/2037 r | 2,635 | 2,543 | ||||||
RBSSP Resecuritization Trust | ||||||||
Series 2009-10, Class 8A1 | ||||||||
0.411%, 05/26/2036 n r | 1,195 | 1,155 | ||||||
Series 2009-11, Class 4A1 | ||||||||
2.011%, 12/26/2037 n r | 474 | 476 | ||||||
Series 2009-13, Class 5A1 | ||||||||
0.361%, 11/26/2036 n r | 2,595 | 2,556 | ||||||
Series 2009-8, Class 3A1 | ||||||||
0.393%, 03/26/2037 n r | 335 | 326 | ||||||
Series 2009-9, Class 9A1 | ||||||||
0.481%, 09/26/2037 n r | 1,348 | 1,296 | ||||||
Series 2010-4, Class 1A1 | ||||||||
0.371%, 03/26/2036 n r | 4,039 | 3,754 | ||||||
Series 2010-4, Class 5A1 | ||||||||
0.421%, 02/26/2037 n r | 2,693 | 2,556 | ||||||
Series 2010-8, Class 4A1 | ||||||||
0.591%, 07/26/2036 n r | 1,794 | 1,697 | ||||||
Series 2010-10, Class 2A1 | ||||||||
0.391%, 09/26/2036 n r | 2,514 | 2,281 | ||||||
Series 2010-11, Class 2A1 | ||||||||
0.431%, 03/26/2037 n r | 3,199 | 3,057 | ||||||
Renaissance Home Equity Loan Trust | ||||||||
5.140%, 11/25/2035 | 2,425 | 2,157 | ||||||
31,563 | ||||||||
Manufactured Housing – 0.5% | ||||||||
Green Tree Financial | ||||||||
7.000%, 04/25/2038 n | 388 | 396 | ||||||
Newcastle Investment Trust | ||||||||
4.500%, 07/10/2035 n | 3,455 | 3,560 | ||||||
Origen Manufactured Housing | ||||||||
Series 2005-A, Class A2 | ||||||||
4.490%, 05/15/2018 | 14 | 14 | ||||||
Series 2005-B, Class A2 | ||||||||
5.247%, 12/15/2018 | 504 | 508 | ||||||
4,478 | ||||||||
Other – 2.5% | ||||||||
American Home Mortgage Advance Trust | ||||||||
Series 2010-ADV1, Class A1 | ||||||||
3.968%, 08/15/2022 n | 2,705 | 2,712 | ||||||
Series 2010-ADV2, Class B1 | ||||||||
8.830%, 05/10/2041 n | 1,500 | 1,507 | ||||||
Series 2010-ADV2, Class C1 | ||||||||
8.830%, 05/10/2041 n | 1,500 | 1,477 | ||||||
Crown Castle Towers | ||||||||
4.523%, 01/15/2035 n r | 2,000 | 2,078 | ||||||
Nationstar Mortgage Advance Receivable Trust | ||||||||
3.261%, 12/26/2022 n r | 2,539 | 2,530 | ||||||
Ocwen Advance Receivables Backed Notes | ||||||||
4.140%, 07/15/2023 n | 2,000 | 2,010 | ||||||
Small Business Administration | ||||||||
Series 2005-P10A, Class 1 | ||||||||
4.638%, 02/10/2015 | 2,074 | 2,174 | ||||||
Series 2005-P10B, Class 1 | ||||||||
4.940%, 08/10/2015 | 4,278 | 4,526 | ||||||
Series 2006-P10A, Class 1 | ||||||||
5.408%, 02/10/2016 | 1,283 | 1,382 | ||||||
20,396 | ||||||||
Utilities – 0.5% | ||||||||
CenterPoint Energy | ||||||||
4.970%, 08/01/2014 | 2,383 | 2,450 | ||||||
PG&E Energy Recovery Funding | ||||||||
5.030%, 03/25/2014 | 826 | 852 | ||||||
PSE&G Transition Funding | ||||||||
6.610%, 06/15/2015 | 1,190 | 1,291 | ||||||
4,593 | ||||||||
Total Asset-Backed Securities | ||||||||
(Cost $137,782) | 140,157 | |||||||
Commercial Mortgage-Backed Securities – 9.7% | ||||||||
Americold | ||||||||
2.500%, 01/17/2029 n r | 4,770 | 4,791 | ||||||
Bear Stearns Commercial Mortgage Securities | ||||||||
5.405%, 12/11/2040 | 5,000 | 5,342 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||
Series 2005-CD1, Class A4 | ||||||||
5.222%, 07/15/2044 | 4,000 | 4,305 | ||||||
Series 2007-CD4, Class A2B | ||||||||
5.205%, 12/11/2049 | 1,385 | 1,424 | ||||||
Commercial Mortgage Pass-Through Certificates | ||||||||
4.982%, 05/10/2043 r | 2,500 | 2,658 |
56 | Nuveen Investments |
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Extended Stay America Trust | ||||||||
4.860%, 11/05/2027 n | $ | 3,920 | $ | 3,842 | ||||
GE Capital Commercial Mortgage Corporation | ||||||||
6.070%, 06/10/2038 | 3,250 | 3,337 | ||||||
GMAC Commercial Mortgage Securities | ||||||||
Series 2003-C2, Class A2 | ||||||||
5.471%, 05/10/2040 | 3,500 | 3,768 | ||||||
Series 2004-C1, Class A2 | ||||||||
4.100%, 03/10/2038 | 243 | 243 | ||||||
Greenwich Capital Commercial Funding | ||||||||
5.117%, 04/10/2037 | 3,362 | 3,387 | ||||||
GS Commercial Mortgage | ||||||||
5.690%, 08/10/2045 | 259 | 264 | ||||||
GS Mortgage Securities Trust | ||||||||
5.807%, 08/10/2045 q | 5,000 | 5,227 | ||||||
GS Mortgage Securities II | ||||||||
3.679%, 08/12/2043 n | 6,111 | 6,236 | ||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
6.429%, 04/15/2035 | 6,132 | 6,215 | ||||||
JPMorgan Chase Commercial Mortgage Securities Trust | ||||||||
Series 2007-CB18, Class A3 | ||||||||
5.447%, 06/12/2047 | 4,000 | 4,145 | ||||||
Series 2010-C1, Class A1 | ||||||||
3.853%, 06/15/2043 n | 4,264 | 4,368 | ||||||
Series 2010-C2, Class A1 | ||||||||
2.749%, 11/15/2043 n | 3,954 | 3,909 | ||||||
Merrill Lynch Mortgage Trust | ||||||||
5.611%, 05/12/2039 | 3,894 | 4,013 | ||||||
Morgan Stanley Capital I | ||||||||
4.970%, 12/15/2041 | 1,090 | 1,161 | ||||||
Morgan Stanley Dean Witter Capital I | ||||||||
5.980%, 01/15/2039 | 4,374 | 4,573 | ||||||
Vornado DP | ||||||||
2.970%, 09/14/2028 n | 5,334 | 5,258 | ||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||
5.246%, 12/15/2043 | 1,739 | 1,768 | ||||||
Total Commercial Mortgage-Backed Securities | ||||||||
(Cost $77,693) | 80,234 | |||||||
U.S. Government Agency Mortgage-Backed Securities – 8.4% | ||||||||
Adjustable Rate r – 5.9% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
2.740%, 12/01/2026, #786591 | 345 | 362 | ||||||
2.597%, 01/01/2029, #846946 | 340 | 356 | ||||||
2.510%, 10/01/2029, #786853 | 247 | 257 | ||||||
4.254%, 04/01/2030, #972055 | 273 | 289 | ||||||
2.107%, 05/01/2030, #847014 | 207 | 214 | ||||||
2.464%, 06/01/2031, #847367 | 151 | 157 | ||||||
2.581%, 08/01/2032, #847331 | 2,136 | 2,225 | ||||||
2.551%, 09/01/2032, #847652 | 1,085 | 1,134 | ||||||
2.656%, 10/01/2032, #847063 | 188 | 197 | ||||||
2.597%, 05/01/2033, #780456 | 696 | 725 | ||||||
2.569%, 10/01/2033, #780911 | 1,369 | 1,422 | ||||||
2.605%, 03/01/2034, #781296 | 1,583 | 1,643 | ||||||
3.725%, 03/01/2036, #848193 | 2,835 | 2,949 | ||||||
2.628%, 08/01/2036, #1L1462 | 1,016 | 1,056 | ||||||
2.688%, 01/01/2038, #848282 | 3,068 | 3,203 | ||||||
Federal National Mortgage Association Pool | ||||||||
2.368%, 11/01/2025, #433988 | 473 | 485 | ||||||
2.558%, 10/01/2030, #847241 | 1,415 | 1,481 | ||||||
3.411%, 06/01/2031, #625338 | 208 | 218 | ||||||
5.019%, 12/01/2031, #535363 | 1,254 | 1,349 | ||||||
2.596%, 03/01/2032, #545791 | 31 | 33 | ||||||
2.512%, 05/01/2032, #545717 | 170 | 176 | ||||||
2.665%, 05/01/2032, #634948 | 136 | 142 | ||||||
2.599%, 10/01/2032, #661645 | 29 | 30 | ||||||
2.379%, 12/01/2032, #671884 | 189 | 197 | ||||||
2.256%, 04/01/2034, #775389 | 147 | 152 | ||||||
2.596%, 04/01/2034, #AD0486 | 2,734 | 2,854 | ||||||
2.607%, 06/01/2034, #725721 | 2,401 | 2,504 | ||||||
2.164%, 07/01/2034, #795242 | 1,833 | 1,897 | ||||||
2.461%, 11/01/2034, #797182 | 1,540 | 1,601 | ||||||
2.710%, 11/01/2034, #841068 | 1,775 | 1,859 | ||||||
2.773%, 03/01/2035, #819652 | 2,698 | 2,804 | ||||||
2.729%, 07/01/2035, #745922 | 1,434 | 1,496 | ||||||
2.536%, 08/01/2035, #838958 | 1,464 | 1,532 | ||||||
2.179%, 12/01/2035, #848390 | 774 | 791 | ||||||
2.599%, 07/01/2036, #AE0058 | 3,185 | 3,326 | ||||||
2.878%, 07/01/2036, #886034 | 1,045 | 1,098 | ||||||
2.539%, 08/01/2036, #555369 | 216 | 225 | ||||||
2.685%, 09/01/2036, #995949 | 967 | 1,015 | ||||||
2.714%, 08/01/2037, #AD0550 | 2,085 | 2,178 | ||||||
2.566%, 03/01/2038, #AD0706 | 1,946 | 2,033 | ||||||
Government National Mortgage Association Pool | ||||||||
2.625%, 08/20/2021, #008824 | 119 | 122 | ||||||
2.625%, 07/20/2022, #008006 | 166 | 170 | ||||||
2.625%, 09/20/2025, #008699 | 91 | 93 | ||||||
3.375%, 04/20/2026, #008847 | 73 | 75 | ||||||
2.625%, 08/20/2027, #080106 | 26 | 26 | ||||||
3.375%, 01/20/2028, #080154 | 39 | 41 | ||||||
3.375%, 05/20/2029, #080283 | 107 | 111 | ||||||
2.875%, 11/20/2030, #080469 | 202 | 208 | ||||||
3.375%, 04/20/2031, #080507 | 73 | 75 | ||||||
2.625%, 08/20/2031, #080535 | 228 | 234 | ||||||
3.500%, 02/20/2032, #080580 | 53 | 55 | ||||||
48,875 | ||||||||
Fixed Rate – 2.5% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
5.469%, 01/25/2012 | 624 | 639 | ||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
4.500%, 05/01/2018, #G11618 | 2,754 | 2,909 | ||||||
4.500%, 05/01/2019, #B14728 | 3,718 | 3,924 | ||||||
4.500%, 04/01/2022, #M30035 | 1,162 | 1,213 | ||||||
Federal National Mortgage Association Pool | ||||||||
5.500%, 05/01/2012, #254340 | 135 | 137 | ||||||
5.000%, 03/01/2013, #254682 | 124 | 131 | ||||||
4.000%, 12/01/2013, #255039 | 1,087 | 1,116 | ||||||
4.000%, 12/01/2019, #AA5298 | 1,475 | 1,540 | ||||||
4.000%, 05/01/2020, #AD0107 | 2,380 | 2,482 | ||||||
4.000%, 03/01/2022, #890134 | 2,355 | 2,456 | ||||||
4.500%, 04/01/2024, #AA4312 | 3,832 | 4,042 | ||||||
20,589 | ||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $68,247) | 69,464 | |||||||
Nuveen Investments | 57 |
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Short Term Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
U.S. Government & Agency Securities – 7.1% | ||||||||
U.S. Agency Debentures – 4.5% | ||||||||
Federal Home Loan Bank | ||||||||
1.625%, 07/27/2011 | $ | 5,550 | $ | 5,590 | ||||
2.250%, 04/13/2012 q | 6,000 | 6,136 | ||||||
1.500%, 01/16/2013 | 5,400 | 5,486 | ||||||
1.875%, 06/21/2013 | 3,385 | 3,464 | ||||||
Federal Home Loan Mortgage Corporation | ||||||||
1.625%, 04/15/2013 | 2,000 | 2,035 | ||||||
1.400%, 07/26/2013 | 7,335 | 7,339 | ||||||
Federal National Mortgage Association | ||||||||
1.000%, 04/04/2012 q | 7,500 | 7,549 | ||||||
37,599 | ||||||||
U.S. Treasuries – 2.6% | ||||||||
U.S. Treasury Notes | ||||||||
4.625%, 10/31/2011 q | 1,235 | 1,279 | ||||||
0.750%, 11/30/2011 q | 2,000 | 2,008 | ||||||
1.125%, 12/15/2011 q | 6,340 | 6,388 | ||||||
0.875%, 02/29/2012 q | 7,500 | 7,543 | ||||||
4.125%, 08/31/2012 q | 3,760 | 3,985 | ||||||
21,203 | ||||||||
Total U.S. Government & Agency Securities | ||||||||
(Cost $58,142) | 58,802 | |||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities – 6.3% |
| |||||||
Adjustable Rate r – 1.4% | ||||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
0.811%, 02/25/2048 n | 4,834 | 4,842 | ||||||
Federal National Mortgage Association | ||||||||
Series 2003-25, Class FN | ||||||||
0.711%, 04/25/2018 | 3,675 | 3,705 | ||||||
Series 2004-90, Class GF | ||||||||
0.561%, 11/25/2034 | 2,809 | 2,811 | ||||||
11,358 | ||||||||
Fixed Rate – 4.9% | ||||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
Series A1 | ||||||||
0.690%, 10/25/2011 n € | 2,000 | 1,989 | ||||||
Series 2010-S1, Class 2A | ||||||||
3.250%, 04/25/2038 n | 2,640 | 2,670 | ||||||
Federal Home Loan Mortgage Corporation | ||||||||
Series 1022, Class J | ||||||||
6.000%, 12/15/2020 | 23 | 25 | ||||||
Series 2629, Class BO | ||||||||
3.250%, 03/15/2018 | 2,692 | 2,775 | ||||||
Series 2763, Class TA | ||||||||
4.000%, 03/15/2011 | 531 | 532 | ||||||
Series 2780, Class QC | ||||||||
4.500%, 03/15/2017 | 957 | 966 | ||||||
Series 2795, Class CL | ||||||||
4.500%, 07/15/2017 | 2,676 | 2,736 | ||||||
Series 2843, Class BH | ||||||||
4.000%, 01/15/2018 | 2,486 | 2,549 | ||||||
Series 3555, Class DA | ||||||||
4.000%, 12/15/2014 | 2,445 | 2,529 | ||||||
Series 3555, Class EA | ||||||||
4.000%, 12/15/2014 | 993 | 1,027 | ||||||
Series 3591, Class NA | ||||||||
1.250%, 10/15/2012 | 2,092 | 2,104 | ||||||
Federal National Mortgage Association | ||||||||
Series 1992-150, Class MA | ||||||||
5.500%, 09/25/2022 | 58 | 65 | ||||||
Series 2002-83, Class MD | ||||||||
5.000%, 09/25/2016 | 973 | 990 | ||||||
Series 2003-122, Class AJ | ||||||||
4.500%, 02/25/2028 | 4,229 | 4,380 | ||||||
Series 2003-68, Class QP | ||||||||
3.000%, 07/25/2022 | 2,359 | 2,403 | ||||||
Series 2004-90, Class GA | ||||||||
4.350%, 03/25/2034 | 1,756 | 1,838 | ||||||
Series 2010-M1, Class A1 | ||||||||
3.305%, 06/25/2019 | 2,112 | 2,176 | ||||||
Series 2010-M6, Class A1 | ||||||||
2.210%, 09/25/2020 | 1,979 | 1,915 | ||||||
FHLMC Structured Pass-Through Securities | ||||||||
Series T-45, Class A4 | ||||||||
4.520%, 08/27/2012 | 4,189 | 4,360 | ||||||
Government National Mortgage Association | ||||||||
5.500%, 06/20/2028 | 2,617 | 2,718 | ||||||
40,747 | ||||||||
Total Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Security | ||||||||
(Cost $51,727) | 52,105 | |||||||
Collateralized Mortgage Obligation-Private Mortgage-Backed Securities – 3.4% | ||||||||
Adjustable Rate r – 1.8% | ||||||||
Arkle Master Issuer | ||||||||
0.461%, 05/17/2011 n ¬ | 3,640 | 3,635 | ||||||
Countrywide Home Loans | ||||||||
4.974%, 02/25/2034 | 291 | 289 | ||||||
GSR Mortgage Loan Trust | ||||||||
4.025%, 01/25/2035 ¥ | 1,937 | 310 | ||||||
Indymac Index Mortgage Loan Trust | ||||||||
2.833%, 03/25/2035 | 468 | 399 | ||||||
JPMorgan Mortgage Trust | ||||||||
5.962%, 01/25/2037 | 432 | 54 | ||||||
Master Adjustable Rate Mortgages Trust | ||||||||
2.274%, 11/25/2033 | 1,729 | 1,473 | ||||||
NCUA Guaranteed Notes | ||||||||
0.821%, 12/08/2020 | 6,460 | 6,452 | ||||||
Sequoia Mortgage Trust | ||||||||
5.238%, 02/20/2047 | 668 | 540 | ||||||
Structured Mortgage Loan Trust | ||||||||
2.789%, 08/25/2034 | 179 | 163 | ||||||
Washington Mutual | ||||||||
5.775%, 09/25/2036 | 664 | 107 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
5.850%, 10/25/2036 | 1,898 | 1,526 | ||||||
14,948 | ||||||||
58 | Nuveen Investments |
Short Term Bond Fund (continued) |
| |||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE > | ||||||
Fixed Rate – 1.6% | ||||||||
Countrywide Alternative Loan Trust | ||||||||
6.000%, 08/25/2036 | $ | 1,260 | $ | 1,134 | ||||
GMAC Mortgage Corporation Loan Trust | ||||||||
Series 2006-J1, Class A1 | ||||||||
5.750%, 04/25/2036 | 1,017 | 968 | ||||||
Series 2010-1, Class A | ||||||||
4.250%, 07/25/2040 n | 1,478 | 1,491 | ||||||
Master Alternative Loans Trust | ||||||||
8.000%, 01/25/2035 | 438 | 391 | ||||||
Mortgage Equity Conversion Asset Trust | ||||||||
4.000%, 07/25/2060 n | 2,551 | 2,551 | ||||||
NCUA Guaranteed Notes | ||||||||
1.840%, 10/07/2020 | 3,246 | 3,213 | ||||||
Thornburg Mortgage Securities Trust | ||||||||
6.178%, 09/25/2037 | 1,602 | 1,556 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-3, Class A1 | ||||||||
5.500%, 03/25/2036 | 537 | 534 | ||||||
Series 2007-2, Class 1A8 | ||||||||
5.750%, 03/25/2037 | 1,428 | 1,314 | ||||||
13,152 | ||||||||
Total Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | ||||||||
(Cost $30,444) | 28,100 | |||||||
Municipal Bond – 0.8% | ||||||||
Louisiana Local Government Environmental Facilities, Community Development Authority | ||||||||
1.520% 02/01/2018 | ||||||||
(Cost $6,284) | 6,285 | 6,296 | ||||||
Short-Term Investments – 2.5% |
| |||||||
Money Market Fund – 2.3% | ||||||||
First American Prime Obligations Fund, Class Z | ||||||||
0.084% Å W | 19,228,332 | 19,228 | ||||||
U.S. Treasury Obligations – 0.2% |
| |||||||
U.S. Treasury Bills ¨ | ||||||||
0.117%, 02/10/2011 | 1,005 | 1,005 | ||||||
0.134%, 04/07/2011 | 550 | 550 | ||||||
0.144%, 05/05/2011 | 350 | 350 | ||||||
1,905 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $21,133) | 21,133 | |||||||
Investment Purchased with Proceeds from Securities Lending – 10.1% |
| |||||||
Mount Vernon Securities Lending Prime Portfolio | ||||||||
0.292% W † | ||||||||
(Cost $84,294) | 84,294,243 | 84,294 | ||||||
Total Investments – 109.6% |
| |||||||
(Cost $895,060) | 909,083 | |||||||
Other Assets and Liabilities, Net – (9.6)% |
| (79,775 | ) | |||||
Total Net Assets – 100.0% |
| $ | 829,308 | |||||
> | Securities are valued in accordance with procedures described in note 1 in Notes to Financial Statements. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” |
q | This security or a portion of this security is out on loan at December 31, 2010. Total loaned securities had a fair value of $82,544 at December 31, 2010. |
¬ | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of December 31, 2010, the fair value of foreign securities was $96,724 or 11.7% of total net assets. |
r | Variable Rate Security – The rate shown is the rate in effect as of December 31, 2010. |
¥ | Security considered illiquid. |
€ | Zero coupon bonds make no periodic interest payments, but are issued at deep discounts from par value. The rate shown is the effective yield as of December 31, 2010. |
Å | Investment in affiliated security. |
W | The rate shown is the annualized seven-day effective yield as of December 31, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts and/or swap agreements. Yield shown is the annualized effective yield as of December 31, 2010. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. |
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Purchased (Sold) | Notional Contract Value | Unrealized Appreciation (Depreciation) | ||||||||||||
U.S. Treasury 2 Year Note Futures | March 2011 | 164 | $ | 35,901 | $ | (65 | ) | |||||||||
U.S. Treasury 5 Year Note Futures | March 2011 | (859 | ) | (101,120 | ) | 1,615 | ||||||||||
U.S. Treasury 10 Year Note Futures | March 2011 | (108 | ) | (13,007 | ) | 412 | ||||||||||
U.S. Treasury Long Bond Futures | March 2011 | (17 | ) | (2,076 | ) | 79 | ||||||||||
$ | 2,041 | |||||||||||||||
Credit Default Swap Contracts
Credit Default Swaps on Credit Indices
Sell Protection1
Counterparty | Reference Index | Receive Fixed Rate | Expiration Date | Notional Amount2 | Unrealized Appreciation | |||||||||||||
JPMorgan | Markit CDX NA HY 15 Index | 5.000 | % | 12/20/2015 | $ | 7,900 | $ | 197 | ||||||||||
UBS | Markit CDX NA HY 15 Index | 5.000 | 12/20/2015 | 7,900 | 270 | |||||||||||||
$ | 467 | |||||||||||||||||
1 | If the fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the reference entity or underlying securities comprising the reference index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference entity or underlying securities comprising the reference index. |
2 | The maximum potential amount the fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
Nuveen Investments | 59 |
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Short Term Bond Fund (concluded)
Interest Rate Swap Contracts | ||||||||||||||||||||||||
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Depreciation | ||||||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 1.255 | % | 11/03/2011 | $ | 24,000 | $ | (198 | ) | ||||||||||||||
JPMorgan Chase | 3-Month LIBOR | Receive | 3.858 | 01/19/2020 | 4,000 | (271 | ) | |||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.358 | 09/25/2011 | 11,000 | (116 | ) | |||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.133 | 03/25/2012 | 16,000 | (174 | ) | |||||||||||||||||
UBS | 3-Month LIBOR | Receive | 1.048 | 06/25/2012 | 18,000 | (132 | ) | |||||||||||||||||
UBS | 3-Month LIBOR | Receive | 3.001 | 08/03/2014 | 4,000 | (251 | ) | |||||||||||||||||
$ | (1,142 | ) | ||||||||||||||||||||||
See accompanying notes to financial statements.
60 | Nuveen Investments |
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Nuveen Total Return Bond Fund (“Total Return Bond Fund”) (formerly known as First American Total Return Bond Fund) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Corporate Bonds – 59.5% | ||||||||
Banking – 7.6% | ||||||||
Ally Financial | ||||||||
7.500%, 09/15/2020 n q | $ | 910 | $ | 954 | ||||
Bank of America | ||||||||
5.875%, 01/05/2021 q | 5,815 | 6,016 | ||||||
8.000%, 12/29/2049 q r | 1,815 | 1,829 | ||||||
Citigroup | ||||||||
5.375%, 08/09/2020 q | 1,300 | 1,351 | ||||||
6.125%, 08/25/2036 | 2,765 | 2,649 | ||||||
6.875%, 03/05/2038 q | 2,550 | 2,829 | ||||||
Citigroup Capital XXI | ||||||||
8.300%, 12/21/2077 q r | 2,735 | 2,844 | ||||||
HSBC Holdings | ||||||||
6.800%, 06/01/2038 ¬ | 1,910 | 2,065 | ||||||
JPMorgan Chase | ||||||||
4.400%, 07/22/2020 | 2,770 | 2,726 | ||||||
5.500%, 10/15/2040 q | 2,420 | 2,474 | ||||||
Series 1 | ||||||||
7.900%, 04/29/2049 r | 1,970 | 2,094 | ||||||
JPMorgan Chase Capital XX | ||||||||
6.550%, 09/29/2066 q r | 3,670 | 3,692 | ||||||
Key Bank | ||||||||
7.413%, 05/06/2015 | 1,485 | 1,647 | ||||||
KeyCorp | ||||||||
3.750%, 08/13/2015 q | 2,710 | 2,719 | ||||||
Royal Bank of Scotland | ||||||||
6.400%, 10/21/2019 q ¬ | 2,100 | 2,113 | ||||||
Sovereign Bank | ||||||||
8.750%, 05/30/2018 | 2,350 | 2,563 | ||||||
UBS | ||||||||
4.875%, 08/04/2020 ¬ | 2,410 | 2,452 | ||||||
UBS Preferred Funding Trust V | ||||||||
6.243%, 05/29/2049 r | 1,615 | 1,550 | ||||||
Wells Fargo | ||||||||
7.980%, 03/29/2049 q r | 3,270 | 3,450 | ||||||
Wells Fargo Bank | ||||||||
5.950%, 08/26/2036 q | 710 | 726 | ||||||
Wells Fargo Capital X | ||||||||
5.950%, 12/15/2086 r | 1,230 | 1,187 | ||||||
Wells Fargo Capital XIII | ||||||||
7.700%, 12/29/2049 q r | 2,090 | 2,161 | ||||||
52,091 | ||||||||
Basic Industry – 5.7% | ||||||||
Alrosa Finance | ||||||||
7.750%, 11/03/2020 n q ¬ | 1,015 | 1,064 | ||||||
Arcelormittal | ||||||||
7.000%, 10/15/2039 ¬ | 3,065 | 3,181 | ||||||
Cliffs Natural Resources | ||||||||
4.800%, 10/01/2020 | 2,725 | 2,663 | ||||||
Dow Chemical | ||||||||
4.250%, 11/15/2020 q | 1,885 | 1,806 | ||||||
FMG Resources | ||||||||
7.000%, 11/01/2015 n ¬ | 1,300 | 1,332 | ||||||
Hidili Industry International Development | ||||||||
8.625%, 11/04/2015 n ¬ | 425 | 422 | ||||||
Incitec Pivot Finance | ||||||||
6.000%, 12/10/2019 n | 1,915 | 1,961 | ||||||
International Paper | ||||||||
8.700%, 06/15/2038 | 1,680 | 2,119 | ||||||
Inversiones | ||||||||
6.125%, 11/05/2019 n ¬ | 1,280 | 1,362 | ||||||
Lyondell Chemical | ||||||||
11.000%, 05/01/2018 | 1,350 | 1,529 | ||||||
Metinvest | ||||||||
10.250%, 05/20/2015 n ¬ | 1,255 | 1,336 | ||||||
Newmont Mining | ||||||||
6.250%, 10/01/2039 | 4,125 | 4,485 | ||||||
Plum Creek Timberlands | ||||||||
4.700%, 03/15/2021 | 3,050 | 2,903 | ||||||
Reynolds Group Issuer | ||||||||
7.125%, 04/15/2019 n | 1,500 | 1,526 | ||||||
Rhodia | ||||||||
6.875%, 09/15/2020 n ¬ | 1,500 | 1,521 | ||||||
Rio Tinto Finance U.S.A. | ||||||||
7.125%, 07/15/2028 q ¬ | 1,625 | 1,994 | ||||||
Sinochem Overseas Capital | ||||||||
4.500%, 11/12/2020 n q ¬ | 750 | 739 | ||||||
Southern Copper | ||||||||
7.500%, 07/27/2035 | 1,265 | 1,404 | ||||||
Teck Cominco Limited | ||||||||
6.125%, 10/01/2035 ¬ | 1,575 | 1,696 | ||||||
Vale Overseas | ||||||||
6.875%, 11/10/2039 ¬ | 1,990 | 2,199 | ||||||
Vedanta Resources | ||||||||
9.500%, 07/18/2018 n q ¬ | 1,575 | 1,723 | ||||||
38,965 | ||||||||
Brokerage – 3.7% | ||||||||
Goldman Sachs Capital II | ||||||||
5.793%, 12/29/2049 r | 2,740 | 2,322 | ||||||
Goldman Sachs Group | ||||||||
6.000%, 06/15/2020 q | 10,605 | 11,460 | ||||||
Merrill Lynch | ||||||||
6.050%, 05/16/2016 | 5,235 | 5,394 | ||||||
Morgan Stanley | ||||||||
7.300%, 05/13/2019 q | 2,640 | 2,972 | ||||||
5.500%, 07/24/2020 | 3,250 | 3,283 | ||||||
25,431 | ||||||||
Capital Goods – 1.3% | ||||||||
Abengoa Finance | ||||||||
8.875%, 11/01/2017 n q ¬ | 1,150 | 1,064 | ||||||
GE Capital Trust I | ||||||||
6.375%, 11/15/2067 r | 3,600 | 3,555 | ||||||
L-3 Communications | ||||||||
6.375%, 10/15/2015 | 1,680 | 1,730 | ||||||
Martin Marietta Material | ||||||||
6.600%, 04/15/2018 | 850 | 914 | ||||||
United Rentals | ||||||||
9.250%, 12/15/2019 q | 1,455 | 1,619 | ||||||
8,882 | ||||||||
Communications – 4.5% | ||||||||
American Tower | ||||||||
5.050%, 09/01/2020 | 2,195 | 2,159 | ||||||
AT&T | ||||||||
6.550%, 02/15/2039 q | 1,510 | 1,644 | ||||||
British Sky Broadcasting | ||||||||
6.100%, 02/15/2018 n ¬ | 1,975 | 2,203 | ||||||
CBS | ||||||||
5.750%, 04/15/2020 q | 1,190 | 1,265 | ||||||
Comcast | ||||||||
6.400%, 05/15/2038 | 1,630 | 1,742 | ||||||
Digicel Group | ||||||||
10.500%, 04/15/2018 n q ¬ | 1,500 | 1,650 | ||||||
DirecTV Holdings | ||||||||
5.200%, 03/15/2020 | 4,195 | 4,349 | ||||||
Embarq | ||||||||
7.082%, 06/01/2016 | 1,545 | 1,709 |
Nuveen Investments | 61 |
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Frontier Communications | ||||||||
8.500%, 04/15/2020 q | $ | 1,355 | $ | 1,480 | ||||
NBC Universal | ||||||||
4.375%, 04/01/2021 n | 2,515 | 2,441 | ||||||
News America | ||||||||
6.650%, 11/15/2037 | 1,600 | 1,772 | ||||||
Sinclair Television Group | ||||||||
9.250%, 11/01/2017 n | 1,215 | 1,315 | ||||||
Sprint Nextel | ||||||||
6.000%, 12/01/2016 | 1,200 | 1,159 | ||||||
TCM Sub | ||||||||
3.550%, 01/15/2015 n q | 870 | 888 | ||||||
Telecom Italia Capital | ||||||||
7.175%, 06/18/2019 q ¬ | 2,250 | 2,407 | ||||||
Time Warner Cable | ||||||||
5.875%, 11/15/2040 | 1,515 | 1,499 | ||||||
Verizon Communications | ||||||||
6.900%, 04/15/2038 q | 915 | 1,067 | ||||||
30,749 | ||||||||
Consumer Cyclical – 2.3% | ||||||||
Ford Motor Credit | ||||||||
6.625%, 08/15/2017 | 1,425 | 1,498 | ||||||
Giti Tire | ||||||||
12.250%, 01/26/2012 ¬ | 1,000 | 989 | ||||||
Goodyear Tire & Rubber | ||||||||
10.500%, 05/15/2016 q | 1,275 | 1,454 | ||||||
Ingram Micro | ||||||||
5.250%, 09/01/2017 | 1,090 | 1,103 | ||||||
J.C. Penney | ||||||||
5.650%, 06/01/2020 | 1,425 | 1,365 | ||||||
Navistar International | ||||||||
8.250%, 11/01/2021 q | 1,575 | 1,693 | ||||||
R.R. Donnelley & Sons | ||||||||
7.625%, 06/15/2020 q | 1,070 | 1,146 | ||||||
Time Warner | ||||||||
6.100%, 07/15/2040 | 1,750 | 1,836 | ||||||
Viacom | ||||||||
6.875%, 04/30/2036 q | 1,975 | 2,266 | ||||||
Whirlpool | ||||||||
5.500%, 03/01/2013 | 2,360 | 2,506 | ||||||
15,856 | ||||||||
Consumer Non Cyclical – 3.0% | ||||||||
Altria Group | ||||||||
9.950%, 11/10/2038 q | 2,720 | 3,833 | ||||||
Anheuser-Busch InBev Worldwide | ||||||||
8.200%, 01/15/2039 n q | 1,525 | 2,069 | ||||||
CVS Caremark | ||||||||
6.302%, 06/01/2062 r | 1,810 | 1,744 | ||||||
HCA Holdings | ||||||||
7.750%, 05/15/2021 n q | 1,125 | 1,125 | ||||||
JBS Finance II | ||||||||
8.250%, 01/29/2018 n ¬ | 1,175 | 1,181 | ||||||
Kraft Foods | ||||||||
6.500%, 08/11/2017 | 1,235 | 1,438 | ||||||
Lorillard Tobacco | ||||||||
8.125%, 06/23/2019 | 1,590 | 1,769 | ||||||
MHP | ||||||||
10.250%, 04/29/2015 n ¬ | 1,225 | 1,291 | ||||||
Mylan | ||||||||
7.875%, 07/15/2020 n | 1,025 | 1,104 | ||||||
Pilgrim’s Pride | ||||||||
7.875%, 12/15/2018 n | 990 | 985 | ||||||
UnitedHealth Group | ||||||||
6.875%, 02/15/2038 q | 1,395 | 1,624 | ||||||
Valeant Pharmaceuticals | ||||||||
6.875%, 12/01/2018 n q ¬ | 2,330 | 2,313 | ||||||
20,476 | ||||||||
Electric – 1.8% | ||||||||
Calpine | ||||||||
7.875%, 07/31/2020 n | 1,315 | 1,331 | ||||||
Constellation Energy Group | ||||||||
5.150%, 12/01/2020 | 2,010 | 1,979 | ||||||
FirstEnergy Solutions | ||||||||
6.050%, 08/15/2021 | 2,000 | 2,054 | ||||||
Majapahit Holding | ||||||||
7.750%, 10/17/2016 n ¬ | 1,850 | 2,137 | ||||||
MidAmerican Energy Holdings | ||||||||
6.125%, 04/01/2036 q | 2,630 | 2,841 | ||||||
Ohio Power | ||||||||
Series K | ||||||||
6.000%, 06/01/2016 | 1,685 | 1,897 | ||||||
12,239 | ||||||||
Energy – 4.7% | ||||||||
Amerada Hess | ||||||||
7.125%, 03/15/2033 | 1,950 | 2,317 | ||||||
Anadarko Petroleum | ||||||||
6.375%, 09/15/2017 q | 1,140 | 1,242 | ||||||
6.200%, 03/15/2040 q | 1,675 | 1,635 | ||||||
Canadian Oil Sands | ||||||||
7.750%, 05/15/2019 n ¬ | 1,700 | 2,009 | ||||||
Carrizo Oil & Gas | ||||||||
8.625%, 10/15/2018 n | 1,150 | 1,185 | ||||||
Cloud Peak Energy | ||||||||
8.250%, 12/15/2017 q | 1,270 | 1,364 | ||||||
Diamond Offshore Drilling | ||||||||
5.700%, 10/15/2039 | 1,775 | 1,762 | ||||||
Headwaters | ||||||||
11.375%, 11/01/2014 | 900 | 984 | ||||||
Linn Energy | ||||||||
8.625%, 04/15/2020 n | 1,310 | 1,412 | ||||||
Lukoil International Finance | ||||||||
6.125%, 11/09/2020 n ¬ | 2,625 | 2,628 | ||||||
Nabors Industries | ||||||||
5.000%, 09/15/2020 n q | 1,590 | 1,542 | ||||||
Nexen | ||||||||
6.400%, 05/15/2037 ¬ | 2,240 | 2,170 | ||||||
Petrobras International Finance | ||||||||
6.875%, 01/20/2040 ¬ | 1,770 | 1,859 | ||||||
Petro-Canada | ||||||||
6.800%, 05/15/2038 ¬ | 1,275 | 1,452 | ||||||
Petroplus Finance | ||||||||
9.375%, 09/15/2019 n q ¬ | 1,465 | 1,355 | ||||||
Pride International | ||||||||
8.500%, 06/15/2019 | 725 | 825 | ||||||
Seadrill | ||||||||
6.500%, 10/05/2015 | 1,600 | 1,556 | ||||||
Valero Energy | ||||||||
6.125%, 02/01/2020 | 2,200 | 2,337 | ||||||
Weatherford International | ||||||||
7.000%, 03/15/2038 ¬ | 1,950 | 2,092 | ||||||
31,726 | ||||||||
Finance – 5.2% | ||||||||
Anglogold Holdings | ||||||||
6.500%, 04/15/2040 ¬ | 2,275 | 2,326 | ||||||
Capital One Bank | ||||||||
8.800%, 07/15/2019 | 2,810 | 3,457 | ||||||
Capital One Capital III | ||||||||
7.686%, 08/15/2036 r | 1,485 | 1,485 |
62 | Nuveen Investments |
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Capital One Financial | ||||||||
6.150%, 09/01/2016 | $ | 2,265 | $ | 2,452 | ||||
Countrywide Financial | ||||||||
6.250%, 05/15/2016 | 2,885 | 2,959 | ||||||
Credit Acceptance | ||||||||
9.125%, 02/01/2017 n | 1,325 | 1,391 | ||||||
Discover Financial Services | ||||||||
10.250%, 07/15/2019 | 1,975 | 2,451 | ||||||
General Electric Capital | ||||||||
6.875%, 01/10/2039 q | 4,705 | 5,437 | ||||||
International Lease Finance | ||||||||
8.875%, 09/01/2017 q | 985 | 1,063 | ||||||
8.250%, 12/15/2020 | 2,310 | 2,379 | ||||||
Janus Capital Group | ||||||||
6.700%, 06/15/2017 q r | 1,700 | 1,771 | ||||||
National Money Mart | ||||||||
10.375%, 12/15/2016 q ¬ | 1,250 | 1,350 | ||||||
Rockies Express Pipeline | ||||||||
5.625%, 04/15/2020 n | 1,625 | 1,571 | ||||||
RSHB Capital | ||||||||
7.750%, 05/29/2018 n ¬ | 2,120 | 2,295 | ||||||
Transcapitalinvest | ||||||||
5.670%, 03/05/2014 n ¬ | 2,670 | 2,831 | ||||||
35,218 | ||||||||
Insurance – 4.7% | ||||||||
Aflac | ||||||||
6.450%, 08/15/2040 q | 2,185 | 2,238 | ||||||
Allied World Assurance | ||||||||
7.500%, 08/01/2016 ¬ | 2,510 | 2,779 | ||||||
Genworth Financial | ||||||||
6.515%, 05/22/2018 | 2,640 | 2,683 | ||||||
Hartford Financial Services Group | ||||||||
6.000%, 01/15/2019 | 3,535 | 3,684 | ||||||
Liberty Mutual Group | ||||||||
7.000%, 03/15/2037 n q r | 1,705 | 1,532 | ||||||
Lincoln National | ||||||||
8.750%, 07/01/2019 | 2,395 | 2,996 | ||||||
6.050%, 04/20/2067 r | 1,620 | 1,494 | ||||||
MetLife | ||||||||
6.750%, 06/01/2016 | 1,600 | 1,856 | ||||||
MetLife Capital Trust IV | ||||||||
7.875%, 12/15/2067 n r | 2,220 | 2,348 | ||||||
Pacific Life Insurance | ||||||||
6.000%, 02/10/2020 n q | 840 | 883 | ||||||
Prudential Financial | ||||||||
5.500%, 03/15/2016 | 1,650 | 1,766 | ||||||
7.375%, 06/15/2019 | 2,100 | 2,476 | ||||||
5.900%, 03/17/2036 | 1,555 | 1,577 | ||||||
Unum Group | ||||||||
5.625%, 09/15/2020 q | 1,830 | 1,837 | ||||||
ZFS Finance USA Trust V | ||||||||
6.500%, 05/09/2067 n r | 1,860 | 1,813 | ||||||
31,962 | ||||||||
Natural Gas – 1.1% | ||||||||
Energy Transfer Equity | ||||||||
7.500%, 10/15/2020 | 1,335 | 1,375 | ||||||
Kinder Morgan Energy Partners | ||||||||
6.950%, 01/15/2038 | 1,920 | 2,087 | ||||||
NGPL Pipeco | ||||||||
7.119%, 12/15/2017 n | 1,585 | 1,735 | ||||||
Southern Union | ||||||||
7.200%, 11/01/2066 r | 545 | 502 | ||||||
Transocean | ||||||||
6.000%, 03/15/2018 q ¬ | 1,595 | 1,675 | ||||||
7,374 | ||||||||
Real Estate – 2.6% | ||||||||
Boston Properties | ||||||||
4.125%, 05/15/2021 | 3,050 | 2,892 | ||||||
Central China Real Estate | ||||||||
12.250%, 10/20/2015 n ¬ | 825 | 896 | ||||||
Country Garden Holding | ||||||||
11.750%, 09/10/2014 n ¬ | 1,710 | 1,890 | ||||||
Health Care Properties – REIT | ||||||||
6.300%, 09/15/2016 | 1,725 | 1,858 | ||||||
Prologis – REIT | ||||||||
6.875%, 03/15/2020 | 3,080 | 3,270 | ||||||
Shimao Property Holdings | ||||||||
8.000%, 12/01/2016 n ¬ | 620 | 612 | ||||||
Sigma Capital | ||||||||
9.000%, 04/30/2015 ¬ | 1,029 | 1,094 | ||||||
Simon Property Group – REIT | ||||||||
5.650%, 02/01/2020 q | 1,825 | 1,974 | ||||||
Vornado Realty – REIT | ||||||||
4.250%, 04/01/2015 | 2,975 | 3,003 | ||||||
17,489 | ||||||||
Sovereign – 8.3% | ||||||||
Australian Government | ||||||||
5.750%, 04/15/2012 ¬ | AUD 7,010 | 7,240 | ||||||
4.500%, 04/15/2020 ¬ | AUD 7,350 | 6,963 | ||||||
Canadian Government | ||||||||
1.500%, 03/01/2012 ¬ | CAD 7,200 | 7,245 | ||||||
3.750%, 06/01/2019 ¬ | CAD 7,000 | 7,419 | ||||||
Norwegian Government | ||||||||
6.000%, 05/16/2011 ¬ | NOK 21,000 | 3,647 | ||||||
6.500%, 05/15/2013 ¬ | NOK 14,500 | 2,710 | ||||||
Republic of Argentina | ||||||||
8.750%, 06/02/2017 ¬ | $ | 1,150 | 1,184 | |||||
Republic of Germany | ||||||||
2.250%, 04/10/2015 ¬ | EUR 11,000 | 15,037 | ||||||
Republic of Indonesia | ||||||||
5.875%, 03/13/2020 n q ¬ | $ | 1,730 | 1,899 | |||||
Ukraine Government | ||||||||
7.750%, 09/23/2020 n q ¬ | 1,250 | 1,272 | ||||||
United Mexican States | ||||||||
5.750%, 10/12/2110 ¬ | 2,200 | 1,952 | ||||||
56,568 | ||||||||
Technology – 0.5% | ||||||||
Avnet | ||||||||
5.875%, 06/15/2020 | 845 | 848 | ||||||
CDW LLC/CDW Finance | ||||||||
8.000%, 12/15/2018 n q | 1,100 | 1,122 | ||||||
Seagate | ||||||||
6.875%, 05/01/2020 n ¬ | 1,360 | 1,299 | ||||||
3,269 | ||||||||
Transportation – 2.5% | ||||||||
Air Canada | ||||||||
9.250%, 08/01/2015 n q ¬ | 1,105 | 1,160 | ||||||
America West Air | ||||||||
8.057%, 01/02/2022 q | 1,308 | 1,383 | ||||||
Avis Budget Car Rental | ||||||||
7.750%, 05/15/2016 | 1,450 | 1,479 | ||||||
Continental Airlines | ||||||||
7.339%, 04/19/2014 | 2,059 | 2,060 |
Nuveen Investments | 63 |
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Hapag-Lloyd | ||||||||
9.750%, 10/15/2017 n ¬ | $ | 1,250 | $ | 1,353 | ||||
Hertz | ||||||||
8.875%, 01/01/2014 | 1,750 | 1,789 | ||||||
7.375%, 01/15/2021 n q | 900 | 909 | ||||||
Martin Midstream Partners | ||||||||
8.875%, 04/01/2018 | 1,350 | 1,391 | ||||||
Navios Maritime Acquisition | ||||||||
8.625%, 11/01/2017 n ¬ | 1,350 | 1,380 | ||||||
Northwest Airlines | ||||||||
7.027%, 11/01/2019 | 1,080 | 1,101 | ||||||
United Airlines | ||||||||
Series 2007-1, Class A | ||||||||
6.636%, 01/02/2024 | 1,303 | 1,307 | ||||||
Series 2009-1 | ||||||||
10.400%, 05/01/2018 | 1,416 | 1,636 | ||||||
16,948 | ||||||||
Total Corporate Bonds | ||||||||
(Cost $380,898) | 405,243 | |||||||
U.S. Government Agency Mortgage-Backed Securities – 18.2% | ||||||||
Adjustable Rate r – 1.1% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
2.958%, 10/01/2029, # 1L0117 | 665 | 667 | ||||||
2.510%, 07/01/2030, # 847240 | 598 | 624 | ||||||
2.409%, 05/01/2033, # 847411 | 435 | 452 | ||||||
5.808%, 07/01/2036, # 1K1238 | 1,394 | 1,466 | ||||||
2.834%, 05/01/2038, # 84-8289 | 3,112 | 3,248 | ||||||
Federal National Mortgage Association Pool | ||||||||
2.384%, 09/01/2033, # 725553 | 247 | 258 | ||||||
2.508%, 01/01/2035, # 745548 | 624 | 651 | ||||||
7,366 | ||||||||
Fixed Rate – 17.1% | ||||||||
Federal Home Loan Mortgage Corporation Pool | ||||||||
6.500%, 07/01/2031, # A17212 | 1,207 | 1,357 | ||||||
7.000%, 08/01/2037, # H09059 | 653 | 735 | ||||||
Federal National Mortgage Association Pool | ||||||||
5.500%, 02/01/2025, # 255628 | 1,355 | 1,464 | ||||||
5.500%, 10/01/2025, # 255956 | 4,847 | 5,215 | ||||||
6.000%, 04/01/2032, # 745101 | 425 | 458 | ||||||
5.500%, 06/01/2033, # 843435 | 576 | 620 | ||||||
5.000%, 11/01/2033, # 725027 | 4,661 | 4,930 | ||||||
5.000%, 03/01/2034, # 725205 | 698 | 739 | ||||||
5.000%, 03/01/2034, # 725250 | 604 | 639 | ||||||
6.000%, 03/01/2034, # 745324 | 904 | 995 | ||||||
5.500%, 09/01/2034, # 725773 | 995 | 1,071 | ||||||
6.500%, 04/01/2036, # 831377 | 777 | 870 | ||||||
6.500%, 04/01/2036, # 852909 | 393 | 440 | ||||||
6.500%, 08/01/2036, # 893318 | 977 | 1,095 | ||||||
6.500%, 09/01/2036, # 897129 | 1,991 | 2,231 | ||||||
5.500%, 04/01/2037, # 918883 | 934 | 1,000 | ||||||
6.000%, 06/01/2037, # 944340 | 986 | 1,072 | ||||||
6.000%, 09/01/2037, # 256890 | 1,167 | 1,263 | ||||||
5.500%, 05/01/2038, # 889618 | 1 | 1 | ||||||
5.500%, 07/01/2038, # 985344 | 2 | 2 | ||||||
6.000%, 08/01/2038, # 257307 | 1,424 | 1,550 | ||||||
5.500%, 11/01/2038, # AA0005 | 3,967 | 4,247 | ||||||
5.500%, 12/01/2038, # AA0889 | 3,833 | 4,103 | ||||||
4.500%, 09/01/2039, # AC1877 | 5,101 | 5,241 | ||||||
6.000%, 09/01/2039, # AD0205 | 4,396 | 4,783 | ||||||
4.500%, 12/01/2039, # 932323 | 5,899 | 6,062 | ||||||
5.500%, 01/15/2040 ¬ | 6,300 | 6,740 | ||||||
4.000%, 11/01/2040, # MA0583 | 10,446 | 10,402 | ||||||
4.000%, 12/01/2040, # AB1959 | 5,237 | 5,215 | ||||||
4.000%, 01/15/2041 ¬ | 13,770 | 13,697 | ||||||
4.500%, 01/15/2041 ¬ | 27,420 | 28,144 | ||||||
116,381 | ||||||||
Total U.S. Government Agency Mortgage-Backed Securities | ||||||||
(Cost $121,384) | 123,747 | |||||||
Commercial Mortgage-Backed Securities – 9.4% | ||||||||
Americold Trust | ||||||||
6.811%, 01/14/2029 n | 3,470 | 3,463 | ||||||
Bear Stearns Commercial Mortgage Securities | ||||||||
Series 2005-PW10, Class A4 | ||||||||
5.405%, 12/11/2040 r | 3,325 | 3,552 | ||||||
Series 2007-T28, Class D | ||||||||
5.988%, 09/11/2042 n ¥ r | 1,780 | 776 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||
Series 2005-CD1, Class A4 | ||||||||
5.222%, 07/15/2044 r | 2,440 | 2,626 | ||||||
Series 2007-CD4, Class A2B | ||||||||
5.205%, 12/11/2049 | 1,360 | 1,398 | ||||||
Series 2007-CD5, Class A4 | ||||||||
5.886%, 11/15/2044 r | 5,650 | 6,029 | ||||||
Commercial Mortgage Pass-Through Certificates | ||||||||
5.449%, 02/05/2019 n | 1,805 | 1,813 | ||||||
Extended Stay America Trust | ||||||||
4.860%, 11/05/2027 n | 3,630 | 3,558 | ||||||
Greenwich Capital Commercial Funding | ||||||||
5.117%, 04/10/2037 | 2,944 | 2,967 | ||||||
GS Mortgage Securities II | ||||||||
Series 2006-GG6, Class A2 | ||||||||
5.506%, 04/10/2038 | 2,920 | 2,935 | ||||||
Series 2006-GG8, Class A4 | ||||||||
5.560%, 11/10/2039 | 3,135 | 3,325 | ||||||
JPMorgan Chase Commercial Mortgage Securities | ||||||||
Series 2007-CB18, Class A4 | ||||||||
5.440%, 06/12/2047 | 3,215 | 3,369 | ||||||
Series 2010-C1, Class A1 | ||||||||
3.853%, 06/15/2043 n | 4,125 | 4,226 | ||||||
LB-UBS Commercial Mortgage Trust | ||||||||
Series 2004-C2, Class A4 | ||||||||
4.367%, 03/15/2036 | 4,000 | 4,159 | ||||||
Series 2005-C7, Class A2 | ||||||||
5.103%, 11/15/2030 | 1,593 | 1,594 | ||||||
Merrill Lynch Mortgage Trust | ||||||||
5.690%, 02/12/2051 | 5,540 | 5,783 | ||||||
Morgan Stanley Capital I | ||||||||
Series 2003-IQ6, Class A4 | ||||||||
4.970%, 12/15/2041 | 5,112 | 5,447 | ||||||
Series 2006-IQ12, Class A4 | ||||||||
5.332%, 12/15/2043 | 4,025 | 4,265 | ||||||
OBP Depositor Trust | ||||||||
4.646%, 07/15/2045 n | 2,880 | 2,939 | ||||||
Total Commercial Mortgage-Backed Securities | ||||||||
(Cost $61,329) | 64,224 | |||||||
64 | Nuveen Investments |
Total Return Bond Fund (continued) | ||||||||
DESCRIPTION | PAR | FAIR VALUE > | ||||||
Asset-Backed Securities – 5.6% | ||||||||
Automotive – 1.2% | ||||||||
Fifth Third Auto Trust | ||||||||
4.810%, 01/15/2013 | $ | 2,319 | $ | 2,361 | ||||
Santander Drive Auto Receivables Trust | ||||||||
1.360%, 03/15/2013 r | 5,650 | 5,656 | ||||||
8,017 | ||||||||
Credit Cards – 2.4% | ||||||||
Capital One Multi-Asset Execution Trust | ||||||||
4.850%, 02/18/2014 | 4,515 | 4,571 | ||||||
Chase Issuance Trust | ||||||||
1.780%, 04/15/2014 r | 3,195 | 3,248 | ||||||
Citibank Credit Card Issuance Trust | ||||||||
2.010%, 03/15/2014 r | 3,270 | 3,328 | ||||||
Discover Card Master Trust | ||||||||
5.650%, 03/16/2020 | 3,655 | 4,147 | ||||||
Discover Card Master Trust I | ||||||||
0.510%, 06/18/2013 r | 790 | 790 | ||||||
16,084 | ||||||||
Home Equity – 1.3% | ||||||||
GRMT Mortgage Loan Trust | ||||||||
8.272%, 07/20/2031 n r ¥ | 112 | 104 | ||||||
RBSSP Resecuritization Trust | ||||||||
Series 2010-11, Class 2A1 | ||||||||
0.431%, 03/26/2037 n r | 2,872 | 2,744 | ||||||
Series 2010-4, Class 1A1 | ||||||||
0.371%, 03/26/2036 n r | 3,992 | 3,711 | ||||||
Renaissance Home Equity Loan Trust | ||||||||
5.140%, 11/25/2035 r | 2,495 | 2,219 | ||||||
8,778 | ||||||||
Manufactured Housing – 0.2% | ||||||||
Green Tree Financial | ||||||||
Series 1996-8, Class A7 | ||||||||
8.050%, 10/15/2027 r | 121 | 128 | ||||||
Series 2008-MH1, Class A1 | ||||||||
7.000%, 04/25/2038 n | 1,198 | 1,225 | ||||||
Origen Manufactured Housing | ||||||||
4.490%, 05/15/2018 | 11 | 11 | ||||||
1,364 | ||||||||
Other – 0.5% | ||||||||
Henderson Receivables | ||||||||
3.820%, 12/15/2048 n r | 2,021 | 1,937 | ||||||
Ocwen Advance Receivables Backed Notes | ||||||||
4.140%, 07/15/2023 n | 1,745 | 1,754 | ||||||
3,691 | ||||||||
Total Asset-Backed Securities | ||||||||
(Cost $36,416) | 37,934 | |||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities – 3.1% | ||||||||
Adjustable Rate r – 1.2% | ||||||||
Countrywide Home Loans | ||||||||
4.986%, 02/25/2034 | 799 | 793 | ||||||
FDIC Structured Sale Guaranteed Notes | ||||||||
0.806%, 02/25/2048 n | 3,969 | 3,975 | ||||||
GSR Mortgage Loan Trust | ||||||||
4.823%, 01/25/2035 ¥ | 1,981 | 317 | ||||||
Indymac Index Mortgage Loan Trust | ||||||||
2.821%, 03/25/2035 | 538 | 459 | ||||||
JPMorgan Alternative Loan Trust | ||||||||
Series 2007-S1, Class A1 | ||||||||
0.541%, 04/25/2047 | 1,993 | 1,504 | ||||||
JPMorgan Mortgage Trust | ||||||||
5.962%, 01/25/2037 | 1,541 | 193 | ||||||
Wachovia Mortgage Loan Trust | ||||||||
2.995%, 10/20/2035 | 828 | 648 | ||||||
7,889 | ||||||||
Fixed Rate – 1.9% | ||||||||
Bank of America Alternative Loan Trust | ||||||||
6.456%, 04/25/2037 ¥ | 2,078 | 495 | ||||||
Countrywide Alternative Loan Trust | ||||||||
Series 2004-24CB, Class 2A1 | ||||||||
5.000%, 11/25/2019 | 902 | 932 | ||||||
Series 2006-19CB, Class A15 | ||||||||
6.000%, 08/25/2036 | 1,176 | 1,059 | ||||||
GMAC Mortgage Corporation Loan Trust | ||||||||
4.250%, 07/25/2040 n | 1,423 | 1,436 | ||||||
GSMPS Mortgage Loan Trust | ||||||||
6.815%, 03/25/2043 ¥ | 2,531 | 1,774 | ||||||
GSR Mortgage Loan Trust | ||||||||
5.742%, 05/25/2035 ¥ | 2,120 | 1,228 | ||||||
Impac Secured Assets | ||||||||
8.000%, 10/25/2030 ¥ | 2,234 | 1,969 | ||||||
Lehman Mortgage Trust | ||||||||
6.183%, 07/25/2047 | 2,217 | 2,114 | ||||||
Residential Accredit Loans | ||||||||
5.500%, 08/25/2035 | 1,205 | 1,129 | ||||||
Washington Mutual Mortgage Pass-Through Certificates | ||||||||
6.395%, 08/25/2038 | 1,082 | 1,118 | ||||||
13,254 | ||||||||
Total Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | ||||||||
(Cost $27,696) | 21,143 | |||||||
Nuveen Investments | 65 |
Schedule of Investments December 31, 2010 (unaudited), all dollars are rounded to thousands (000)
Total Return Bond Fund (continued) |
| |||||||
DESCRIPTION | PAR/SHARES | FAIR VALUE Å | ||||||
U.S. Government & Agency Securities – 2.1% |
| |||||||
U.S. Treasuries – 2.1% | ||||||||
U.S. Treasury Bond | $ | 1,075 | $ | 990 | ||||
U.S. Treasury Note | 13,283 | 13,601 | ||||||
Total U.S. Government & Agency Securities | ||||||||
(Cost $15,280) | 14,591 | |||||||
Preferred Stocks – 0.5% |
| |||||||
Banking – 0.2% | ||||||||
Bank of America | 9,000 | 233 | ||||||
Bank of America | 5,000 | 89 | ||||||
Goldman Sachs Group | 43,000 | 904 | ||||||
1,226 | ||||||||
Insurance – 0.3% | ||||||||
Aspen Insurance Holdings | 84,500 | 2,045 | ||||||
Sovereign – 0.0% | ||||||||
Fannie Mae | 217,000 | 121 | ||||||
Total Preferred Stocks | ||||||||
(Cost $8,364) | 3,392 | |||||||
Closed-End Funds – 0.2% | ||||||||
Blackrock Credit Allocation Income Trust | 36,000 | 436 | ||||||
Highland Credit Strategies Fund | 23,000 | 174 | ||||||
ING Clarion Global Real Estate Income Fund | 40,000 | 310 | ||||||
Pimco Income Strategy Fund | 2,000 | 23 | ||||||
Pioneer Diversified High Income Trust | 16,000 | 323 | ||||||
Total Closed-End Funds | ||||||||
(Cost $1,197) | 1,266 | |||||||
Convertible Security – 0.1% | ||||||||
Chesapeake Energy | ||||||||
Series 2005B | ||||||||
(Cost $621) | 7,300 | 675 | ||||||
Municipal Bond – 0.1% | ||||||||
Provincia De Cordoba | ||||||||
12.375% 08/17/2017 n ¬ | ||||||||
(Cost $566) | 550 | 572 | ||||||
Short-Term Investments – 7.6% |
| |||||||
Money Market Fund – 7.3% | ||||||||
First American Prime Obligations Fund, Class Z | 49,959,912 | 49,960 | ||||||
U.S. Treasury Obligations – 0.3% | ||||||||
U.S. Treasury Bills ¨ | ||||||||
0.114%, 02/10/2011 | 1,190 | 1,190 | ||||||
0.134%, 04/07/2011 | 545 | 545 | ||||||
1,735 | ||||||||
Total Short-Term Investments | ||||||||
(Cost $51,695) | 51,695 | |||||||
Investment Purchased with Proceeds from Securities Lending – 10.9% |
| |||||||
Mount Vernon Securities Lending Prime Portfolio | ||||||||
(Cost $73,879) | 73,879,052 | 73,879 | ||||||
Total Investments – 117.3% | ||||||||
(Cost $779,325) | 798,361 | |||||||
Other Assets and Liabilities, Net – (17.3)% | (117,643 | ) | ||||||
Total Net Assets – 100.0% | $ | 680,718 | ||||||
Å | Securities are valued in accordance with procedures described in note 1 in Notes to Financial Statements. |
n | Security purchased within the terms of a private placement memorandum, exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other “qualified institutional buyers.” |
q | This security or a portion of this security is out on loan at December 31, 2010. Total loaned securities had a fair value of $72,463 at December 31, 2010. |
r | Variable Rate Security – The rate shown is the rate in effect as of December 31, 2010. |
¬ | Foreign security fair values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollars unless otherwise noted. As of December 31, 2010, the fair value of foreign securities was $136,124 or 20.0% of total net assets. |
« | Security purchased on a when-issued/delayed delivery basis. |
W | Security considered illiquid. |
Å | Investment in affiliated security. |
W | The rate shown is the annualized seven-day effective yield as of December 31, 2010. |
¨ | Security has been deposited as initial margin on open futures contracts. Yield shown is the annualized effective yield as of December 31, 2010. |
† | The fund may loan securities representing up to one third of the fair value of its total assets (which includes collateral for securities on loan) to broker dealers, banks, or other institutional borrowers of securities. The fund maintains collateral equal to at least 100% of the fair value of the securities loaned. The adequacy of the collateral is monitored on a daily basis. The cash collateral received by the fund is invested in this affiliated money market fund. |
REIT | – Real Estate Investment Trust |
66 | Nuveen Investments |
Total Return Bond Fund (concluded) | ||||||||||||||||
Schedule of Open Futures Contracts | ||||||||||||||||
Description | Settlement Month | Number of Contracts Purchased (Sold) | Notional Contract Value | Unrealized Appreciation (Depreciation) | ||||||||||||
90 Day Eurodollar Futures | March 2013 | 216 | $ | 211,540 | $ | (3 | ) | |||||||||
Mexican Peso Currency Futures | March 2011 | 183 | 7,373 | 69 | ||||||||||||
U.S. Treasury 5 Year Note Futures | March 2011 | (60 | ) | (7,063 | ) | (2 | ) | |||||||||
U.S. Treasury 10 Year Note Futures | March 2011 | (193 | ) | (23,244 | ) | (171 | ) | |||||||||
U.S. Treasury Long Bond Futures | March 2011 | (180 | ) | (21,983 | ) | 520 | ||||||||||
$ | 413 | |||||||||||||||
Schedule of Open Forward Foreign Currency Exchange Contracts | ||||||||||||||||||||
Currency Contracts to Deliver | Amount (Local Currency) | In Exchange For Currency | Amount (Local Currency) | Settlement Date | Unrealized Depreciation | |||||||||||||||
Euro | 11,400 | U.S. Dollar | 15,084 | 01/14/2011 | $ | (150 | ) |
Credit Default Swap Contracts
Credit Default Swaps on Credit Indices
Sell Protection1
Counterparty | Reference Index | Receive Fixed Rate | Expiration Date | Notional Amount2 | Unrealized Appreciation | |||||||||||||||
JPMorgan Chase | Markit CDX NA HY 15 | 5.000 | % | 12/20/2015 | $ | 17,300 | $ | 360 |
1 | If the fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the reference entity or underlying securities comprising the reference index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference entity or underlying securities comprising the reference index. |
2 | The maximum potential amount the fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
Interest Rate Swap Contracts | ||||||||||||||||||||||||
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Expiration Date | Notional Amount | Unrealized Depreciation | ||||||||||||||||||
UBS | 3-Month LIBOR | Receive | 2.056 | % | 07/01/2015 | $ | 41,000 | $ | (558 | ) |
See accompanying notes to financial statements.
Nuveen Investments | 67 |
Total Return Bond Fund (concluded)
Statements of Assets and Liabilities | December 31, 2010 (unaudited), all dollars and shares are rounded to thousands (000), except for per share data |
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | ||||||||||
Unaffiliated investments, at cost | $ | 1,126,359 | $ | 459,635 | $192,964 | |||||||
Affiliated money market fund, at cost(a) | 45,495 | 16,167 | 3,508 | |||||||||
Affiliated investment purchased with proceeds from securities lending, at cost(a) | 150,792 | 117,338 | 10,188 | |||||||||
ASSETS: | ||||||||||||
Unaffiliated investments, at fair value* | $ | 1,169,530 | $ | 471,352 | $198,993 | |||||||
Affiliated money market fund, at fair value(a) | 45,495 | 16,167 | 3,508 | |||||||||
Affiliated investment purchased with proceeds from securities lending, at fair value(a) | 150,792 | 117,338 | 10,188 | |||||||||
Cash | 49 | 337 | — | |||||||||
Receivables: | ||||||||||||
Dividends and interest | 10,694 | 9,361 | 1,640 | |||||||||
Investments sold | 12,367 | 455 | — | |||||||||
Fund shares sold | 94 | 488 | 417 | |||||||||
Variation margin on futures contracts | — | — | 14 | |||||||||
Credit default swap premiums paid | — | — | — | |||||||||
Unrealized appreciation on credit default swaps | — | — | — | |||||||||
Other assets | 28 | 27 | 39 | |||||||||
Total assets | 1,389,049 | 615,525 | 214,799 | |||||||||
LIABILITIES: | ||||||||||||
Bank overdraft | — | — | 3 | |||||||||
Unrealized depreciation on interest rate swaps | 2,664 | — | 320 | |||||||||
Unrealized depreciation on forward foreign currency exchange contracts Payables: | — | — | 18 | |||||||||
Dividends | 2,557 | 2,551 | 157 | |||||||||
Return of securities loaned | 150,792 | 117,338 | 10,188 | |||||||||
Investments purchased | 55,318 | 1,172 | — | |||||||||
Fund shares redeemed | 1,059 | 475 | 43 | |||||||||
Variation margin on futures contracts | 434 | — | — | |||||||||
To affiliates | 709 | 342 | 92 | |||||||||
Distribution and shareholder servicing fees | 25 | 15 | 8 | |||||||||
Other liabilities | 12 | 12 | 13 | |||||||||
Total liabilities | 213,570 | 121,905 | 10,842 | |||||||||
Net assets | $ | 1,175,479 | $ | 493,620 | $203,957 | |||||||
COMPOSITION OF NET ASSETS: | ||||||||||||
Capital paid-in | 1,171,549 | 492,787 | 212,134 | |||||||||
Undistributed (Over-distribution of) net investment income | 2,603 | 132 | 356 | |||||||||
Accumulated net realized gain (loss) | (39,918 | ) | (10,919 | ) | (14,264 | ) | ||||||
Net unrealized appreciation (depreciation) | 41,245 | 11,620 | 5,731 | |||||||||
Net assets | $ | 1,175,479 | $ | 493,620 | $203,957 | |||||||
* Including securities loaned, at fair value | $ | 148,043 | $ | 114,657 | $ 9,237 |
(a) | Effective January 1, 2011, this investment is no longer affiliated. |
See accompanying notes to financial statements.
68 Nuveen Investments
Total Return Bond Fund (concluded)
Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | |||||||||||
$116,713 | $714,778 | $791,538 | $655,486 | |||||||||||
2,226 | 11,567 | 19,228 | 49,960 | |||||||||||
| 18,108 |
| 109,487 | 84,294 | 73,879 | |||||||||
$119,395 | $744,967 | $805,561 | $674,522 | |||||||||||
2,226 | 11,567 | 19,228 | 49,960 | |||||||||||
| 18,108 |
| 109,487 | 84,294 | 73,879 | |||||||||
— | 2 | 183 | — | |||||||||||
854 | 6,934 | 6,019 | 7,064 | |||||||||||
56 | 89 | 190 | 71 | |||||||||||
32 | 165 | 892 | 320 | |||||||||||
61 | 193 | — | — | |||||||||||
— | — | 24 | 179 | |||||||||||
— | — | 467 | 360 | |||||||||||
23 | 20 | 27 | 31 | |||||||||||
140,755 | 873,424 | 916,885 | 806,386 | |||||||||||
16 | — | — | — | |||||||||||
— | 1,560 | 1,142 | 558 | |||||||||||
| — |
| — | — | 150 | |||||||||
228 | 1,598 | 1,131 | 1,738 | |||||||||||
18,108 | 109,487 | 84,294 | 73,879 | |||||||||||
— | — | — | 48,420 | |||||||||||
521 | 143 | 275 | 272 | |||||||||||
— | — | 293 | 211 | |||||||||||
60 | 451 | 417 | 414 | |||||||||||
4 | 3 | 15 | 12 | |||||||||||
17 | 15 | 10 | 14 | |||||||||||
18,954 | 113,257 | 87,577 | 125,668 | |||||||||||
$121,801 | $760,167 | $829,308 | $680,718 | |||||||||||
130,652 | 746,960 | 841,502 | 734,338 | |||||||||||
(265) | 524 | 471 | 2,082 | |||||||||||
(11,069) | (15,005 | ) | (28,054 | ) | (74,826 | ) | ||||||||
2,483 | 27,688 | 15,389 | 19,124 | |||||||||||
$121,801 | $760,167 | $829,308 | $680,718 | |||||||||||
$ 17,789 | $107,346 | $ 82,544 | $ 72,463 |
See accompanying notes to financial statements.
Nuveen Investments 69
Statements of Assets and Liabilities (Unaudited) continued
Total Return Bond Fund (concluded)
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | ||||||||||
Class A: | ||||||||||||
Net assets | $ | 92,096 | $ | 31,749 | $ | 10,453 | ||||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 8,118 | 3,551 | 1,001 | |||||||||
Net asset value and redemption price per share | $ | 11.35 | $ | 8.94 | $ | 10.45 | ||||||
Maximum offering price per share | $ | 11.85 | $ | 9.34 | $ | 10.91 | ||||||
Class B:(See Note 1) | ||||||||||||
Net assets | $ | 2,653 | $ | 1,541 | $ | — | ||||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 236 | 174 | — | |||||||||
Net asset value, offering price, and redemption price per share | $ | 11.24 | $ | 8.87 | $ | — | ||||||
Class C: | ||||||||||||
Net assets | $ | 3,640 | $ | 9,181 | $ | 7,143 | ||||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 322 | 1,032 | 690 | |||||||||
Net asset value per share | $ | 11.30 | $ | 8.90 | $ | 10.35 | ||||||
Class R:(See Note 1) | ||||||||||||
Net assets | $ | 489 | $ | 340 | $ | 5 | ||||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 43 | 37 | 1 | |||||||||
Net asset value, offering price, and redemption price per share | $ | 11.40 | $ | 9.11 | $ | 10.36 | ||||||
Class Y:(See Note 1) | ||||||||||||
Net assets | $ | 1,076,601 | $ | 450,809 | $ | 186,356 | ||||||
Shares issued and outstanding ($0.0001 par value – 2 billion authorized) | 94,930 | 50,415 | 17,810 | |||||||||
Net asset value, offering price, and redemption price per share | $ | 11.34 | $ | 8.94 | $ | 10.46 |
See accompanying notes to financial statements.
70 Nuveen Investments
Total Return Bond Fund (concluded)
Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | |||||||||||
$17,072 | $ | 24,874 | $ | 87,948 | $ | 33,298 | ||||||||
| 1,950 | | 2,393 | 8,774 | 3,144 | |||||||||
$ 8.76 | $ | 10.39 | $ | 10.02 | $ | 10.59 | ||||||||
$ 8.96 | $ | 10.63 | $ | 10.25 | $ | 11.06 | ||||||||
$ — | $ | — | $ | — | $ | 1,343 | ||||||||
— | — | — | 127 | |||||||||||
$ — | $ | — | $ | — | $ | 10.53 | ||||||||
$ 1,736 | $ | — | $ | 4,946 | $ | 7,909 | ||||||||
198 | — | 492 | 752 | |||||||||||
$ 8.76 | $ | — | $ | 10.05 | $ | 10.52 | ||||||||
$ 490 | $ | — | $ | — | $ | 1,149 | ||||||||
56 | — | — | 108 | |||||||||||
$ 8.75 | $ | — | $ | — | $ | 10.63 | ||||||||
$102,503 | $ | 735,293 | $ | 736,414 | $ | 637,019 | ||||||||
11,700 | 71,030 | 73,433 | 60,202 | |||||||||||
$ 8.76 | $ | 10.35 | $ | 10.03 | $ | 10.58 |
See accompanying notes to financial statements.
Nuveen Investments 71
Total Return Bond Fund (concluded)
Statements of Operations | For the six-month period ended December 31, 2010 (unaudited), all dollars are rounded to thousands (000) |
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | ||||||||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||||||||||
Interest from unaffiliated investments | $30,500 | $18,053 | $2,055 | $2,399 | $15,990 | $12,215 | $17,995 | |||||||||||||||||||||
Dividends from unaffiliated investments | — | 1,159 | 29 | — | — | — | 152 | |||||||||||||||||||||
Dividends from affiliated money market fund | 25 | 6 | 1 | — | 1 | 2 | 26 | |||||||||||||||||||||
Less: Foreign taxes withheld | — | (6 | ) | — | — | — | — | — | ||||||||||||||||||||
Securities lending income | 76 | 175 | 17 | 11 | 44 | 40 | 33 | |||||||||||||||||||||
Total investment income | 30,601 | 19,387 | 2,102 | 2,410 | 16,035 | 12,257 | 18,206 | |||||||||||||||||||||
EXPENSES: | ||||||||||||||||||||||||||||
Investment advisory fees | 3,235 | 1,550 | 480 | 417 | 1,975 | 1,967 | 2,157 | |||||||||||||||||||||
Administration fees | 1,489 | 521 | 225 | 204 | 910 | 918 | 836 | |||||||||||||||||||||
Transfer agent fees | 105 | 65 | 51 | 56 | 32 | 65 | 61 | |||||||||||||||||||||
Custodian fees | 32 | 11 | 5 | 4 | 20 | 20 | 18 | |||||||||||||||||||||
Professional fees | 26 | 26 | 26 | 24 | 26 | 26 | 28 | |||||||||||||||||||||
Registration fees | 26 | 26 | 25 | 25 | 17 | 24 | 27 | |||||||||||||||||||||
Postage and printing fees | 26 | 10 | 3 | 4 | 16 | 17 | 13 | |||||||||||||||||||||
Directors’ fees | 16 | 16 | 16 | 16 | 16 | 16 | 16 | |||||||||||||||||||||
Other expenses | 13 | 11 | 10 | 10 | 11 | 11 | 12 | |||||||||||||||||||||
Distribution and shareholder servicing fees: | ||||||||||||||||||||||||||||
Class A | 119 | 38 | 12 | 23 | 33 | 111 | 41 | |||||||||||||||||||||
Class B (See Note 1) | 16 | 8 | — | — | — | — | 7 | |||||||||||||||||||||
Class C | 20 | 42 | 37 | 10 | — | 20 | 38 | |||||||||||||||||||||
Class R (See Note 1) | 1 | 1 | 3 | 1 | — | — | 2 | |||||||||||||||||||||
Total expenses | 5,124 | 2,325 | 893 | 794 | 3,056 | 3,195 | 3,256 | |||||||||||||||||||||
Less: Fee waivers | (461 | ) | (359 | ) | (267 | ) | (270 | ) | (278 | ) | (760 | ) | (511 | ) | ||||||||||||||
Less: Expense reimbursement from Regulatory Settlement | (102 | ) | — | — | (26 | ) | (15 | ) | — | — | ||||||||||||||||||
Net expenses | 4,561 | 1,966 | 626 | 498 | 2,763 | 2,435 | 2,745 | |||||||||||||||||||||
Net investment income | 26,040 | 17,421 | 1,476 | 1,912 | 13,272 | 9,822 | 15,461 | |||||||||||||||||||||
REALIZED AND UNREALIZED GAINS (LOSSES): | ||||||||||||||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||||||||||||||
Investments | 28,665 | 12,578 | 1,510 | 2,406 | 9,526 | 1,875 | 17,392 | |||||||||||||||||||||
Futures contracts | (7,385 | ) | 529 | (97 | ) | 68 | (61 | ) | (4,119 | ) | (3,628 | ) | ||||||||||||||||
Swaps | (1,084 | ) | — | (99 | ) | — | (685 | ) | (319 | ) | 1,875 | |||||||||||||||||
Options written | — | — | — | — | — | — | 49 | |||||||||||||||||||||
Forward foreign currency exchange contracts and foreign currency | — | — | (1 | ) | — | — | — | 190 | ||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||||||||||||||||||
Investments | (9,103 | ) | 19,350 | 815 | (1,999 | ) | (3,582 | ) | 818 | 2,996 | ||||||||||||||||||
Futures contracts | 2,855 | (276 | ) | 170 | (257 | ) | (1,201 | ) | 3,361 | 2,621 | ||||||||||||||||||
Swaps | (125 | ) | — | (8 | ) | — | (68 | ) | 397 | 122 | ||||||||||||||||||
Forward foreign currency exchange contracts and foreign currency | — | — | (13 | ) | — | — | — | (121 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) | 13,823 | 32,181 | 2,277 | 218 | 3,929 | 2,013 | 21,496 | |||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | $39,863 | $49,602 | $3,753 | $2,130 | $17,201 | $11,835 | $36,957 |
See accompanying notes to financial statements.
72 Nuveen Investments
Total Return Bond Fund (concluded)
(This page intentionally left blank.)
Nuveen Investments 73
Total Return Bond Fund (concluded)
Statements of Changes in Net Assets (Unaudited) all dollars are rounded to thousands (000)
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | ||||||||||||||||||||||
Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | |||||||||||||||||||
OPERATIONS: | ||||||||||||||||||||||||
Net investment income | $ | 26,040 | $ | 65,618 | $ | 17,421 | $ | 27,468 | $ | 1,476 | $ | 4,972 | ||||||||||||
Net realized gain (loss) from: | ||||||||||||||||||||||||
Investments | 28,665 | (1,794 | ) | 12,578 | 23,740 | 1,510 | (418 | ) | ||||||||||||||||
Futures contracts | (7,385 | ) | (2,773 | ) | 529 | 52 | (97 | ) | 811 | |||||||||||||||
Swaps | (1,084 | ) | 5,671 | — | — | (99 | ) | 15 | ||||||||||||||||
Options written | — | — | — | — | — | — | ||||||||||||||||||
Forward foreign currency exchange contracts and foreign currency | — | (3 | ) | — | — | (1 | ) | 3 | ||||||||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||||||||||||||
Investments | (9,103 | ) | 157,451 | 19,350 | 13,991 | 815 | 11,283 | |||||||||||||||||
Futures contracts | 2,855 | (967 | ) | (276 | ) | 187 | 170 | (138 | ) | |||||||||||||||
Swaps | (125 | ) | (3,764 | ) | — | — | (8 | ) | (169 | ) | ||||||||||||||
Options written | — | — | — | — | — | — | ||||||||||||||||||
Forward foreign currency exchange contracts and foreign currency | — | — | — | — | (13 | ) | (1 | ) | ||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 39,863 | 219,439 | 49,602 | 65,438 | 3,753 | 16,358 | ||||||||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||||||||||||||||||
Net investment income: | ||||||||||||||||||||||||
Class A | (1,709 | ) | (4,290 | ) | (1,160 | ) | (2,599 | ) | (78 | ) | (192 | ) | ||||||||||||
Class B (See Note 1) | (44 | ) | (201 | ) | (58 | ) | (146 | ) | — | — | ||||||||||||||
Class C | (56 | ) | (150 | ) | (292 | ) | (447 | ) | (44 | ) | (107 | ) | ||||||||||||
Class R (See Note 1) | (8 | ) | (19 | ) | (14 | ) | (24 | ) | (8 | ) | (33 | ) | ||||||||||||
Class Y (See Note 1) | (22,804 | ) | (61,718 | ) | (15,786 | ) | (24,028 | ) | (1,604 | ) | (3,966 | ) | ||||||||||||
Accumulated net realized gains: | ||||||||||||||||||||||||
Class A | — | — | — | — | — | — | ||||||||||||||||||
Class B (See Note 1) | — | — | — | — | — | — | ||||||||||||||||||
Class C | — | — | — | — | — | — | ||||||||||||||||||
Class R (See Note 1) | — | — | — | — | — | — | ||||||||||||||||||
Class Y (See Note 1) | — | — | — | — | — | — | ||||||||||||||||||
Return of capital: | ||||||||||||||||||||||||
Class A | — | — | — | — | — | — | ||||||||||||||||||
Class B (See Note 1) | — | — | — | — | — | — | ||||||||||||||||||
Class C | — | — | — | — | — | — | ||||||||||||||||||
Class R (See Note 1) | — | — | — | — | — | — | ||||||||||||||||||
Class Y (See Note 1) | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (24,621 | ) | (66,378 | ) | (17,310 | ) | (27,244 | ) | (1,734 | ) | (4,298 | ) |
1 | The fund began offering Class C and Class R on October 28, 2009. |
2 | The fund began offering Class C on October 28, 2009. |
See accompanying notes to financial statements.
74 Nuveen Investments
Total Return Bond Fund (concluded)
Intermediate Government Bond Fund1 | Intermediate Term Bond Fund | Short Term Bond Fund2 | Total Return Bond Fund | |||||||||||||||||||||||||||
Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | |||||||||||||||||||||||
$ | 1,912 | $ | 3,209 | $ | 13,272 | $ | 33,185 | $ | 9,822 | $ | 17,985 | $ | 15,461 | $ | 36,869 | |||||||||||||||
2,406 | 336 | 9,526 | (736 | ) | 1,875 | (4,660 | ) | 17,392 | (3,645 | ) | ||||||||||||||||||||
68 | 321 | (61 | ) | 2,078 | (4,119 | ) | (2,779 | ) | (3,628 | ) | (9,664 | ) | ||||||||||||||||||
— | — | (685 | ) | 402 | (319 | ) | 514 | 1,875 | 6,235 | |||||||||||||||||||||
— | — | — | — | — | — | 49 | 1,331 | |||||||||||||||||||||||
| — |
| — | — | — | — | (1 | ) | 190 | (503 | ) | |||||||||||||||||||
| | | ||||||||||||||||||||||||||||
(1,999 | ) | 4,070 | (3,582 | ) | 65,457 | 818 | 22,925 | 2,996 | 95,390 | |||||||||||||||||||||
(257 | ) | 58 | (1,201 | ) | 1,416 | 3,361 | (1,139 | ) | 2,621 | (529 | ) | |||||||||||||||||||
— | — | (68 | ) | (1,311 | ) | 397 | (866 | ) | 122 | (677 | ) | |||||||||||||||||||
— | — | — | — | — | — | — | (88 | ) | ||||||||||||||||||||||
| — |
| — | — | — | — | — | (121 | ) | (7 | ) | |||||||||||||||||||
2,130 | 7,994 | 17,201 | 100,491 | 11,835 | 31,979 | 36,957 | 124,712 | |||||||||||||||||||||||
(215 | ) | (305 | ) | (408 | ) | (1,095 | ) | (926 | ) | (2,624 | ) | (670 | ) | (1,012 | ) | |||||||||||||||
— | — | — | — | — | — | (24 | ) | (75 | ) | |||||||||||||||||||||
(14 | ) | (11 | ) | — | — | (24 | ) | (21 | ) | (126 | ) | (194 | ) | |||||||||||||||||
(5 | ) | (5 | ) | — | — | — | — | (16 | ) | (22 | ) | |||||||||||||||||||
(1,758 | ) | (2,949 | ) | (12,385 | ) | (32,180 | ) | (7,761 | ) | (15,745 | ) | (14,500 | ) | (36,239 | ) | |||||||||||||||
— | (149 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
— | (1,675 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
— | (2 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
— | (16 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
(1,992 | ) | (5,112 | ) | (12,793 | ) | (33,275 | ) | (8,711 | ) | (18,390 | ) | (15,336 | ) | (37,542 | ) |
See accompanying notes to financial statements.
Nuveen Investments 75
Statements of Changes in Net Assets (Unaudited) continued
Total Return Bond Fund (concluded)
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | ||||||||||||||||||||||
Six-Months Ended | Year Ended 6/30/10 | Six-Months Ended | Year Ended 6/30/10 | Six-Months Ended | Year Ended 6/30/10 | |||||||||||||||||||
FUND SHARE TRANSACTIONS: | ||||||||||||||||||||||||
Class A: | ||||||||||||||||||||||||
Proceeds from sales | 5,992 | 11,630 | 6,113 | 27,146 | 5,310 | 4,852 | ||||||||||||||||||
Fund merger | — | — | — | — | — | — | ||||||||||||||||||
Reinvestment of distributions | 1,323 | 3,320 | 769 | 1,743 | 61 | 155 | ||||||||||||||||||
Payments for redemptions | (9,675 | ) | (13,714 | ) | (6,980 | ) | (29,443 | ) | (2,912 | ) | (3,026 | ) | ||||||||||||
Net increase (decrease) in net assets from Class A transactions | (2,360 | ) | 1,236 | (98 | ) | (554 | ) | 2,459 | 1,981 | |||||||||||||||
Class B: (See Note 1) | ||||||||||||||||||||||||
Proceeds from sales | 112 | 110 | 70 | 193 | — | — | ||||||||||||||||||
Reinvestment of distributions | 43 | 186 | 44 | 105 | — | — | ||||||||||||||||||
Payments for redemptions | (1,152 | ) | (3,073 | ) | (326 | ) | (1,157 | ) | — | — | ||||||||||||||
Net increase (decrease) in net assets from Class B transactions | (997 | ) | (2,777 | ) | (212 | ) | (859 | ) | — | — | ||||||||||||||
Class C: | ||||||||||||||||||||||||
Proceeds from sales | 479 | 874 | 1,957 | 2,167 | 2,221 | 5,477 | ||||||||||||||||||
Fund merger | — | — | — | — | — | — | ||||||||||||||||||
Reinvestment of distributions | 45 | 125 | 158 | 226 | 36 | 94 | ||||||||||||||||||
Payments for redemptions | (730 | ) | (1,307 | ) | (518 | ) | (1,236 | ) | (1,882 | ) | (556 | ) | ||||||||||||
Net increase (decrease) in net assets from Class C transactions | (206 | ) | (308 | ) | 1,597 | 1,157 | 375 | 5,015 | ||||||||||||||||
Class R: (See Note 1) | ||||||||||||||||||||||||
Proceeds from sales | 176 | 108 | 78 | 97 | 92 | 137 | ||||||||||||||||||
Fund merger | — | — | — | — | — | — | ||||||||||||||||||
Reinvestment of distributions | 8 | 19 | 7 | 10 | 8 | 33 | ||||||||||||||||||
Payments for redemptions | (78 | ) | (201 | ) | (117 | ) | (72 | ) | (1,497 | ) | (197 | ) | ||||||||||||
Net increase (decrease) in net assets from Class R transactions | 106 | (74 | ) | (32 | ) | 35 | (1,397 | ) | (27 | ) | ||||||||||||||
Class Y: (See Note 1) | ||||||||||||||||||||||||
Proceeds from sales | 109,077 | 224,539 | 119,101 | 187,427 | 46,819 | 58,004 | ||||||||||||||||||
Fund merger | — | — | — | — | — | — | ||||||||||||||||||
Reinvestment of distributions | 7,386 | 18,523 | 1,647 | 1,804 | 198 | 592 | ||||||||||||||||||
Payments for redemptions | (233,378 | ) | (485,332 | ) | (49,213 | ) | (53,873 | ) | (19,398 | ) | (80,351 | ) | ||||||||||||
Net increase (decrease) in net assets from Class Y transactions | (116,915 | ) | (242,270 | ) | 71,535 | 135,358 | 27,619 | (21,755 | ) | |||||||||||||||
Net increase (decrease) in net assets from fund share transactions | (120,372 | ) | (244,193 | ) | 72,790 | 135,137 | 29,056 | (14,786 | ) | |||||||||||||||
Net increase (decrease) in net assets | (105,130 | ) | (91,132 | ) | 105,082 | 173,331 | 31,075 | (2,726 | ) | |||||||||||||||
Net assets at beginning of period | 1,280,609 | 1,371,741 | 388,538 | 215,207 | 172,882 | 175,608 | ||||||||||||||||||
Net assets at end of period | $ | 1,175,479 | $ | 1,280,609 | $ | 493,620 | $ | 388,538 | $ | 203,957 | $ | 172,882 | ||||||||||||
Undistributed (Over-distribution of) net investment income at the end of period | $ | 2,603 | $ | 1,184 | $ | 132 | $ | 21 | $ | 356 | $ | 614 |
1 | The fund began offering Class C and Class R on October 28, 2009. |
2 | The fund began offering Class C on October 28, 2009. |
See accompanying notes to financial statements.
76 Nuveen Investments
Total Return Bond Fund (concluded)
Intermediate Government Bond Fund1 | Intermediate Term Bond Fund | Short Term Bond Fund2 | Total Return Bond Fund | |||||||||||||||||||||||||||
Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | |||||||||||||||||||||||
924 | 3,604 | 1,385 | 5,909 | 12,454 | 32,250 | 8,321 | 16,522 | |||||||||||||||||||||||
— | 13,225 | — | — | — | — | — | — | |||||||||||||||||||||||
181 | 407 | 333 | 890 | 724 | 2,045 | 458 | 774 | |||||||||||||||||||||||
(3,032 | ) | (9,067 | ) | (3,345 | ) | (6,593 | ) | (13,238 | ) | (14,685 | ) | (4,589 | ) | (5,066 | ) | |||||||||||||||
(1,927 | ) | 8,169 | (1,627 | ) | 206 | (60 | ) | 19,610 | 4,190 | 12,230 | ||||||||||||||||||||
— | — | — | — | — | — | 76 | 138 | |||||||||||||||||||||||
— | — | — | — | — | — | 22 | 63 | |||||||||||||||||||||||
— | — | — | — | — | — | (211 | ) | (735 | ) | |||||||||||||||||||||
— | — | — | — | — | — | (113 | ) | (534 | ) | |||||||||||||||||||||
109 | �� | 90 | — | — | 2,687 | 3,455 | 1,666 | 4,120 | ||||||||||||||||||||||
— | 2,023 | — | — | — | — | — | — | |||||||||||||||||||||||
10 | 8 | — | — | 19 | 17 | 84 | 139 | |||||||||||||||||||||||
(322 | ) | (219 | ) | — | — | (885 | ) | (359 | ) | (801 | ) | (710 | ) | |||||||||||||||||
(203 | ) | 1,902 | — | — | 1,821 | 3,113 | 949 | 3,549 | ||||||||||||||||||||||
69 | 134 | — | — | — | — | 582 | 337 | |||||||||||||||||||||||
— | 874 | — | — | — | — | — | — | |||||||||||||||||||||||
5 | 5 | — | — | — | — | 16 | 22 | |||||||||||||||||||||||
(235 | ) | (375 | ) | — | — | — | — | (68 | ) | (484 | ) | |||||||||||||||||||
(161 | ) | 638 | — | — | — | — | 530 | (125 | ) | |||||||||||||||||||||
18,449 | 32,634 | 109,902 | 199,377 | 312,540 | 533,108 | 67,077 | 151,764 | |||||||||||||||||||||||
— | 81,335 | — | — | — | — | — | — | |||||||||||||||||||||||
758 | 2,492 | 2,980 | 8,060 | 1,698 | 3,684 | 3,884 | 9,613 | |||||||||||||||||||||||
(68,936 | ) | (68,118 | ) | (116,761 | ) | (262,030 | ) | (209,708 | ) | (233,939 | ) | (109,648 | ) | (223,673 | ) | |||||||||||||||
(49,729 | ) | 48,343 | (3,879 | ) | (54,593 | ) | 104,530 | 302,853 | (38,687 | ) | (62,296 | ) | ||||||||||||||||||
|
(52,020 |
) | 59,052 | (5,506 | ) | (54,387 | ) | 106,291 | 325,576 | (33,131 | ) | (47,176 | ) | |||||||||||||||||
(51,882 | ) | 61,934 | (1,098 | ) | 12,829 | 109,415 | 339,165 | (11,510 | ) | 39,994 | ||||||||||||||||||||
173,683 | 111,749 | 761,265 | 748,436 | 719,893 | 380,728 | 692,228 | 652,234 | |||||||||||||||||||||||
$ | 121,801 | $ | 173,683 | $ | 760,167 | $ | 761,265 | $ | 829,308 | $ | 719,893 | $ | 680,718 | $ | 692,228 | |||||||||||||||
$ | (265 ) | $ | (185 | ) | $ | 524 | $ | 45 | $ | 471 | $ | (640 | ) | $ | 2,082 | $ | 1,957 |
See accompanying notes to financial statements.
Nuveen Investments 77
Total Return Bond Fund (concluded)
Financial Highlights (Unaudited) For a share outstanding throughout the indicated periods.
Beginning Net Asset Value | Net Investment Income | Realized and Unrealized Gains (Losses) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Distributions from Net Realized Gains | Total Distributions | Ending Net Asset Value | |||||||||||||||||||||||||
Core Bond Fund1 | ||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||
20102 | $ | 11.22 | $ | 0.22 | $ | 0.12 | $ | 0.34 | $ | (0.21 | ) | $ | — | $ | (0.21 | ) | $ | 11.35 | ||||||||||||||
20103 | 10.04 | 0.51 | 1.18 | 1.69 | (0.51 | ) | — | (0.51 | ) | 11.22 | ||||||||||||||||||||||
20093 | 10.86 | 0.61 | (0.81 | ) | (0.20 | ) | (0.62 | ) | — | (0.62 | ) | 10.04 | ||||||||||||||||||||
20083 | 10.79 | 0.51 | 0.05 | 0.56 | | (0.49 | ) | — | (0.49 | ) | 10.86 | |||||||||||||||||||||
20073 | 10.71 | 0.47 | 0.09 | 0.56 | (0.48 | ) | — | (0.48 | ) | 10.79 | ||||||||||||||||||||||
20064 | 11.15 | 0.33 | (0.37 | ) | (0.04 | ) | (0.33 | ) | (0.07 | ) | (0.40 | ) | 10.71 | |||||||||||||||||||
20055 | 11.27 | 0.40 | (0.09 | ) | 0.31 | (0.42 | ) | (0.01 | ) | (0.43 | ) | 11.15 | ||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||
20102 | $ | 11.12 | $ | 0.17 | $ | 0.11 | $ | 0.28 | $ | (0.16 | ) | $ | — | $ | (0.16 | ) | $ | 11.24 | ||||||||||||||
20103 | 9.95 | 0.43 | 1.17 | 1.60 | (0.43 | ) | — | (0.43 | ) | 11.12 | ||||||||||||||||||||||
20093 | 10.77 | 0.54 | (0.81 | ) | (0.27 | ) | (0.55 | ) | — | (0.55 | ) | 9.95 | ||||||||||||||||||||
20083 | 10.70 | 0.42 | 0.06 | 0.48 | (0.41 | ) | — | (0.41 | ) | 10.77 | ||||||||||||||||||||||
20073 | 10.63 | 0.38 | 0.09 | 0.47 | (0.40 | ) | — | (0.40 | ) | 10.70 | ||||||||||||||||||||||
20064 | 11.07 | 0.26 | (0.36 | ) | (0.10 | ) | (0.27 | ) | (0.07 | ) | (0.34 | ) | 10.63 | |||||||||||||||||||
20055 | 11.19 | 0.31 | (0.09 | ) | 0.22 | (0.33 | ) | (0.01 | ) | (0.34 | ) | 11.07 | ||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||
20102 | $ | 11.18 | $ | 0.17 | $ | 0.11 | $ | 0.28 | $ | (0.16 | ) | $ | — | $ | (0.16 | ) | $ | 11.30 | ||||||||||||||
20103 | 10.00 | 0.42 | 1.19 | 1.61 | (0.43 | ) | — | (0.43 | ) | 11.18 | ||||||||||||||||||||||
20093 | 10.83 | 0.54 | (0.82 | ) | (0.28 | ) | (0.55 | ) | — | (0.55 | ) | 10.00 | ||||||||||||||||||||
20083 | 10.75 | 0.43 | 0.06 | 0.49 | (0.41 | ) | — | (0.41 | ) | 10.83 | ||||||||||||||||||||||
20073 | 10.67 | 0.38 | 0.10 | 0.48 | (0.40 | ) | — | (0.40 | ) | 10.75 | ||||||||||||||||||||||
20064 | 11.12 | 0.26 | (0.37 | ) | (0.11 | ) | (0.27 | ) | (0.07 | ) | (0.34 | ) | 10.67 | |||||||||||||||||||
20055 | 11.24 | 0.31 | (0.09 | ) | 0.22 | (0.33 | ) | (0.01 | ) | (0.34 | ) | 11.12 | ||||||||||||||||||||
Class R (See Note 1) | ||||||||||||||||||||||||||||||||
20102 | $ | 11.27 | $ | 0.21 | $ | 0.11 | $ | 0.32 | $ | (0.19 | ) | $ | — | $ | (0.19 | ) | $ | 11.40 | ||||||||||||||
20103 | 10.09 | 0.48 | 1.19 | 1.67 | (0.49 | ) | — | (0.49 | ) | 11.27 | ||||||||||||||||||||||
20093 | 10.89 | 0.59 | (0.79 | ) | (0.20 | ) | (0.60 | ) | — | (0.60 | ) | 10.09 | ||||||||||||||||||||
20083 | 10.81 | 0.49 | 0.05 | 0.54 | (0.46 | ) | — | (0.46 | ) | 10.89 | ||||||||||||||||||||||
20073 | 10.73 | 0.44 | 0.09 | 0.53 | (0.45 | ) | — | (0.45 | ) | 10.81 | ||||||||||||||||||||||
20064 | 11.17 | 0.31 | (0.36 | ) | (0.05 | ) | (0.32 | ) | (0.07 | ) | (0.39 | ) | 10.73 | |||||||||||||||||||
20055 | 11.30 | 0.38 | (0.10 | ) | 0.28 | (0.40 | ) | (0.01 | ) | (0.41 | ) | 11.17 | ||||||||||||||||||||
Class Y (See Note 1) | ||||||||||||||||||||||||||||||||
20102 | $ | 11.21 | $ | 0.23 | $ | 0.12 | $ | 0.35 | $ | (0.22 | ) | $ | — | $ | (0.22 | ) | $ | 11.34 | ||||||||||||||
20103 | 10.03 | 0.54 | 1.18 | 1.72 | (0.54 | ) | — | (0.54 | ) | 11.21 | ||||||||||||||||||||||
20093 | 10.86 | 0.64 | (0.82 | ) | (0.18 | ) | (0.65 | ) | — | (0.65 | ) | 10.03 | ||||||||||||||||||||
20083 | 10.78 | 0.54 | 0.06 | 0.60 | (0.52 | ) | — | (0.52 | ) | 10.86 | ||||||||||||||||||||||
20073 | 10.70 | 0.49 | 0.10 | 0.59 | (0.51 | ) | — | (0.51 | ) | 10.78 | ||||||||||||||||||||||
20064 | 11.15 | 0.35 | (0.38 | ) | (0.03 | ) | (0.35 | ) | (0.07 | ) | (0.42 | ) | 10.70 | |||||||||||||||||||
20055 | 11.27 | 0.42 | (0.08 | ) | 0.34 | (0.45 | ) | (0.01 | ) | (0.46 | ) | 11.15 |
1Per | share data calculated using average shares outstanding method. |
2For | the six-month period ended December 31, 2010 (unaudited). All ratios have been annualized, except total return and portfolio turnover. |
3For | the period July 1 to June 30 in the fiscal year indicated. |
4For | the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
5For | the period October 1 to September 30 in the fiscal year indicated. |
6Total | return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
See accompanying notes to financial statements.
78 Nuveen Investments
Total Return Bond Fund (concluded)
Total Return6 | Net Assets Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net to Average | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net to Average | Portfolio Turnover Rate | ||||||||||||||||||||
| | | ||||||||||||||||||||||||
2.99 | % | $ | 92,096 | 0.93 | % | 3.80 | % | 1.02 | % | 3.71 | % | 45 | % | |||||||||||||
17.11 | 93,374 | 0.95 | 4.65 | 1.02 | 4.58 | 83 | ||||||||||||||||||||
(1.37 | ) | 82,373 | 0.95 | 6.34 | 1.02 | 6.27 | 160 | |||||||||||||||||||
5.24 | 94,571 | 0.95 | 4.63 | 1.01 | 4.57 | 131 | ||||||||||||||||||||
5.26 | 102,723 | 0.95 | 4.25 | 1.01 | 4.19 | 137 | ||||||||||||||||||||
(0.34 | ) | 134,845 | 0.95 | 3.98 | 1.03 | 3.90 | 139 | |||||||||||||||||||
2.75 | 161,410 | 0.95 | 3.51 | 1.05 | 3.41 | 208 | ||||||||||||||||||||
2.54 | % | $ | 2,653 | 1.68 | % | 3.05 | % | 1.77 | % | 2.96 | % | 45 | % | |||||||||||||
16.31 | 3,607 | 1.70 | 3.97 | 1.77 | 3.90 | 83 | ||||||||||||||||||||
(2.12 | ) | 5,780 | 1.70 | 5.59 | 1.77 | 5.52 | 160 | |||||||||||||||||||
4.50 | 7,733 | 1.70 | 3.87 | 1.76 | 3.81 | 131 | ||||||||||||||||||||
4.41 | 9,634 | 1.70 | 3.50 | 1.76 | 3.44 | 137 | ||||||||||||||||||||
(0.91 | ) | 13,819 | 1.70 | 3.23 | 1.78 | 3.15 | 139 | |||||||||||||||||||
2.00 | 17,078 | 1.70 | 2.76 | 1.80 | 2.66 | 208 | ||||||||||||||||||||
2.53 | % | $ | 3,640 | 1.68 | % | 3.05 | % | 1.77 | % | 2.96 | % | 45 | % | |||||||||||||
16.32 | 3,796 | 1.70 | 3.91 | 1.77 | 3.84 | 83 | ||||||||||||||||||||
(2.21 | ) | 3,693 | 1.70 | 5.59 | 1.77 | 5.52 | 160 | |||||||||||||||||||
4.57 | 4,383 | 1.70 | 3.89 | 1.76 | 3.83 | 131 | ||||||||||||||||||||
4.48 | 4,567 | 1.70 | 3.50 | 1.76 | 3.44 | 137 | ||||||||||||||||||||
(1.01 | ) | 5,183 | 1.70 | 3.22 | 1.78 | 3.14 | 139 | |||||||||||||||||||
1.99 | 7,266 | 1.70 | 2.76 | 1.80 | 2.66 | 208 | ||||||||||||||||||||
2.85 | % | $ | 489 | 1.18 | %�� | 3.55 | % | 1.27 | % | 3.46 | % | 45 | % | |||||||||||||
16.74 | 379 | 1.20 | 4.42 | 1.27 | 4.35 | 83 | ||||||||||||||||||||
(1.43 | ) | 406 | 1.20 | 6.11 | 1.27 | 6.04 | 160 | |||||||||||||||||||
5.06 | 289 | 1.20 | 4.42 | 1.26 | 4.36 | 131 | ||||||||||||||||||||
4.99 | 65 | 1.20 | 4.01 | 1.29 | 3.92 | 137 | ||||||||||||||||||||
(0.51 | ) | 34 | 1.20 | 3.77 | 1.43 | 3.54 | 139 | |||||||||||||||||||
2.51 | 16 | 1.20 | 3.37 | 1.45 | 3.12 | 208 | ||||||||||||||||||||
3.12 | % | $ | 1,076,601 | 0.68 | % | 4.05 | % | 0.77 | % | 3.96 | % | 45 | % | |||||||||||||
17.42 | 1,179,453 | 0.70 | 4.93 | 0.77 | 4.86 | 83 | ||||||||||||||||||||
(1.22 | ) | 1,279,489 | 0.70 | 6.57 | 0.77 | 6.50 | 160 | |||||||||||||||||||
5.60 | 1,468,599 | 0.70 | 4.88 | 0.76 | 4.82 | 131 | ||||||||||||||||||||
5.53 | 1,530,750 | 0.70 | 4.50 | 0.76 | 4.44 | 137 | ||||||||||||||||||||
(0.24 | ) | 1,680,105 | 0.70 | 4.24 | 0.78 | 4.16 | 139 | |||||||||||||||||||
3.01 | 1,725,850 | 0.70 | 3.77 | 0.80 | 3.67 | 208 |
See accompanying notes to financial statements.
Nuveen Investments 79
Financial Highlights (Unaudited) For a share outstanding throughout the indicated periods.
Total Return Bond Fund (concluded)
Beginning Net Asset | Net Investment Income | Realized and Unrealized Gains (Losses) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Distributions from Net Realized Gains | Distributions from Return of Capital | Total Distributions | Ending Net Asset Value | ||||||||||||||||||||||||||||
High Income Bond Fund1 |
| |||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.28 | $ | 0.34 | $ | 0.65 | $ | 0.99 | $ | (0.33 | ) | $ | — | $ | — | $ | (0.33 | ) | $ | 8.94 | ||||||||||||||||
20103 | 7.15 | 0.67 | 1.12 | 1.79 | (0.66 | ) | — | — | (0.66 | ) | 8.28 | |||||||||||||||||||||||||
20093 | 8.65 | 0.73 | (1.47 | ) | (0.74 | ) | (0.76 | ) | — | — | (0.76 | ) | 7.15 | |||||||||||||||||||||||
20083 | 9.61 | 0.71 | (0.97 | ) | (0.26 | ) | (0.70 | ) | — | — | (0.70 | ) | 8.65 | |||||||||||||||||||||||
20073 | 9.22 | 0.65 | 0.38 | 1.03 | (0.64 | ) | — | — | (0.64 | ) | 9.61 | |||||||||||||||||||||||||
20064 | 9.41 | 0.49 | (0.20 | ) | 0.29 | (0.48 | ) | — | — | (0.48 | ) | 9.22 | ||||||||||||||||||||||||
20055 | 9.45 | 0.66 | (0.04 | ) | 0.62 | (0.66 | ) | — | — | (0.66 | ) | 9.41 | ||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.23 | $ | 0.30 | $ | 0.64 | $ | 0.94 | $ | (0.30 | ) | $ | — | $ | — | $ | (0.30 | ) | $ | 8.87 | ||||||||||||||||
20103 | 7.11 | 0.60 | 1.12 | 1.72 | (0.60 | ) | — | — | (0.60 | ) | 8.23 | |||||||||||||||||||||||||
20093 | 8.61 | 0.68 | (1.47 | ) | (0.79 | ) | (0.71 | ) | — | — | (0.71 | ) | 7.11 | |||||||||||||||||||||||
20083 | 9.57 | 0.63 | (0.96 | ) | (0.33 | ) | (0.63 | ) | — | — | (0.63 | ) | 8.61 | |||||||||||||||||||||||
20073 | 9.18 | 0.57 | 0.39 | 0.96 | (0.57 | ) | — | — | (0.57 | ) | 9.57 | |||||||||||||||||||||||||
20064 | 9.37 | 0.43 | (0.19 | ) | 0.24 | (0.43 | ) | — | — | (0.43 | ) | 9.18 | ||||||||||||||||||||||||
20055 | 9.41 | 0.58 | (0.03 | ) | 0.55 | (0.59 | ) | — | — | (0.59 | ) | 9.37 | ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.25 | $ | 0.30 | $ | 0.65 | $ | 0.95 | $ | (0.30 | ) | $ | — | $ | — | $ | (0.30 | ) | $ | 8.90 | ||||||||||||||||
20103 | 7.12 | 0.60 | 1.13 | 1.73 | (0.60 | ) | — | — | (0.60 | ) | 8.25 | |||||||||||||||||||||||||
20093 | 8.62 | 0.68 | (1.47 | ) | (0.79 | ) | (0.71 | ) | — | — | (0.71 | ) | 7.12 | |||||||||||||||||||||||
20083 | 9.58 | 0.63 | (0.96 | ) | (0.33 | ) | (0.63 | ) | — | — | (0.63 | ) | 8.62 | |||||||||||||||||||||||
20073 | 9.19 | 0.57 | 0.39 | 0.96 | (0.57 | ) | — | — | (0.57 | ) | 9.58 | |||||||||||||||||||||||||
20064 | 9.38 | 0.43 | (0.19 | ) | 0.24 | (0.43 | ) | — | — | (0.43 | ) | 9.19 | ||||||||||||||||||||||||
20055 | 9.42 | 0.58 | (0.03 | ) | 0.55 | (0.59 | ) | — | — | (0.59 | ) | 9.38 | ||||||||||||||||||||||||
Class R (See Note 1) |
| |||||||||||||||||||||||||||||||||||
20102 | $ | 8.44 | $ | 0.33 | $ | 0.66 | $ | 0.99 | $ | (0.32 | ) | $ | — | $ | — | $ | (0.32 | ) | $ | 9.11 | ||||||||||||||||
20103 | 7.28 | 0.66 | 1.14 | 1.80 | (0.64 | ) | — | — | (0.64 | ) | 8.44 | |||||||||||||||||||||||||
20093 | 8.79 | 0.73 | (1.49 | ) | (0.76 | ) | (0.75 | ) | — | — | (0.75 | ) | 7.28 | |||||||||||||||||||||||
20083 | 9.75 | 0.69 | (0.98 | ) | (0.29 | ) | (0.67 | ) | — | — | (0.67 | ) | 8.79 | |||||||||||||||||||||||
20073 | 9.35 | 0.62 | 0.40 | 1.02 | (0.62 | ) | — | — | (0.62 | ) | 9.75 | |||||||||||||||||||||||||
20064 | 9.53 | 0.49 | (0.20 | ) | 0.29 | (0.47 | ) | — | — | (0.47 | ) | 9.35 | ||||||||||||||||||||||||
20055 | 9.60 | 0.62 | (0.04 | ) | 0.58 | (0.65 | ) | — | — | (0.65 | ) | 9.53 | ||||||||||||||||||||||||
Class Y (See Note 1) |
| |||||||||||||||||||||||||||||||||||
20102 | $ | 8.29 | $ | 0.35 | $ | 0.65 | $ | 1.00 | $ | (0.35 | ) | $ | — | $ | — | $ | (0.35 | ) | $ | 8.94 | ||||||||||||||||
20103 | 7.16 | 0.69 | 1.12 | 1.81 | (0.68 | ) | — | — | (0.68 | ) | 8.29 | |||||||||||||||||||||||||
20093 | 8.66 | 0.75 | (1.47 | ) | (0.72 | ) | (0.78 | ) | — | — | (0.78 | ) | 7.16 | |||||||||||||||||||||||
20083 | 9.62 | 0.73 | (0.97 | ) | (0.24 | ) | (0.72 | ) | — | — | (0.72 | ) | 8.66 | |||||||||||||||||||||||
20073 | 9.23 | 0.67 | 0.39 | 1.06 | (0.67 | ) | — | — | (0.67 | ) | 9.62 | |||||||||||||||||||||||||
20064 | 9.42 | 0.51 | (0.20 | ) | 0.31 | (0.50 | ) | — | — | (0.50 | ) | 9.23 | ||||||||||||||||||||||||
20055 | 9.46 | 0.68 | (0.03 | ) | 0.65 | (0.69 | ) | — | — | (0.69 | ) | 9.42 | ||||||||||||||||||||||||
Inflation Protected Securities Fund1 |
| |||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.33 | $ | 0.07 | $ | 0.14 | $ | 0.21 | $ | (0.09 | ) | $ | — | $ | — | $ | (0.09 | ) | $ | 10.45 | ||||||||||||||||
20103 | 9.59 | 0.28 | 0.73 | 1.01 | (0.27 | ) | — | — | (0.27 | ) | 10.33 | |||||||||||||||||||||||||
20093 | 10.20 | 0.14 | (0.37 | ) | (0.23 | ) | (0.26 | ) | — | (0.12 | ) | (0.38 | ) | 9.59 | ||||||||||||||||||||||
20083 | 9.43 | 0.54 | 0.76 | 1.30 | (0.53 | ) | — | — | (0.53 | ) | 10.20 | |||||||||||||||||||||||||
20073 | 9.54 | 0.39 | (0.16 | ) | 0.23 | (0.34 | ) | — | — | (0.34 | ) | 9.43 | ||||||||||||||||||||||||
20064 | 10.12 | 0.38 | (0.55 | ) | (0.17 | ) | (0.40 | ) | (0.01 | ) | — | (0.41 | ) | 9.54 | ||||||||||||||||||||||
20055 | 10.00 | 0.51 | (0.02 | ) | 0.49 | (0.37 | ) | — | — | (0.37 | ) | 10.12 | ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.24 | $ | 0.03 | $ | 0.15 | $ | 0.18 | $ | (0.07 | ) | $ | — | $ | — | $ | (0.07 | ) | $ | 10.35 | ||||||||||||||||
20103 | 9.53 | 0.18 | 0.75 | 0.93 | (0.22 | ) | — | — | (0.22 | ) | 10.24 | |||||||||||||||||||||||||
20093 | 10.18 | 0.11 | (0.43 | ) | (0.32 | ) | (0.21 | ) | — | (0.12 | ) | (0.33 | ) | 9.53 | ||||||||||||||||||||||
20083 | 9.41 | 0.48 | 0.75 | 1.23 | (0.46 | ) | — | — | (0.46 | ) | 10.18 | |||||||||||||||||||||||||
20073 | 9.53 | 0.33 | (0.18 | ) | 0.15 | (0.27 | ) | — | — | (0.27 | ) | 9.41 | ||||||||||||||||||||||||
20064 | 10.11 | 0.31 | (0.53 | ) | (0.22 | ) | (0.35 | ) | (0.01 | ) | — | (0.36 | ) | 9.53 | ||||||||||||||||||||||
20055 | 10.00 | 0.40 | 0.02 | 0.42 | (0.31 | ) | — | — | (0.31 | ) | 10.11 | |||||||||||||||||||||||||
Class R (See Note 1) |
| |||||||||||||||||||||||||||||||||||
20102 | $ | 10.31 | $ | 0.05 | $ | 0.08 | $ | 0.13 | $ | (0.08 | ) | $ | — | $ | — | $ | (0.08 | ) | $ | 10.36 | ||||||||||||||||
20103 | 9.58 | 0.26 | 0.72 | 0.98 | (0.25 | ) | — | — | (0.25 | ) | 10.31 | |||||||||||||||||||||||||
20093 | 10.20 | 0.13 | (0.39 | ) | (0.26 | ) | (0.24 | ) | — | (0.12 | ) | (0.36 | ) | 9.58 | ||||||||||||||||||||||
20083 | 9.43 | 0.52 | 0.75 | 1.27 | (0.50 | ) | — | — | (0.50 | ) | 10.20 | |||||||||||||||||||||||||
20073 | 9.55 | 0.33 | (0.13 | ) | 0.20 | (0.32 | ) | — | — | (0.32 | ) | 9.43 | ||||||||||||||||||||||||
20064 | 10.13 | 0.38 | (0.56 | ) | (0.18 | ) | (0.39 | ) | (0.01 | ) | — | (0.40 | ) | 9.55 | ||||||||||||||||||||||
20055 | 10.00 | 0.43 | 0.05 | 0.48 | (0.35 | ) | — | — | (0.35 | ) | 10.13 | |||||||||||||||||||||||||
Class Y (See Note 1) |
| |||||||||||||||||||||||||||||||||||
20102 | $ | 10.34 | $ | 0.08 | $ | 0.14 | $ | 0.22 | $ | (0.10 | ) | $ | — | $ | — | $ | (0.10 | ) | $ | 10.46 | ||||||||||||||||
20103 | �� | 9.59 | 0.33 | 0.71 | 1.04 | (0.29 | ) | — | — | (0.29 | ) | 10.34 | ||||||||||||||||||||||||
20093 | 10.20 | 0.23 | (0.45 | ) | (0.22 | ) | (0.27 | ) | — | (0.12 | ) | (0.39 | ) | 9.59 | ||||||||||||||||||||||
20083 | 9.43 | 0.56 | 0.76 | 1.32 | (0.55 | ) | — | — | (0.55 | ) | 10.20 | |||||||||||||||||||||||||
20073 | 9.55 | 0.40 | (0.16 | ) | 0.24 | (0.36 | ) | — | — | (0.36 | ) | 9.43 | ||||||||||||||||||||||||
20064 | 10.13 | 0.42 | (0.57 | ) | (0.15 | ) | (0.42 | ) | (0.01 | ) | — | (0.43 | ) | 9.55 | ||||||||||||||||||||||
20055 | 10.00 | 0.51 | 0.01 | 0.52 | (0.39 | ) | — | — | (0.39 | ) | 10.13 |
1 | Per share data calculated using average shares outstanding method. |
2 | For the six-month period ended December 31, 2010 (unaudited). All ratios have been annualized, except total return and portfolio turnover. |
3 | For the period July 1 through June 30 in the fiscal year indicated. |
4 | For the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
5 | For the period October 1 through September 30 in the fiscal year indicated. |
6 | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
See accompanying notes to financial statements.
80 Nuveen Investments
Total Return Bond Fund (concluded)
Total Return6 | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
12.16 | % | $ | 31,749 | 1.10 | % | 7.65 | % | 1.26 | % | 7.49 | % | 70 | % | |||||||||||||
25.47 | 29,532 | 1.10 | 8.12 | 1.29 | 7.93 | 132 | ||||||||||||||||||||
(7.26 | ) | 25,696 | 1.10 | 10.79 | 1.36 | 10.53 | 108 | |||||||||||||||||||
(2.84 | ) | 24,420 | 1.10 | 7.74 | 1.31 | 7.53 | 100 | |||||||||||||||||||
11.46 | 28,932 | 1.10 | 6.74 | 1.30 | 6.54 | 101 | ||||||||||||||||||||
3.14 | 29,573 | 1.10 | 6.94 | 1.29 | 6.75 | 68 | ||||||||||||||||||||
6.74 | 34,144 | 1.02 | 6.88 | 1.27 | 6.63 | 77 | ||||||||||||||||||||
11.58 | % | $ | 1,541 | 1.85 | % | 6.91 | % | 2.01 | % | 6.75 | % | 70 | % | |||||||||||||
24.56 | 1,628 | 1.85 | 7.47 | 2.04 | 7.28 | 132 | ||||||||||||||||||||
(7.99 | ) | 2,157 | 1.85 | 9.92 | 2.11 | 9.66 | 108 | |||||||||||||||||||
(3.57 | ) | 3,496 | 1.85 | 6.97 | 2.06 | 6.76 | 100 | |||||||||||||||||||
10.67 | 4,814 | 1.85 | 6.00 | 2.05 | 5.80 | 101 | ||||||||||||||||||||
2.57 | 5,988 | 1.85 | 6.19 | 2.04 | 6.00 | 68 | ||||||||||||||||||||
5.97 | 7,191 | 1.77 | 6.13 | 2.02 | 5.88 | 77 | ||||||||||||||||||||
11.67 | % | $ | 9,181 | 1.85 | % | 6.91 | % | 2.01 | % | 6.75 | % | 70 | % | |||||||||||||
24.67 | 6,969 | 1.85 | 7.41 | 2.04 | 7.22 | 132 | ||||||||||||||||||||
(7.98 | ) | 5,038 | 1.85 | 9.98 | 2.11 | 9.72 | 108 | |||||||||||||||||||
(3.57 | ) | 6,490 | 1.85 | 6.97 | 2.06 | 6.76 | 100 | |||||||||||||||||||
10.66 | 8,522 | 1.85 | 5.98 | 2.05 | 5.78 | 101 | ||||||||||||||||||||
2.56 | 9,873 | 1.85 | 6.19 | 2.04 | 6.00 | 68 | ||||||||||||||||||||
5.96 | 13,403 | 1.77 | 6.13 | 2.02 | 5.88 | 77 | ||||||||||||||||||||
11.91 | % | $ | 340 | 1.34 | % | 7.35 | % | 1.50 | % | 7.19 | % | 70 | % | |||||||||||||
25.12 | 343 | 1.35 | 7.92 | 1.54 | 7.73 | 132 | ||||||||||||||||||||
(7.49 | ) | 265 | 1.35 | 10.72 | 1.61 | 10.46 | 108 | |||||||||||||||||||
(3.04 | ) | 185 | 1.35 | 7.37 | 1.56 | 7.16 | 100 | |||||||||||||||||||
11.12 | 186 | 1.35 | 6.38 | 1.56 | 6.17 | 101 | ||||||||||||||||||||
3.09 | 73 | 1.35 | 6.82 | 1.69 | 6.48 | 68 | ||||||||||||||||||||
6.23 | 4 | 1.33 | 6.31 | 1.73 | 5.91 | 77 | ||||||||||||||||||||
12.16 | % | $ | 450,809 | 0.85 | % | 7.91 | % | 1.01 | % | 7.75 | % | 70 | % | |||||||||||||
25.75 | 350,066 | 0.85 | 8.38 | 1.04 | 8.19 | 132 | ||||||||||||||||||||
(7.01 | ) | 182,051 | 0.85 | 10.93 | 1.11 | 10.67 | 108 | |||||||||||||||||||
(2.59 | ) | 204,164 | 0.85 | 7.99 | 1.06 | 7.78 | 100 | |||||||||||||||||||
11.73 | 232,998 | 0.85 | 6.98 | 1.05 | 6.78 | 101 | ||||||||||||||||||||
3.34 | 205,382 | 0.85 | 7.19 | 1.04 | 7.00 | 68 | ||||||||||||||||||||
7.01 | 207,610 | 0.77 | 7.13 | 1.02 | 6.88 | 77 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
2.05 | % | $ | 10,453 | 0.85 | % | 1.33 | % | 1.13 | % | 1.05 | % | 20 | % | |||||||||||||
10.62 | 7,894 | 0.84 | 2.77 | 1.15 | 2.46 | 72 | ||||||||||||||||||||
(2.18 | ) | 5,439 | 0.85 | 1.52 | 1.10 | 1.27 | 24 | |||||||||||||||||||
14.01 | 3,294 | 0.85 | 5.40 | 1.08 | 5.17 | 71 | ||||||||||||||||||||
2.41 | 2,712 | 0.85 | 4.09 | 1.06 | 3.88 | 90 | ||||||||||||||||||||
(1.69 | ) | 5,042 | 0.85 | 5.20 | 1.08 | 4.97 | 85 | |||||||||||||||||||
4.93 | 6,917 | 0.85 | 5.04 | 1.09 | 4.80 | 23 | ||||||||||||||||||||
1.71 | % | $ | 7,143 | 1.60 | % | 0.57 | % | 1.88 | % | 0.29 | % | 20 | % | |||||||||||||
9.76 | 6,673 | 1.60 | 1.78 | 1.91 | 1.47 | 72 | ||||||||||||||||||||
(3.03 | ) | 1,406 | 1.59 | 1.19 | 1.84 | 0.94 | 24 | |||||||||||||||||||
13.20 | 365 | 1.60 | 4.82 | 1.83 | 4.59 | 71 | ||||||||||||||||||||
1.53 | 348 | 1.60 | 3.44 | 1.81 | 3.23 | 90 | ||||||||||||||||||||
(2.26 | ) | 552 | 1.60 | 4.29 | 1.83 | 4.06 | 85 | |||||||||||||||||||
4.18 | 855 | 1.60 | 3.98 | 1.84 | 3.74 | 23 | ||||||||||||||||||||
1.29 | % | $ | 5 | 1.10 | % | 0.93 | % | 1.38 | % | 0.65 | % | 20 | % | |||||||||||||
10.43 | 1,332 | 1.09 | 2.64 | 1.40 | 2.33 | 72 | ||||||||||||||||||||
(2.43 | ) | 1,262 | 1.10 | 1.34 | 1.35 | 1.09 | 24 | |||||||||||||||||||
13.73 | 1,175 | 1.10 | 5.21 | 1.33 | 4.98 | 71 | ||||||||||||||||||||
2.09 | 822 | 1.10 | 3.45 | 1.31 | 3.24 | 90 | ||||||||||||||||||||
(1.80 | ) | 1 | 1.10 | 5.17 | 1.48 | 4.79 | 85 | |||||||||||||||||||
4.81 | 1 | 1.10 | 4.22 | 1.49 | 3.83 | 23 | ||||||||||||||||||||
2.13 | % | $ | 186,356 | 0.60 | % | 1.59 | % | 0.88 | % | 1.31 | % | 20 | % | |||||||||||||
10.92 | 156,983 | 0.59 | 3.27 | 0.90 | 2.96 | 72 | ||||||||||||||||||||
(2.03 | ) | 167,501 | 0.60 | 2.48 | 0.85 | 2.23 | 24 | |||||||||||||||||||
14.29 | 278,749 | 0.60 | 5.64 | 0.83 | 5.41 | 71 | ||||||||||||||||||||
2.56 | 273,312 | 0.60 | 4.21 | 0.81 | 4.00 | 90 | ||||||||||||||||||||
(1.50 | ) | 317,977 | 0.60 | 5.73 | 0.83 | 5.50 | 85 | |||||||||||||||||||
5.24 | 269,412 | 0.60 | 5.05 | 0.84 | 4.81 | 23 |
See accompanying notes to financial statements.
Nuveen Investments 81
Financial Highlights (Unaudited) For a share outstanding throughout the indicated periods.
Total Return Bond Fund (concluded)
Beginning Net Asset Value | Net Investment Income | Realized and Unrealized Gains (Losses) on Investments | Total from Investment Operations | Distributions from Net Investment Income | Distributions Realized | Distributions from Return of Capital | Total Distributions | Ending Net Asset | ||||||||||||||||||||||||||||
Intermediate | ||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.77 | $ | 0.10 | $ | (0.01 | ) | $ | 0.09 | $ | (0.10 | ) | $ | — | $ | — | $ | (0.10 | ) | $ | 8.76 | |||||||||||||||
20103 | 8.67 | 0.20 | 0.27 | 0.47 | (0.20 | ) | (0.17 | ) | — | 7 | (0.37 | ) | 8.77 | |||||||||||||||||||||||
20093 | 8.42 | 0.19 | 0.25 | 0.44 | (0.19 | ) | — | — | (0.19 | ) | 8.67 | |||||||||||||||||||||||||
20083 | 8.00 | 0.28 | 0.43 | 0.71 | (0.29 | ) | — | — | (0.29 | ) | 8.42 | |||||||||||||||||||||||||
20073 | 7.99 | 0.31 | 0.06 | 0.37 | (0.33 | ) | — | (0.03 | ) | (0.36 | ) | 8.00 | ||||||||||||||||||||||||
20064 | 8.26 | 0.22 | (0.22 | ) | — | (0.22 | ) | (0.05 | ) | — | (0.27 | ) | 7.99 | |||||||||||||||||||||||
20055 | 8.82 | 0.27 | (0.15 | ) | 0.12 | (0.28 | ) | (0.40 | ) | — | (0.68 | ) | 8.26 | |||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.77 | $ | 0.06 | $ | — | $ | 0.06 | $ | (0.07 | ) | $ | — | $ | — | $ | (0.07 | ) | $ | 8.76 | ||||||||||||||||
20106 | 8.76 | 0.09 | 0.17 | 0.26 | (0.08 | ) | (0.17 | ) | — | 7 | (0.25 | ) | 8.77 | |||||||||||||||||||||||
Class R (See Note 1) | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.77 | $ | 0.08 | $ | (0.01 | ) | $ | 0.07 | $ | (0.09 | ) | $ | — | $ | — | $ | (0.09 | ) | $ | 8.75 | |||||||||||||||
20106 | 8.76 | 0.09 | 0.20 | 0.29 | (0.11 | ) | (0.17 | ) | — | 7 | (0.28 | ) | 8.77 | |||||||||||||||||||||||
Class Y (See Note 1) | ||||||||||||||||||||||||||||||||||||
20102 | $ | 8.77 | $ | 0.10 | $ | — | $ | 0.10 | $ | (0.11 | ) | $ | — | $ | — | $ | (0.11 | ) | $ | 8.76 | ||||||||||||||||
20103 | 8.67 | 0.21 | 0.27 | 0.48 | (0.21 | ) | (0.17 | ) | — | 7 | (0.38 | ) | 8.77 | |||||||||||||||||||||||
20093 | 8.42 | 0.21 | 0.25 | 0.46 | (0.21 | ) | — | — | (0.21 | ) | 8.67 | |||||||||||||||||||||||||
20083 | 8.00 | 0.30 | 0.42 | 0.72 | (0.30 | ) | — | — | (0.30 | ) | 8.42 | |||||||||||||||||||||||||
20073 | 7.99 | 0.32 | 0.06 | 0.38 | (0.34 | ) | — | (0.03 | ) | (0.37 | ) | 8.00 | ||||||||||||||||||||||||
20064 | 8.25 | 0.22 | (0.20 | ) | 0.02 | (0.23 | ) | (0.05 | ) | — | (0.28 | ) | 7.99 | |||||||||||||||||||||||
20055 | 8.82 | 0.28 | (0.16 | ) | 0.12 | (0.29 | ) | (0.40 | ) | — | (0.69 | ) | 8.25 | |||||||||||||||||||||||
Intermediate Term | ||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.33 | $ | 0.17 | $ | 0.05 | $ | 0.22 | $ | (0.16 | ) | $ | — | $ | — | $ | (0.16 | ) | $ | 10.39 | ||||||||||||||||
20103 | 9.47 | 0.42 | 0.86 | 1.28 | (0.42 | ) | — | — | (0.42 | ) | 10.33 | |||||||||||||||||||||||||
20093 | 9.90 | 0.48 | (0.40 | ) | 0.08 | (0.51 | ) | — | — | (0.51 | ) | 9.47 | ||||||||||||||||||||||||
20083 | 9.73 | 0.44 | 0.14 | 0.58 | (0.41 | ) | — | — | (0.41 | ) | 9.90 | |||||||||||||||||||||||||
20073 | 9.68 | 0.41 | 0.05 | 0.46 | (0.41 | ) | — | — | (0.41 | ) | 9.73 | |||||||||||||||||||||||||
20064 | 9.99 | 0.29 | (0.27 | ) | 0.02 | (0.30 | ) | (0.03 | ) | — | (0.33 | ) | 9.68 | |||||||||||||||||||||||
20055 | 10.25 | 0.34 | (0.17 | ) | 0.17 | (0.33 | ) | (0.10 | ) | — | (0.43 | ) | 9.99 | |||||||||||||||||||||||
Class Y (See Note 1) | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.29 | $ | 0.18 | $ | 0.05 | $ | 0.23 | $ | (0.17 | ) | $ | — | $ | — | $ | (0.17 | ) | $ | 10.35 | ||||||||||||||||
20103 | 9.43 | 0.43 | 0.86 | 1.29 | (0.43 | ) | — | — | (0.43 | ) | 10.29 | |||||||||||||||||||||||||
20093 | 9.87 | 0.49 | (0.40 | ) | 0.09 | (0.53 | ) | — | — | (0.53 | ) | 9.43 | ||||||||||||||||||||||||
20083 | 9.70 | 0.45 | 0.15 | 0.60 | (0.43 | ) | — | — | (0.43 | ) | 9.87 | |||||||||||||||||||||||||
20073 | 9.65 | 0.42 | 0.06 | 0.48 | (0.43 | ) | — | — | (0.43 | ) | 9.70 | |||||||||||||||||||||||||
20064 | 9.96 | 0.30 | (0.27 | ) | 0.03 | (0.31 | ) | (0.03 | ) | — | (0.34 | ) | 9.65 | |||||||||||||||||||||||
20055 | 10.22 | 0.36 | (0.17 | ) | 0.19 | (0.35 | ) | (0.10 | ) | — | (0.45 | ) | 9.96 |
1 | Per share data calculated using average shares outstanding method. |
2 | For the six-month period ended December 31, 2010 (unaudited). All ratios have been annualized, except total return and portfolio turnover. |
3 | For the period July 1 to June 30 in the fiscal year indicated. |
4 | For the nine-month period October 1, 2005 to June 30, 2006. Effective in 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
5 | For the period October 1 to September 30 in the fiscal year indicated. |
6 | Commenced operations on October 28, 2009. All ratios for the period October 28, 2009 to June 30, 2010 have been annualized, except total return and portfolio turnover. |
7 | Rounds to less than $0.01 per share. |
8 | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
See accompanying notes to financial statements.
82 Nuveen Investments
Total Return Bond Fund (concluded)
Total Return8 | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
1.06 | % | $ | 17,072 | 0.72 | % | 2.18 | % | 1.16 | % | 1.74 | % | 32 | % | |||||||||||||
5.50 | 19,003 | 0.75 | 2.33 | 1.19 | 1.89 | 105 | ||||||||||||||||||||
5.30 | 10,496 | 0.75 | 2.22 | 1.15 | 1.82 | 133 | ||||||||||||||||||||
8.90 | 6,504 | 0.75 | 3.32 | 1.33 | 2.74 | 118 | ||||||||||||||||||||
4.68 | 1,619 | 0.75 | 3.80 | 1.46 | 3.09 | 84 | ||||||||||||||||||||
0.06 | 1,689 | 0.75 | 3.56 | 1.26 | 3.05 | 70 | ||||||||||||||||||||
1.40 | 1,970 | 0.75 | 3.21 | 1.09 | 2.87 | 161 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
0.63 | % | $ | 1,736 | 1.57 | % | 1.33 | % | 1.91 | % | 0.99 | % | 32 | % | |||||||||||||
3.00 | 1,940 | 1.60 | 1.50 | 1.94 | 1.16 | 105 | ||||||||||||||||||||
0.77 | % | $ | 490 | 1.07 | % | 1.83 | % | 1.41 | % | 1.49 | % | 32 | % | |||||||||||||
3.34 | 652 | 1.10 | 1.78 | 1.44 | 1.44 | 105 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
1.14 | % | $ | 102,503 | 0.57 | % | 2.32 | % | 0.91 | % | 1.98 | % | 32 | % | |||||||||||||
5.66 | 152,088 | 0.60 | 2.39 | 0.94 | 2.05 | 105 | ||||||||||||||||||||
5.46 | 101,253 | 0.60 | 2.41 | 0.90 | 2.11 | 133 | ||||||||||||||||||||
9.07 | 63,784 | 0.60 | 3.60 | 1.08 | 3.12 | 118 | ||||||||||||||||||||
4.84 | 37,705 | 0.60 | 3.94 | 1.21 | 3.33 | 84 | ||||||||||||||||||||
0.30 | 42,781 | 0.60 | 3.70 | 1.01 | 3.29 | 70 | ||||||||||||||||||||
1.43 | 69,349 | 0.60 | 3.34 | 0.84 | 3.10 | 161 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
2.15 | % | $ | 24,874 | 0.84 | % | 3.21 | % | 1.01 | % | 3.04 | % | 34 | % | |||||||||||||
13.64 | 26,341 | 0.85 | 4.12 | 1.01 | 3.96 | 58 | ||||||||||||||||||||
1.21 | 23,905 | 0.85 | 5.25 | 1.01 | 5.09 | 41 | ||||||||||||||||||||
6.02 | 28,364 | 0.85 | 4.38 | 1.01 | 4.22 | 102 | ||||||||||||||||||||
4.80 | 30,655 | 0.85 | 4.07 | 1.01 | 3.91 | 110 | ||||||||||||||||||||
0.23 | 38,296 | 0.75 | 3.88 | 1.03 | 3.60 | 113 | ||||||||||||||||||||
1.69 | 48,426 | 0.75 | 3.39 | 1.05 | 3.09 | 118 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
2.24 | % | $ | 735,293 | 0.69 | % | 3.36 | % | 0.76 | % | 3.29 | % | 34 | % | |||||||||||||
13.87 | 734,924 | 0.70 | 4.28 | 0.76 | 4.22 | 58 | ||||||||||||||||||||
1.26 | 724,531 | 0.70 | 5.39 | 0.76 | 5.33 | 41 | ||||||||||||||||||||
6.20 | 766,932 | 0.70 | 4.53 | 0.76 | 4.47 | 102 | ||||||||||||||||||||
4.98 | 752,984 | 0.70 | 4.22 | 0.76 | 4.16 | 110 | ||||||||||||||||||||
0.34 | 899,175 | 0.60 | 4.03 | 0.78 | 3.85 | 113 | ||||||||||||||||||||
1.85 | 1,074,624 | 0.60 | 3.55 | 0.80 | 3.35 | 118 |
See accompanying notes to financial statements.
Nuveen Investments 83
Financial Highlights (Unaudited) For a share outstanding throughout the indicated periods.
Total Return Bond Fund (concluded)
Beginning Net Asset Value | Net Investment Income |
Realized and | Total from Investment Operations | Distributions from Net Investment Income | Distributions from Net Realized Gains | Distributions Return of | Total Distributions | Ending Net Asset Value | ||||||||||||||||||||||||||||
Short Term Bond Fund1 | ||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.98 | $ | 0.12 | $ | 0.03 | $ | 0.15 | $ | (0.11 | ) | $ | — | $ | — | $ | (0.11 | ) | $ | 10.02 | ||||||||||||||||
20103 | 9.66 | 0.31 | 0.34 | 0.65 | (0.33 | ) | — | — | (0.33 | ) | 9.98 | |||||||||||||||||||||||||
20093 | 9.89 | 0.46 | (0.26 | ) | 0.20 | (0.43 | ) | — | — | (0.43 | ) | 9.66 | ||||||||||||||||||||||||
20083 | 9.90 | 0.45 | (0.03 | ) | 0.42 | (0.43 | ) | — | — | (0.43 | ) | 9.89 | ||||||||||||||||||||||||
20073 | 9.83 | 0.36 | 0.09 | 0.45 | (0.38 | ) | — | — | (0.38 | ) | 9.90 | |||||||||||||||||||||||||
20064 | 9.93 | 0.23 | (0.06 | ) | 0.17 | (0.27 | ) | — | — | (0.27 | ) | 9.83 | ||||||||||||||||||||||||
20055 | 10.11 | 0.27 | (0.16 | ) | 0.11 | (0.29 | ) | — | — | 7 | (0.29 | ) | 9.93 | |||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.00 | $ | 0.08 | $ | 0.03 | $ | 0.11 | $ | (0.06 | ) | $ | — | $ | — | $ | (0.06 | ) | $ | 10.05 | ||||||||||||||||
20106 | 9.95 | 0.13 | 0.06 | 0.19 | (0.14 | ) | — | — | (0.14 | ) | 10.00 | |||||||||||||||||||||||||
Class Y (See Note 1) | ||||||||||||||||||||||||||||||||||||
20102 | $ | 9.99 | $ | 0.13 | $ | 0.02 | $ | 0.15 | $ | (0.11 | ) | $ | — | $ | — | $ | (0.11 | ) | $ | 10.03 | ||||||||||||||||
20103 | 9.67 | 0.32 | 0.34 | 0.66 | (0.34 | ) | — | — | (0.34 | ) | 9.99 | |||||||||||||||||||||||||
20093 | 9.89 | 0.48 | (0.25 | ) | 0.23 | (0.45 | ) | — | — | (0.45 | ) | 9.67 | ||||||||||||||||||||||||
20083 | 9.91 | 0.46 | (0.03 | ) | 0.43 | (0.45 | ) | — | — | (0.45 | ) | 9.89 | ||||||||||||||||||||||||
20073 | 9.83 | 0.37 | 0.10 | 0.47 | (0.39 | ) | — | — | (0.39 | ) | 9.91 | |||||||||||||||||||||||||
20064 | 9.93 | 0.24 | (0.06 | ) | 0.18 | (0.28 | ) | — | — | (0.28 | ) | 9.83 | ||||||||||||||||||||||||
20055 | 10.11 | 0.28 | (0.16 | ) | 0.12 | (0.29 | ) | — | (0.01 | ) | (0.30 | ) | 9.93 | |||||||||||||||||||||||
Total Return Bond Fund1 | ||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.27 | $ | 0.22 | $ | 0.32 | $ | 0.54 | $ | (0.22 | ) | $ | — | $ | — | $ | (0.22 | ) | $ | 10.59 | ||||||||||||||||
20103 | 9.01 | 0.52 | 1.28 | 1.80 | (0.54 | ) | — | — | (0.54 | ) | 10.27 | |||||||||||||||||||||||||
20093 | 9.90 | 0.64 | (0.74 | ) | (0.10 | ) | (0.63 | ) | (0.16 | ) | — | (0.79 | ) | 9.01 | ||||||||||||||||||||||
20083 | 9.83 | 0.49 | 0.05 | 0.54 | (0.47 | ) | — | — | (0.47 | ) | 9.90 | |||||||||||||||||||||||||
20073 | 9.86 | 0.45 | (0.02 | ) | 0.43 | (0.46 | ) | — | — | (0.46 | ) | 9.83 | ||||||||||||||||||||||||
20064 | 10.18 | 0.31 | (0.33 | ) | (0.02 | ) | (0.30 | ) | — | — | (0.30 | ) | 9.86 | |||||||||||||||||||||||
20055 | 10.25 | 0.43 | (0.07 | ) | 0.36 | (0.43 | ) | — | — | (0.43 | ) | 10.18 | ||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.22 | $ | 0.18 | $ | 0.30 | $ | 0.48 | $ | (0.17 | ) | $ | — | $ | — | $ | (0.17 | ) | $ | 10.53 | ||||||||||||||||
20103 | 8.97 | 0.45 | 1.26 | 1.71 | (0.46 | ) | — | — | (0.46 | ) | 10.22 | |||||||||||||||||||||||||
20093 | 9.86 | 0.58 | (0.74 | ) | (0.16 | ) | (0.57 | ) | (0.16 | ) | — | (0.73 | ) | 8.97 | ||||||||||||||||||||||
20083 | 9.80 | 0.41 | 0.05 | 0.46 | (0.40 | ) | — | — | (0.40 | ) | 9.86 | |||||||||||||||||||||||||
20073 | 9.82 | 0.38 | (0.02 | ) | 0.36 | (0.38 | ) | — | — | (0.38 | ) | 9.80 | ||||||||||||||||||||||||
20064 | 10.14 | 0.25 | (0.32 | ) | (0.07 | ) | (0.25 | ) | — | — | (0.25 | ) | 9.82 | |||||||||||||||||||||||
20055 | 10.21 | 0.35 | (0.07 | ) | 0.28 | (0.35 | ) | — | — | (0.35 | ) | 10.14 | ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.20 | $ | 0.18 | $ | 0.31 | $ | 0.49 | $ | (0.17 | ) | $ | — | $ | — | $ | (0.17 | ) | $ | 10.52 | ||||||||||||||||
20103 | 8.96 | 0.43 | 1.27 | 1.70 | (0.46 | ) | — | — | (0.46 | ) | 10.20 | |||||||||||||||||||||||||
20093 | 9.84 | 0.58 | (0.73 | ) | (0.15 | ) | (0.57 | ) | (0.16 | ) | — | (0.73 | ) | 8.96 | ||||||||||||||||||||||
20083 | 9.78 | 0.42 | 0.04 | 0.46 | (0.40 | ) | — | — | (0.40 | ) | 9.84 | |||||||||||||||||||||||||
20073 | 9.80 | 0.37 | (0.01 | ) | 0.36 | (0.38 | ) | — | — | (0.38 | ) | 9.78 | ||||||||||||||||||||||||
20064 | 10.12 | 0.25 | (0.32 | ) | (0.07 | ) | (0.25 | ) | — | — | (0.25 | ) | 9.80 | |||||||||||||||||||||||
20055 | 10.20 | 0.35 | (0.07 | ) | 0.28 | (0.36 | ) | — | — | (0.36 | ) | 10.12 | ||||||||||||||||||||||||
Class R (See Note 1) | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.31 | $ | 0.21 | $ | 0.31 | $ | 0.52 | $ | (0.20 | ) | $ | — | $ | — | $ | (0.20 | ) | $ | 10.63 | ||||||||||||||||
20103 | 9.07 | 0.42 | 1.32 | 1.74 | (0.50 | ) | — | — | (0.50 | ) | 10.31 | |||||||||||||||||||||||||
20093 | 9.95 | 0.62 | (0.73 | ) | (0.11 | ) | (0.61 | ) | (0.16 | ) | — | (0.77 | ) | 9.07 | ||||||||||||||||||||||
20083 | 9.88 | 0.47 | 0.05 | 0.52 | (0.45 | ) | — | — | (0.45 | ) | 9.95 | |||||||||||||||||||||||||
20073 | 9.90 | 0.43 | (0.02 | ) | 0.41 | (0.43 | ) | — | — | (0.43 | ) | 9.88 | ||||||||||||||||||||||||
20064 | 10.23 | 0.30 | (0.34 | ) | (0.04 | ) | (0.29 | ) | — | — | (0.29 | ) | 9.90 | |||||||||||||||||||||||
20055 | 10.29 | 0.41 | (0.07 | ) | 0.34 | (0.40 | ) | — | — | (0.40 | ) | 10.23 | ||||||||||||||||||||||||
Class Y (See Note 1) | ||||||||||||||||||||||||||||||||||||
20102 | $ | 10.26 | $ | 0.23 | $ | 0.32 | $ | 0.55 | $ | (0.23 | ) | $ | — | $ | — | $ | (0.23 | ) | $ | 10.58 | ||||||||||||||||
20103 | 9.01 | 0.55 | 1.25 | 1.80 | (0.55 | ) | — | — | (0.55 | ) | 10.26 | |||||||||||||||||||||||||
20093 | 9.89 | 0.66 | (0.73 | ) | (0.07 | ) | (0.65 | ) | (0.16 | ) | — | (0.81 | ) | 9.01 | ||||||||||||||||||||||
20083 | 9.83 | 0.52 | 0.04 | 0.56 | (0.50 | ) | — | — | (0.50 | ) | 9.89 | |||||||||||||||||||||||||
20073 | 9.85 | 0.47 | (0.01 | ) | 0.46 | (0.48 | ) | — | — | (0.48 | ) | 9.83 | ||||||||||||||||||||||||
20064 | 10.17 | 0.33 | (0.33 | ) | — | (0.32 | ) | — | — | (0.32 | ) | 9.85 | ||||||||||||||||||||||||
20055 | 10.24 | 0.46 | (0.07 | ) | 0.39 | (0.46 | ) | — | — | (0.46 | ) | 10.17 |
1 | Per share data calculated using average shares outstanding method. |
2 | For the six-month period ended December 31, 2010 (unaudited). All ratios have been annualized, except total return and portfolio turnover. |
3 | For the period July 1 to June 30 in the fiscal year indicated. |
4 | For the nine-month period October 1, 2005 to June 30, 2006, the fund’s fiscal year-end was changed from September 30 to June 30. All ratios for the period have been annualized, except total return and portfolio turnover. |
5 | For the period October 1 to September 30 in the fiscal year indicated. |
6 | Commenced operations on October 28, 2009. All ratios for the period October 28, 2009 to June 30, 2010 have been annualized, except total return and portfolio turnover. |
7 | Rounds to less than $0.01 per share. |
8 | Total return does not reflect sales charges. Total return would have been lower had certain expenses not been waived. |
See accompanying notes to financial statements.
84 Nuveen Investments
Total Return Bond Fund (concluded)
Total Return8 | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Net Investment Income to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investment Income to Average Net Assets (Excluding Waivers) | Portfolio Turnover Rate | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
1.46 | % | $ | 87,948 | 0.75 | % | 2.36 | % | 1.03 | % | 2.08 | % | 19 | % | |||||||||||||
6.77 | 87,631 | 0.75 | 3.17 | 1.04 | 2.88 | 44 | ||||||||||||||||||||
2.22 | 65,704 | 0.74 | 4.87 | 1.06 | 4.55 | 54 | ||||||||||||||||||||
4.30 | 59,933 | 0.74 | 4.48 | 1.05 | 4.17 | 55 | ||||||||||||||||||||
4.60 | 66,722 | 0.75 | 3.61 | 1.04 | 3.32 | 47 | ||||||||||||||||||||
1.75 | 78,771 | 0.75 | 3.11 | 1.04 | 2.82 | 60 | ||||||||||||||||||||
1.08 | 97,863 | 0.75 | 2.68 | 1.05 | 2.38 | 64 | ||||||||||||||||||||
1.12 | % | $ | 4,946 | 1.60 | % | 1.54 | % | 1.78 | % | 1.36 | % | 19 | % | |||||||||||||
1.90 | 3,111 | 1.60 | 1.95 | 1.79 | 1.76 | 44 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
1.54 | % | $ | 736,414 | 0.60 | % | 2.52 | % | 0.78 | % | 2.34 | % | 19 | % | |||||||||||||
6.92 | 629,151 | 0.60 | 3.26 | 0.79 | 3.07 | 44 | ||||||||||||||||||||
2.48 | 315,024 | 0.59 | 5.02 | 0.81 | 4.80 | 54 | ||||||||||||||||||||
4.35 | 257,403 | 0.59 | 4.62 | 0.80 | 4.41 | 55 | ||||||||||||||||||||
4.86 | 311,131 | 0.60 | 3.74 | 0.79 | 3.55 | 47 | ||||||||||||||||||||
1.87 | 454,665 | 0.60 | 3.26 | 0.79 | 3.07 | 60 | ||||||||||||||||||||
1.23 | 625,392 | 0.60 | 2.83 | 0.80 | 2.63 | 64 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
5.28 | % | $ | 33,298 | 0.88 | % | 4.18 | % | 1.13 | % | 3.93 | % | 49 | % | |||||||||||||
20.21 | 28,165 | 0.92 | 5.19 | 1.13 | 4.98 | 96 | ||||||||||||||||||||
0.27 | 13,948 | 1.00 | 7.58 | 1.13 | 7.45 | 147 | ||||||||||||||||||||
5.51 | 15,567 | 0.99 | 4.87 | 1.11 | 4.75 | 124 | ||||||||||||||||||||
4.36 | 13,198 | 1.00 | 4.48 | 1.13 | 4.35 | 180 | ||||||||||||||||||||
(0.17 | ) | 15,522 | 1.00 | 4.14 | 1.17 | 3.97 | 166 | |||||||||||||||||||
3.57 | 19,113 | 1.00 | 4.20 | 1.25 | 3.95 | 285 | ||||||||||||||||||||
4.76 | % | $ | 1,343 | 1.74 | % | 3.32 | % | 1.88 | % | 3.18 | % | 49 | % | |||||||||||||
19.22 | 1,413 | 1.74 | 4.48 | 1.87 | 4.35 | 96 | ||||||||||||||||||||
(0.47 | ) | 1,719 | 1.75 | 6.84 | 1.88 | 6.71 | 147 | |||||||||||||||||||
4.65 | 2,384 | 1.74 | 4.13 | 1.86 | 4.01 | 124 | ||||||||||||||||||||
3.69 | 2,272 | 1.75 | 3.74 | 1.88 | 3.61 | 180 | ||||||||||||||||||||
(0.74 | ) | 3,657 | 1.75 | 3.40 | 1.92 | 3.23 | 166 | |||||||||||||||||||
2.81 | 4,395 | 1.75 | 3.45 | 2.00 | 3.20 | 285 | ||||||||||||||||||||
4.87 | % | $ | 7,909 | 1.74 | % | 3.32 | % | 1.88 | % | 3.18 | % | 49 | % | |||||||||||||
19.13 | 6,748 | 1.75 | 4.34 | 1.88 | 4.21 | 96 | ||||||||||||||||||||
(0.48 | ) | 2,778 | 1.75 | 6.77 | 1.88 | 6.64 | 147 | |||||||||||||||||||
4.66 | 3,673 | 1.74 | 4.22 | 1.86 | 4.10 | 124 | ||||||||||||||||||||
3.70 | 1,792 | 1.75 | 3.73 | 1.88 | 3.60 | 180 | ||||||||||||||||||||
(0.74 | ) | 2,501 | 1.75 | 3.40 | 1.92 | 3.23 | 166 | |||||||||||||||||||
2.71 | 2,858 | 1.75 | 3.46 | 2.00 | 3.21 | 285 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
5.07 | % | $ | 1,149 | 1.24 | % | 3.84 | % | 1.38 | % | 3.70 | % | 49 | % | |||||||||||||
19.47 | 601 | 1.24 | 4.19 | 1.37 | 4.06 | 96 | ||||||||||||||||||||
0.02 | 681 | 1.25 | 7.39 | 1.38 | 7.26 | 147 | ||||||||||||||||||||
5.22 | 293 | 1.24 | 4.66 | 1.36 | 4.54 | 124 | ||||||||||||||||||||
4.20 | 219 | 1.25 | 4.22 | 1.44 | 4.03 | 180 | ||||||||||||||||||||
(0.44 | ) | 14 | 1.25 | 4.05 | 1.57 | 3.73 | 166 | |||||||||||||||||||
3.40 | 3 | 1.25 | 3.98 | 1.65 | 3.58 | 285 | ||||||||||||||||||||
|
|
| ||||||||||||||||||||||||
5.36 | % | $ | 637,019 | 0.74 | % | 4.32 | % | 0.88 | % | 4.18 | % | 49 | % | |||||||||||||
20.31 | 655,301 | 0.74 | 5.44 | 0.87 | 5.31 | 96 | ||||||||||||||||||||
0.52 | 633,108 | 0.75 | 7.77 | 0.88 | 7.64 | 147 | ||||||||||||||||||||
5.67 | 1,069,211 | 0.74 | 5.15 | 0.86 | 5.03 | 124 | ||||||||||||||||||||
4.73 | 851,513 | 0.75 | 4.71 | 0.88 | 4.58 | 180 | ||||||||||||||||||||
0.02 | 378,338 | 0.75 | 4.43 | 0.92 | 4.26 | 166 | ||||||||||||||||||||
3.83 | 278,777 | 0.75 | 4.43 | 1.00 | 4.18 | 285 |
See accompanying notes to financial statements.
Nuveen Investments 85
Total Return Bond Fund (concluded)
December 31, 2010 (Unaudited), all dollars and shares are rounded to thousands (000)
1. General Information and Significant Accounting Policies
General Information
On July 28, 2010, U.S. Bancorp, the indirect parent company of FAF Advisors, Inc. (the “FAF Advisors”), entered into an agreement to sell a portion of the FAF Advisors’ asset management business to Nuveen Investments, Inc. (“Nuveen”). Included in the sale was that part of FAF Advisors’ asset management business that advises the funds included in this report. The sale closed on December 31, 2010.
In connection with the transaction, the funds’ Board of Directors was asked to consider and approve new investment advisory agreements for the funds with Nuveen Asset Management, a wholly-owned subsidiary of Nuveen. The new investment advisory agreements for each fund were submitted to the funds’ shareholders for approval and took effect on January 1, 2011. The funds’ Board of Directors also approved new distribution agreements with Nuveen Investments, LLC. There was no change in the funds’ investment objectives or policies as a result of the transaction. The transition did result in a change to each fund’s name effective January 1, 2011.
Effective January 1, 2011, Nuveen Asset Management changed its name to Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”). Concurrently, Nuveen Fund Advisors formed a wholly-owned subsidiary, Nuveen Asset Management, LLC, to house its portfolio management capabilities. Nuveen Asset Management, LLC now serves as the funds’ sub-adviser, and the funds’ portfolio managers have become employees of Nuveen Asset Management, LLC. This allocation of responsibilities between Nuveen Fund Advisors and Nuveen Asset Management, LLC affects each of the funds. Nuveen Fund Advisors (as each affected fund’s investment adviser) will compensate Nuveen Asset Management, LLC (as each such fund’s sub-adviser) for the portfolio management services it provides to the fund from the fund’s management fee.
First American Investment Funds, Inc. (the “Trust” or “FAIF”) is an open-end investment company registered under the Investment Company Act of 1940, as amended. The Trust is comprised of 37 series, including Nuveen Core Bond Fund, formerly known as First American Core Bond Fund (“Core Bond Fund”), Nuveen High Income Bond Fund, formerly known as First American High Income Bond Fund (“High Income Bond Fund”), Nuveen Inflation Protected Securities Fund, formerly known as First American Inflation Protected Securities Fund (“Inflation Protected Securities Fund”), Nuveen Intermediate Government Bond Fund, formerly known as First American Intermediate Government Bond Fund (“Intermediate Government Bond Fund”), Nuveen Intermediate Term Bond Fund, formerly known as First American Intermediate Term Bond Fund (“Intermediate Term Bond Fund”), Nuveen Short Term Bond Fund, formerly known as First American Short Term Bond Fund (“Short Term Bond Fund”), and Nuveen Total Return Bond Fund, formerly known as First American Total Return Bond Fund (“Total Return Bond Fund”), (collectively, the “Funds”). Effective at the close of business on January 29, 2010, First American U.S. Government Mortgage Fund (“U.S. Government Mortgage Fund”) merged with Intermediate Government Bond Fund. Intermediate Government Bond Fund is the accounting survivor.
Core Bond Fund’s investment objective is to provide high current income consistent with limited risk to capital. Under normal market conditions, the Fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in debt securities such as U.S. government securities (securities issued or guaranteed by the U.S. government or its agencies or instrumentalities), including zero coupon securities, residential and commercial mortgage-backed securities, asset-backed securities and corporate debt obligations, including obligations issued by special-purpose entities that are backed by corporate debt obligations. Up to 10% of the Fund’s total assets may be invested collectively in debt securities rated lower than investment grade or unrated securities of comparable quality as determined by Nuveen Fund Advisors (securities commonly referred to as “high yield” or “junk bonds”). The Fund may invest up to 25% of its total assets in U.S. dollar denominated debt obligations of foreign corporations and governments that are not located in emerging market countries. To generate additional income, the Fund may invest up to 25% of its total assets in dollar roll transactions.
High Income Bond Fund’s investment objective is to provide a high level of current income. Under normal market conditions, the Fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in debt securities rated lower than investment grade at the time of purchase or in unrated securities of comparable quality (securities commonly referred to as “high-yield” securities of “junk bonds”). The Fund may invest in exchange-traded funds, closed-end funds, and other investment companies (“investment companies”). The Fund may invest up to 25% of its total assets in dollar denominated debt obligations of foreign corporations and governments. Up to 20% of the Fund’s total assets may be invested in dollar denominated debt obligations issued by governmental and corporate issuers that are located in emerging market countries.
Inflation Protected Securities Fund’s investment objective is to provide total return while providing protection against inflation. Under normal market conditions, the Fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in inflation protected debt securities. These securities will be issued by the U.S. and non-U.S. governments, their agencies and instrumentalities, and domestic and foreign corporations. Up to 20% of the Fund’s assets may be invested in holdings that are not inflation protected. These holdings may include domestic and foreign corporate debt obligations, securities issued or guaranteed by the U.S. government or its agencies and instrumentalities, debt obligations of foreign governments,
86 | Nuveen Investments |
Total Return Bond Fund (concluded)
residential and commercial mortgage-backed securities, asset-backed securities and derivative instruments. Up to 10% of the Fund’s net assets may be invested in securities that are rated lower than investment grade at the time of purchase or that are unrated and of comparable quality (securities commonly referred to as “high-yield” securities or “junk bonds”). The Fund may invest up to 20% of its net assets in non-dollar denominated securities, and may invest without limitation in U.S. dollar denominated securities of foreign corporations and governments.
Intermediate Government Bond Fund’s investment objective is to provide current income to the extent consistent with the preservation of capital. Under normal market conditions, the Fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in U.S. government securities. The Fund may invest up to 20% of its total assets, collectively, in non-U.S. government debt obligations, including asset-backed securities, residential and commercial mortgage-backed securities, corporate debt obligations, and municipal securities. To generate additional income, the Fund may invest up to 10% of its total assets in dollar roll transactions.
Intermediate Term Bond Fund’s investment objective is to provide current income to the extent consistent with preservation of capital. Under normal market conditions, the Fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in debt securities, such as U.S. government securities, (securities issued or guaranteed by the U.S. government or its agencies or instrumentalities), including zero coupon securities, residential and commercial mortgage-backed securities, asset-backed securities, and corporate debt obligations, including obligations issued by special-purpose entities that are backed by corporate debt obligations. The Fund may invest up to 25% of its total assets in U.S. dollar denominated debt obligations of foreign corporations and governments. To generate additional income, the Fund may invest up to 25% of its total assets in dollar roll transactions.
Short Term Bond Fund’s investment objective is to provide current income while maintaining a high degree of principal stability. Under normal market conditions, the Fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in debt securities, such as residential and commercial mortgage-backed securities, asset-backed securities, corporate debt obligations, including obligations issued by special-purpose entities that are backed by corporate debt obligations, U.S. government securities, which are securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and commercial paper. Up to 10% of the Fund’s total assets may be invested collectively in debt securities rated lower than investment grade or unrated securities of comparable quality as determined by Nuveen Fund Advisors (securities commonly referred to as “high yield” or “junk bonds”). The Fund may invest up to 25% of its total assets in U.S. dollar denominated debt obligations of foreign corporations and governments that are not located in emerging market countries.
Total Return Bond Fund’s investment objective is to provide a high level of current income consistent with prudent risk to capital. While the Fund may realize some capital appreciation, the Fund primarily seeks to achieve total return through preserving capital and generating income. Under normal market conditions, the Fund invests primarily (at least 80% of its net assets, plus the amount of any borrowings for investment purposes) in debt securities such as U.S. government securities (securities issued or guaranteed by the U.S. government or its agencies or instrumentalities), residential and commercial mortgage-backed securities, asset-backed securities, domestic and foreign corporate debt obligations, including obligations issued by special-purpose entities that are backed by corporate debt obligations, and debt obligations of foreign governments. Up to 30% of the Fund’s total assets may be invested collectively in debt securities, provided that the Fund will not invest more than 20% of its total assets in any single category such as securities rated lower than investment grade or unrated securities of comparable quality as determined by the Adviser (securities commonly referred to as “high yield” or “junk bonds”). To generate additional income, the Fund may invest up to 25% of its total assets in dollar roll transactions.
The Funds may invest in derivative financial instruments in an attempt to manage risk, manage the effective maturity or duration of securities in the Funds’ portfolios or for speculative purposes in an effort to increase the Funds’ yield or to enhance returns. The Funds that may invest in non-dollar denominated securities may also use derivatives to gain exposure to non-dollar denominated securities markets to the extent they do not do so through direct investments.
The Funds’ most recent prospectus provides further descriptions of each Fund’s investment objective, principal investment strategies and principal risks.
Effective January 18, 2011, Class Y Shares were renamed Class I Shares and Class R Shares were renamed Class R3 Shares, and Intermediate Term Bond Fund began offering Class C Shares. Class B Shares of Core Bond Fund, High Income Bond Fund and Total Return Bond Fund are only available upon exchange of Class B Shares from another Nuveen mutual fund or for purposes of dividend reinvestment, but are not available for new accounts or for additional investment into existing accounts.
During the six months ended December 31, 2010, Class A Shares of Intermediate Government Bond Fund, Intermediate Term Bond Fund, and Short Term Bond Fund were sold with a front-end sales charge of 2.25%. Class A Shares of Core Bond Fund, High Income Bond Fund, Inflation Protected Securities Fund and Total Return Bond Fund were sold with a front-end sales charge of 4.25%. Class C shares were subject to a contingent deferred sales charge (“CDSC”) for twelve months and did not convert to Class A Shares.
Nuveen Investments | 87 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
Class R Shares had no sales charge and were offered only through certain tax-deferred retirement plans. Class Y Shares had no sales charge and were offered only to qualifying institutional investors and certain other qualifying accounts. Class C and Class R Shares were not offered by Intermediate Term Bond Fund and Class R Shares were not offered by Short Term Bond Fund. Class B Shares were subject to a CDSC for six years and automatically converted to Class A Shares after eight years.
Effective January 18, 2011, Class A Shares of High Income Bond Fund are sold with an up-front sales charge of 4.75%. Class A Shares of Core Bond Fund, Inflation Protected Securities Fund and Total Return Bond Fund are sold with an up-front sales charge of 4.25%. Class A Shares of Intermediate Government Bond Fund and Intermediate Term Bond Fund are sold with an up-front sales charge of 3.00% and for Short Term Bond Fund 2.25%. Class A Share purchases of the Funds, with the exception of Short Term Bond Fund, of $1 million or more are sold at net asset value without an up-front sales charge. Class A Share purchases of Short Term Bond Fund of $250,000 or more are sold at net asset value without an up-front sales charge. Class A Share purchases of the Funds may be subject to a CDSC if redeemed within eighteen months of purchase. Class B Shares are subject to a CDSC of up to 5% depending upon the length of time the shares are held by the investor (CDSC is reduced to 0% at the end of six years). Class B Shares convert to Class A Shares eight years after purchase. Class C Shares are subject to a CDSC of 1% if redeemed within twelve months of purchase. Class R3 and Class I Shares are not subject to any sales charge.
During the six months ended December 31, 2010, Class A, C, R and Y Shares were offered by the Funds, with the exception of Intermediate Term Bond Fund and Short Term Bond Fund. Class C and R Shares were not offered by Intermediate Term Bond Fund, and Class R Shares were not offered by Short Term Bond Fund. Class B Shares of Core Bond Fund, High Income Bond Fund and Total Return Bond Fund were only offered through permitted exchanges and any reinvested dividends.
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Investment Valuation
Security valuations for the Funds’ investments are furnished by an independent pricing service that has been approved by the Funds’ Board of Directors. These securities are generally classified as Level 2. Investments in equity securities that are traded on a national securities exchange (or reported on the NASDAQ National Market (“NASDAQ”) are stated at the last quoted sales price if readily available for such securities on each business day. For securities traded on NASDAQ, the funds utilize the NASDAQ Official Closing Price which compares the last trade to the bid/ask range of a security. If the last trade falls within the bid/ask range, then that price will be the closing price. If the last trade is outside the bid/ask range, and falls above the ask, then the ask price will be the closing price. If the last trade is below the bid, then the bid will be the closing price. These securities are generally classified as Level 1. Other equity securities traded in the over-the-counter market and listed equity securities for which no sale was reported on that date are stated at the last quoted bid price. These securities are generally classified as Level 1. Investments in open-end funds are valued at their respective net asset values on the valuation date. Investments in closed-end funds are valued at their reported closing prices on the national securities exchange on which they trade.
Investment grade debt obligations exceeding 60 days to maturity are valued by an independent pricing service. The pricing service may employ methodologies that utilize actual market transactions, broker-dealer supplied valuations, or other formula-driven valuation techniques. These techniques generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings, and general market conditions. Securities for which prices are not available from an independent pricing service, but where an active market exists, are valued using market quotations obtained from one or more dealers that make markets in the securities or from a widely used quotation system. These securities are generally valued as Level 2 or Level 3 depending on the priority of significant inputs. Investment grade debt obligations with 60 days or less remaining until maturity will be valued at their amortized cost, which approximates fair value. These securities are generally classified as Level 2. Foreign securities are valued at the closing prices on the principal exchanges on which they trade. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. Exchange rates are provided daily by recognized independent pricing agents.
The following investment vehicles, when held by a Fund, are priced as follows: Exchange listed futures and options on futures are priced at their last sale price on the exchange on which they are principally traded, as determined by Nuveen Fund Advisors on the day the valuation is made. These investment vehicles are generally classified as Level 1. If there were no sales on that day, futures and options on futures will be valued at the last reported bid price. Options on securities, indices, and currencies traded on NASDAQ or listed on a stock exchange, whether domestic or foreign, are valued at the last sale price on NASDAQ or on any exchange on the day the valuation is made. If there were no sales on that day, the options will be valued at the last sale price on the previous valuation date. Last sale prices are obtained from an independent pricing service. Forward contracts, swaps, and over-the-counter options on securities, indices, and currencies are valued at the quotations received from an independent pricing service, if available. Foreign currency forward contracts are valued at the current day’s interpolated foreign exchange rate, as calculated using the current day’s
88 | Nuveen Investments |
Total Return Bond Fund (concluded)
exchange rate, and the 30-, 60-, 90-, 180-, and 360-day forward rates provided by an independent pricing service. These investment vehicles are generally classified as Level 2.
When market quotations are not readily available, securities are internally valued at fair value as determined in good faith by procedures established and approved by the Funds’ Board of Directors. Some of the factors which may be considered in determining fair value are fundamental analytical data relating to the investment; the nature and duration of any restrictions on disposition; trading in similar securities of the same issuer or comparable companies; information from broker-dealers; and an evaluation of the forces that influence the market in which the securities are purchased and sold. If events occur that materially affect the value of securities (including non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities will be valued at fair value. Price movements in futures contracts and ADRs (American Depositary Receipts), and various other indices, may be reviewed in the course of making a good faith determination of a security’s fair value. The use of fair value pricing by a Fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without fair value pricing. These securities are generally valued as Level 2 or Level 3 depending on the priority of significant inputs.
Refer to Footnote 2 — Fair Value Measurements for further details on the leveling of securities held by the Funds as of the end of the reporting period.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. As of December 31, 2010, Core Bond Fund and Total Return Bond Fund had outstanding when-issued/delayed delivery purchase commitments of $55,318 and $48,420, respectively.
Investment Income
Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date or, for foreign securities, when information is available. Investment income also reflects paydown gains and losses, if any.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required.
For all open tax years and all major taxing jurisdictions, management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Shareholders
The Funds declare dividends from their net investment income daily and pay shareholders monthly. Fund shares begin to accrue dividends on the business day after the day when the monies used to purchase Fund shares are collected by the Funds’ transfer agent.
Net realized capital gains from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
Dollar Roll Transactions
A dollar roll (“dollar rolls”) is a transaction in which a Fund purchases or sells mortgage-backed securities (“MBS”) for delivery in the future and simultaneously contracts to sell or repurchase a substantially similar (same type, coupon, and maturity) MBS on a different specified future date. For each Fund that invests in such transactions, the dollar rolls are identified in the Fund’s Schedules of Investments as “MDR”. During the roll period, the Fund foregoes principal and interest paid on the MBS. The Fund is compensated by fee income or the difference between the current sales price and the lower forward price for the future purchase. Such compensation is amortized over the life of the dollar rolls and recognized as a component of “Investment Income” on the Statement of Operations. Dollar rolls are valued daily.
Nuveen Investments | 89 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
Dollar rolls involve the risk that the market value of the MBS the Fund is obligated to repurchase under an agreement may decline below the repurchase price. These transactions also involve some risk to the Fund if the other party should default on its obligation and the Fund is delayed or prevented from completing the transaction. In the event that the buyer of securities under a dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the dollar roll may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.
During the six months ended December 31, 2010, the Funds did not enter into dollar roll transactions.
Foreign Currency Translation
To the extent a Fund invests in securities and/or contracts that are denominated in a currency other than U.S. dollars, the Fund will be subject to currency risk, which is the risk that an increase in the U.S. dollar relative to the foreign currency will reduce returns or portfolio value. Generally, when the U.S. dollar rises in value against a foreign currency, the Fund’s investments denominated in that currency will lose value because its currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value. Investments and other assets and liabilities denominated in foreign currencies are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate prevailing in the foreign currency exchange market at the time of valuation. Purchases and sales of investments and income denominated in foreign currencies are translated into U.S. dollars on the respective dates of such transactions.
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at 4:00 p.m. Eastern time. Investments, income and expenses are translated on the respective dates of such transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of the transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Funds and the amounts actually received.
The Funds do not isolate the portion of gains and losses on investments in debt securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of debt securities. The Funds isolate the effect of fluctuations in foreign currency rates when determining the gain or loss upon sale or maturity of foreign currency denominated debt obligations pursuant to the federal income tax regulations. Such amounts are categorized as foreign currency gain (loss) for both financial reporting and income tax purposes.
The Funds report certain foreign currency-related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.
Forward Foreign Currency Exchange Contracts
Each Fund that invests in non-dollar denominated securities is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives and is authorized to enter into forward foreign currency exchange contracts in an attempt to manage such risk. The Fund normally enters into a forward foreign currency exchange contract under two circumstances: (i) for the purchase or sale of a security denominated in a foreign currency to “lock in” the U.S. exchange rate of the transaction, with such period being a shortdated contract covering the period between transaction date and settlement date; or (ii) when the Fund’s Managers, believe that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar or against another foreign currency. Forward foreign currency exchange contracts are valued daily at the forward rate and are recognized as a component of “Unrealized appreciation or depreciation on forward foreign currency exchange contracts” on the Statements of Assets and Liabilities. The change in value of the contracts during the reporting period is recognized as a component of “Change in net unrealized appreciation (depreciation) of forward foreign currency exchange contracts and foreign currency” on the Statements of Operations. When the contract is closed or offset with the same counterparty, the Fund recognizes the difference between the value of the contract at the time it was entered and the value at the time it was closed or offset as a component of “Net realized gain (loss) from forward foreign currency exchange contracts and foreign currency” on the Statement of Operations.
Forward foreign currency exchange contracts will generally not be entered into for terms greater than three months, but may have maturities of up to six months or more. The use of forward foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of a Fund’s investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency exchange contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency exchange contract would limit the risk of loss due to a decline in the value of a particular currency; however, it also would limit any potential gain that might result should the value of the currency increase instead of decrease. These contracts may involve market risk in excess of the amount of unrealized gain or loss reflected on the Statements of Assets and Liabilities.
Refer to Footnote 3 — Derivative Instruments and Hedging Activities for further details on forward foreign currency exchange contract activity.
90 | Nuveen Investments |
Total Return Bond Fund (concluded)
Futures Contracts
Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and is authorized to invest in futures contracts in an attempt to manage such risk. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the “initial margin.” Cash held by the broker to cover initial margin requirements on open futures contracts, if any, is recognized as “Deposits with brokers for open futures contracts” on the Statements of Assets and Liabilities. Subsequent payments (“variation margin”) are made or received by the Fund each day, depending on the daily fluctuation of the value of the contract. Variation margin is recognized as a receivable or payable for “Variation margin on futures contracts” on the Statements of Assets and Liabilities, when applicable.
During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by “marking-to-market” on a daily basis to reflect the changes in market value of the contract and is recognized as a component of “Change in net unrealized appreciation (depreciation) of futures contracts” on the Statements of Operations. When the contract is closed or expired, the Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and value of the contract when originally entered into, which is recognized as a component of “Net realized gain (loss) from futures contracts” on the Statements of Operations.
Risks of investments in futures contracts include the possible adverse movement in the price of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts and/or that a change in the value of the contract may not correlate with a change in the value of the underlying securities or indices.
Refer to Footnote 3 — Derivative Instruments and Hedging Activities for further details on futures contracts activity.
Options Transactions
Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and, with the exception of Intermediate Government Bond Fund, is authorized to purchase and write (sell) call and put options on securities, futures, swaps (“swaptions”) or currencies in an attempt to manage such risk. The purchase of options involves the risk of loss of all or a part of the cash paid for the options (the premium). The market risk associated with purchasing options is limited to the premium paid. The counterparty credit risk of purchasing options, however, needs to take into account the current value of the option, as this is the performance expected from the counterparty. Options purchased are accounted for in the accompanying financial statements in the same manner as portfolio securities. When a Fund writes an option, an amount equal to the net premium received (the premium less commission) is recognized as a component of “Options written, at value” on the Statements of Assets and Liabilities and is subsequently adjusted to reflect the current value of the written option until the option is exercised or expires or the Fund enters into a closing purchase transaction. The changes in values of the options written during the reporting period are recognized as a component of “Change in net unrealized appreciation (depreciation) of options written” on the Statements of Operations. When a call or put option is exercised or expires or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on executing a closing purchase transaction, including commission, is recognized as a component of “Net realized gain (loss) from options written” on the Statements of Operations. The Fund, as writer of an option, has no control over whether the underlying instrument may be sold (called) or purchased (put) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option. There is also the risk the Fund may not be able to enter into a closing transaction because of an illiquid market.
Refer to Footnote 3 — Derivative Instruments and Hedging Activities for further details on option contract activity.
Swap Contracts
Each Fund, with the exception of Intermediate Government Bond Fund, is authorized to enter into swap contracts consistent with their investment objectives and policies to reduce, increase or otherwise alter its risk profile or to alter its portfolio characteristics (i.e. duration, yield curve positioning and credit quality).
Credit Default Swaps
Each Fund is subject to credit risk in the normal course of pursuing its investment objectives. A Fund may enter into a credit default swap contract to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate or sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. Credit default swap contracts involve one party making a stream of payments to another party in exchange for the right to receive a specified return if/when there is a credit event by a third party. Generally, a credit event means bankruptcy, failure to pay, or restructuring. The specific credit events applicable for each credit default swap are stated in the terms of the particular swap agreement. As a purchaser of a credit default swap contract, the Fund pays to the counterparty a periodic interest fee based on the notional amount of the credit default swap. This interest fee is accrued daily and recognized with the daily change in the market value of the contract as a component of “Unrealized appreciation or depreciation on credit default swaps” on the Statements of Assets and Liabilities and is recorded as a realized loss upon payment. Upon occurrence of a specific credit event with respect to the underlying referenced entity, the Fund is obligated to deliver that security, or an equivalent amount of cash, to the counterparty in
Nuveen Investments | 91 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
exchange for receipt of the notional amount from the counterparty. The difference between the value of the security delivered and the notional amount received is recorded as a realized gain. Payments received or made at the beginning of the measurement period are recognized as a component of “Credit default swap premiums paid and/or received” on the Statements of Assets and Liabilities. As a seller of a credit default swap contract, the Fund generally receives from the counterparty a periodic interest fee based on the notional amount of the credit default swap. This interest fee is accrued daily as a component of unrealized appreciation or depreciation and is recorded as a realized gain upon payment. Upon occurrence of a specific credit event with respect to the underlying referenced entity, the Fund will either receive that security, or an equivalent amount of cash, from the counterparty in exchange for payment of the notional amount to the counterparty, or pay a net settlement amount of the credit default swap contract less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The difference between the value of the security received and the notional amount paid is recorded as a realized loss. Changes in the value of a credit default swap during the fiscal period are recognized as a component of “Change in net unrealized appreciation (depreciation) of swaps”, and realized gains and losses are recognized as a component of “Net realized gain (loss) from swaps” on the Statements of Operations. The maximum potential amount of future payments the Fund could incur as a seller of protection in a credit default swap contract is limited to the notional amount of the contract. The maximum potential amount would be offset by the recovery value, if any, of the respective referenced entity.
Currency Swaps
Each Fund, may enter into currency swaps. A currency swap is an agreement between two parties to exchange equivalent fixed amounts in two different currencies for a fixed period of time. The exchange of currencies at the inception date of the contract takes place at the current spot rate. Such an agreement may provide that, for the duration of the swap, each party pays interest to the other on the received amount at an agreed upon fixed or floating interest rate. When the contract ends, the parties re-exchange the currencies at the initial exchange rate, a specified rate, or the then current spot rate. Some currency swaps may not provide for exchanging currencies, but only for exchanging interest cash flows. None of the Funds entered into currency swap contracts during the six months ended December 31, 2010.
Interest Rate Swaps
Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and policies in an attempt to obtain a desired return at a lower cost than if the Fund had invested directly in the asset that yielded the desired return. In connection with these contracts, securities in the Funds’ schedules of investments may be identified as collateral in accordance with the terms of the respective swap contract. Interest rate swap contracts involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (i.e., an exchange of floating rate payments for fixed rate payments with respect to a specified notional amount of principal). Interest rate swap contracts are valued daily. The Funds accrue daily the periodic payments expected to be paid and received on each interest rate swap contract and recognize the daily change in the market value of the Funds’ contractual rights and obligations under the contracts. The net amount recorded on these transactions for each counterparty is recognized on the Statements of Assets and Liabilities as a component of “Unrealized appreciation or depreciation on interest rate swaps” with the change during the fiscal period recognized on the Statements of Operations as a component of “Change in net unrealized appreciation (depreciation) of swaps.” Income received or paid by the Funds is recognized as a component of “Net realized gain (loss) from swaps” on the Statements of Operations, in addition to the net realized gains or losses recognized upon the termination of an interest rate swap contract and are equal to the difference between the Funds’ basis in the interest rate swap and the proceeds from (or cost of) the closing transaction. The amount of the payment obligation is based on the notional amount of the interest rate swap contract. Payments received or made at the beginning of the measurement period are recognized as a component of “Interest rate swap premiums paid and/or received” on the Statements of Assets and Liabilities. For tax purposes, periodic payments are treated as ordinary income or expense.
Total Return Swaps
Each Fund is subject to price risk in the normal course of pursuing its investment objectives. A Fund may enter into total return swap contract to manage its exposure to the market or certain sectors of the market, or to create exposure to certain debt securities to which it is otherwise not exposed. Total return swap contracts involve commitments to pay interest in exchange for a market-linked return, both based on specified notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of offsetting the interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. Payments received or made at the beginning of the measurement period are recognized as a component of “Total return swap premiums paid and/or received” on the Statements of Assets and Liabilities. As a seller of a total return swap contract, the Fund generally receives from the counterparty a periodic interest fee based on the notional amount of the total return swap. This interest fee is accrued daily as a component of unrealized appreciation or depreciation and is recorded as a realized gain upon payment. None of the Funds entered into total return swap contracts during the six months ended December 31, 2010
Refer to Footnote 3 — Derivative Instruments and Hedging Activities for further details on swap contract activity.
92 | Nuveen Investments |
Total Return Bond Fund (concluded)
Market and Counterparty Credit Risk
In the normal course of business each Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose each Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of each Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statements of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange’s clearinghouse, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
Each Fund helps manage counterparty credit risk by entering into agreements only with counterparties Nuveen Fund Advisors believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when each Fund has an unrealized loss, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
Inflation-Indexed Bonds
Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond however, interest will be paid based on a principal value which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond will be recognized as a component of “Interest from unaffiliated investments” on the Statements of Operations, even though investors do not receive their principal until maturity.
Zero Coupon Securities
Each Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Multiclass Operations and Allocations
During the six months ended December 31, 2010, expenses that were directly related to one of the Funds were allocated directly to that Fund, and other operating expenses were allocated to the Funds on several bases, including evenly across all Funds, allocated based on relative net assets of all funds within the First American Funds family, or a combination of both methods. Effective January 1, 2011, income and expenses of the Funds that are not directly attributable to a specific class of shares are prorated among the classes based on the relative net assets of each class. Expenses directly attributable to a class of shares, which presently only include distribution fees and shareholder service fees, are recorded to the specific class.
Realized and unrealized capital gains and losses of the Funds are prorated among the classes based on the relative net assets of each class.
Interfund Lending Program
During the six months ended December 31, 2010, pursuant to an exemptive order issued by the Securities and Exchange Commission (the “SEC”), the Funds, along with other registered investment companies in the First American Funds family, were allowed to participate in an interfund lending program. This program provided an alternative credit facility allowing the Funds to borrow from, or lend money to, other participating funds. The Funds did not have any interfund lending transactions during the six months ended December 31, 2010. The exemptive order terminated with respect to the Funds on December 31, 2010, in connection with the closing of the sale.
Securities Lending
In order to generate additional income, each Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. Each Fund’s policy is to receive collateral from the borrower in the form of cash, U.S. government securities, or other high-grade debt obligations equal to at least 100% of the value of securities loaned. If the value of the securities on loan increases, additional collateral is received from the borrower. As with other extensions or credit, there may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the security fail financially.
Nuveen Investments | 93 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
U.S. Bank National Association (“U.S. Bank”) serves as the securities lending agent for the Funds in transactions involving the lending of portfolio securities on behalf of the Funds. U.S. Bank acts as the securities lending agent pursuant to, and subject to compliance with conditions contained in, an exemptive order issued by the SEC.
During the six months ended December 31, 2010, U.S. Bank, as the securities lending agent, received fees of up to 25% of each Fund’s net income from securities lending transactions and paid half of such fees to the Adviser for certain securities lending services provided by the Adviser. Collateral for securities on loan was invested in a money market fund administered by FAF Advisors and FAF Advisors received an administration fee equal to 0.02% of such Fund’s average daily net assets in the money market fund.
Income from securities lending, net of fees paid to U.S. Bank, is recognized on the Statements of Operations as “Securities lending income.” Securities lending fees paid to U.S. Bank by each Fund during the six months ended December 31, 2010, were as follows:
Fund | Amount | |||
Core Bond Fund | $ | 11 | ||
High Income Bond Fund | 58 | |||
Inflation Protected Securities Fund | 2 | |||
Intermediate Government Bond Fund | 1 | |||
Intermediate Term Bond Fund | 8 | |||
Short Term Bond Fund | 7 | |||
Total Return Bond Fund | 8 |
Indemnifications
Under the Trust’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that provide general indemnifications to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
In determining the fair value of each Fund’s investments, various inputs are used. These inputs are summarized in the three broad levels listed below:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3 – Significant unobservable inputs (including management’s assumptions in determining the fair value of investments).
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of each Fund’s fair value measurements as of December 31, 2010:
Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Core Bond Fund | ||||||||||||||||
Corporate Bonds | $ | — | $ | 513,396 | $ | — | $ | 513,396 | ||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 293,439 | — | 293,439 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 114,842 | — | 114,842 | ||||||||||||
Asset-Backed Securities | — | 99,536 | — | 99,536 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | — | 58,259 | — | 58,259 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 43,824 | — | 43,824 | ||||||||||||
U.S. Government & Agency Securities | — | 42,198 | — | 42,198 | ||||||||||||
Preferred Stock | 122 | — | — | 122 | ||||||||||||
Short-Term Investments | 45,495 | 3,914 | — | 49,409 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 150,792 | — | — | 150,792 | ||||||||||||
Total Investments | $ | 196,409 | $ | 1,169,408 | $ | — | $ | 1,365,817 |
94 | Nuveen Investments |
Total Return Bond Fund (concluded)
Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
High Income Bond Fund | ||||||||||||||||
High Yield Corporate Bonds | $ | — | $ | 415,424 | $ | — | $ | 415,424 | ||||||||
Preferred Stocks | 17,426 | 3,639 | — | 21,065 | ||||||||||||
Convertible Securities | 3,047 | 5,239 | — | 8,286 | ||||||||||||
Exchange-Traded Funds | 8,196 | — | — | 8,196 | ||||||||||||
Investment Grade Corporate Bonds | — | 7,777 | — | 7,777 | ||||||||||||
Common Stocks | 4,950 | 534 | — | 5,484 | ||||||||||||
Closed-End Funds | 4,925 | — | — | 4,925 | ||||||||||||
Asset-Backed Security | — | 5 | — | 5 | ||||||||||||
Short-Term Investments | 16,167 | 190 | — | 16,357 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 117,338 | — | — | 117,338 | ||||||||||||
Total Investments | $ | 172,049 | $ | 432,808 | $ | — | $ | 604,857 | ||||||||
Inflation Protected Securities Fund | ||||||||||||||||
U.S. Government & Agency Securities | $ | — | $ | 177,507 | $ | — | $ | 177,507 | ||||||||
Corporate Bonds | — | 13,197 | — | 13,197 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 6,946 | — | 6,946 | ||||||||||||
Preferred Stocks | 472 | — | — | 472 | ||||||||||||
Exchange-Traded Fund | 316 | — | — | 316 | ||||||||||||
Convertible Security | 185 | — | — | 185 | ||||||||||||
Closed-End Fund | 127 | — | — | 127 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Security | — | 38 | — | 38 | ||||||||||||
Short-Term Investments | 3,508 | 205 | — | 3,713 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 10,188 | — | — | 10,188 | ||||||||||||
Total Investments | $ | 14,796 | $ | 197,893 | $ | — | $ | 212,689 | ||||||||
Intermediate Government Bond Fund | ||||||||||||||||
U.S. Government & Agency Securities | $ | — | $ | 65,195 | $ | — | $ | 65,195 | ||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 25,839 | — | 25,839 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | — | 8,022 | — | 8,022 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 6,629 | — | 6,629 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 4,933 | — | 4,933 | ||||||||||||
Corporate Bonds | — | 4,422 | — | 4,422 | ||||||||||||
Asset-Backed Securities | — | 4,085 | — | 4,085 | ||||||||||||
Short-Term Investments | 2,226 | 270 | — | 2,496 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 18,108 | — | — | 18,108 | ||||||||||||
Total Investments | $ | 20,334 | $ | 119,395 | $ | — | $ | 139,729 | ||||||||
Intermediate Term Bond Fund | ||||||||||||||||
Corporate Bonds | $ | — | $ | 373,426 | $ | — | $ | 373,426 | ||||||||
Asset-Backed Securities | — | 106,245 | — | 106,245 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 74,013 | — | 74,013 | ||||||||||||
U.S. Government & Agency Securities | — | 53,560 | — | 53,560 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | — | 52,299 | — | 52,299 | ||||||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 48,553 | — | 48,553 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 27,905 | — | 27,905 | ||||||||||||
Municipal Bond | — | 6,511 | — | 6,511 | ||||||||||||
Short-Term Investments | 11,567 | 2,455 | — | 14,022 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 109,487 | — | — | 109,487 | ||||||||||||
Total Investments | $ | 121,054 | $ | 744,967 | $ | — | $ | 866,021 | ||||||||
Short Term Bond Fund | ||||||||||||||||
Corporate Bonds | $ | — | $ | 368,498 | $ | — | $ | 368,498 | ||||||||
Asset-Backed Securities | — | 140,157 | — | 140,157 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 80,234 | — | 80,234 | ||||||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 69,464 | — | 69,464 | ||||||||||||
U.S. Government & Agency Securities | — | 58,802 | — | 58,802 | ||||||||||||
Collateralized Mortgage Obligation – U.S. Government Agency Mortgage-Backed Securities | — | 52,105 | — | 52,105 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 28,100 | — | 28,100 | ||||||||||||
Municipal Bond | — | 6,296 | — | 6,296 | ||||||||||||
Short-Term Investments | 19,228 | 1,905 | — | 21,133 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 84,294 | — | — | 84,294 | ||||||||||||
Total Investments | $ | 103,522 | $ | 805,561 | $ | — | $ | 909,083 |
Nuveen Investments | 95 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Total Return Bond Fund | ||||||||||||||||
Corporate Bonds | $ | — | $ | 405,243 | $ | — | $ | 405,243 | ||||||||
U.S. Government Agency Mortgage-Backed Securities | — | 123,747 | — | 123,747 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 64,224 | — | 64,224 | ||||||||||||
Asset-Backed Securities | — | 37,934 | — | 37,934 | ||||||||||||
Collateralized Mortgage Obligation – Private Mortgage-Backed Securities | — | 21,143 | — | 21,143 | ||||||||||||
U.S. Government & Agency Securities | — | 14,591 | — | 14,591 | ||||||||||||
Preferred Stocks | 3,392 | — | — | 3,392 | ||||||||||||
Closed-End Funds | 1,266 | — | — | 1,266 | ||||||||||||
Convertible Security | 675 | — | — | 675 | ||||||||||||
Municipal Bond | — | 572 | — | 572 | ||||||||||||
Short-Term Investments | 49,960 | 1,735 | — | 51,695 | ||||||||||||
Investment Purchased with Proceeds from Securities Lending | 73,879 | — | — | 73,879 | ||||||||||||
Total Investments | $ | 129,172 | $ | 669,189 | $ | — | $ | 798,361 |
As of December 31, 2010, each Fund’s investments in other financial instruments* were classified as follows:
Fund | Level 1 | Level 2 | Level 3 | Total Unrealized Appreciation (Depreciation) | ||||||||||||
Core Bond Fund | $ | 738 | $ | (2,664 | ) | $ | — | $ | (1,926 | ) | ||||||
High Income Bond Fund | (97 | ) | — | — | (97 | ) | ||||||||||
Inflation Protected Securities Fund | 36 | (338 | ) | — | (302 | ) | ||||||||||
Intermediate Government Bond Fund | (199 | ) | — | — | (199 | ) | ||||||||||
Intermediate Term Bond Fund | (941 | ) | (1,560 | ) | — | (2,501 | ) | |||||||||
Short Term Bond Fund | 2,041 | (675 | ) | — | 1,366 | |||||||||||
Total Return Bond Fund | 413 | (348 | ) | — | 65 |
* | Other financial instruments are derivative instruments such as futures and swaps, which are valued at the unrealized appreciation (depreciation) on the instrument. |
The following is a reconciliation of the Funds’ Level 3 investments held at the beginning and end of the measurement period:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | |||||||||||||||||||
Balance at beginning of period | $ | 28,475 | $ | 8,439 | $ | 883 | $ | 10,874 | $ | 8,803 | $ | 12,024 | ||||||||||||
Net realized gain (loss) | — | — | — | — | — | — | ||||||||||||||||||
Net change in unrealized appreciation (depreciation) | — | — | — | — | — | — | ||||||||||||||||||
Purchases at cost | — | — | — | — | — | — | ||||||||||||||||||
Sales at proceeds | — | — | — | — | — | — | ||||||||||||||||||
Transfers in to | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of | (28,475 | ) | (8,439 | ) | (883 | ) | (10,874 | ) | (8,803 | ) | (12,024 | ) | ||||||||||||
Balance as of December 31, 2010 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Change in net in unrealized appreciation (depreciation) during the period of Level 3 securities held as of December 31, 2010 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
During the six months ended December 31, 2010, the Funds recognized no significant transfers to/from Level 1 or Level 2. Transfers in and/or out of Level 3 are shown using end of period values.
3. Derivative Instruments and Hedging Activities
The Funds record derivative instruments at fair value, with changes in fair value recognized on the Statements of Operations, when applicable. Even though the Funds’ investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. For additional information on the derivative instruments in which each Fund was invested during and at the end of the reporting period, refer to the Schedules of Investments, Financial Statements and Footnote 1 – General Information and Significant Accounting Policies.
96 | Nuveen Investments |
Total Return Bond Fund (concluded)
The average notional amount is calculated based on the outstanding notional amount at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. During the six months ended December 31, 2010, the quarterly average gross notional amounts of the derivatives held by the Funds were as follows:
Fund | Futures/ Long | Futures/ Short | Credit Default Swaps | Interest Rate Swaps | Foreign Forward Currency Contracts | |||||||||||||||
Core Bond Fund | $ | 29,142 | $ | 107,203 | $ | — | $ | 156,000 | $ | — | ||||||||||
High Income Bond Fund | 11,785 | 1,204 | — | — | — | |||||||||||||||
Inflation Protected Securities Fund | 5,434 | 5,479 | — | 17,000 | 595 | |||||||||||||||
Intermediate Government Bond Fund | 26,442 | 2,515 | — | — | — | |||||||||||||||
Intermediate Term Bond Fund | 89,671 | 12,942 | — | 91,000 | — | |||||||||||||||
Short Term Bond Fund | 14,531 | 117,600 | 5,267 | 77,000 | — | |||||||||||||||
Total Return Bond Fund | 31,650 | 104,311 | 22,933 | 61,000 | 5,028 |
The following table presents the fair value of all derivative instruments held by the Funds as of December 31, 2010, the location of these instruments on the Statements of Assets and Liabilities and the primary underlying risk exposure.
Statements of Assets and Liabilities Location | Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Fund | Intermediate Bond Fund | Short Term Bond Fund | Total Return Bond Fund | |||||||||||||||||||||||
Asset Derivatives | ||||||||||||||||||||||||||||||
Foreign Exchange Contracts | Receivables, Unrealized Appreciation* | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 69 | |||||||||||||||
Interest Rate Contracts | Receivables, Unrealized Appreciation* | 897 | — | 51 | 3 | — | 2,106 | 520 | ||||||||||||||||||||||
Credit Contracts | Receivables, Unrealized Appreciation | — | — | — | — | — | 467 | 360 | ||||||||||||||||||||||
Balance as of December 31, 2010 | $ | 897 | $ | — | $ | 51 | $ | 3 | $ | — | $ | 2,573 | $ | 949 | ||||||||||||||||
Liability Derivatives | ||||||||||||||||||||||||||||||
Foreign Exchange Contracts | Payables, Unrealized Depreciation* | $ | — | $ | — | $ | 18 | $ | — | $ | — | $ | — | $ | 153 | |||||||||||||||
Interest Rate Contracts | Payables, Unrealized Depreciation* | 2,823 | 97 | 335 | 202 | 2,501 | 1,207 | 731 | ||||||||||||||||||||||
Balance as of December 31, 2010 | $ | 2,823 | $ | 97 | $ | 353 | $ | 202 | $ | 2,501 | $ | 1,207 | $ | 884 |
*Includes | cumulative appreciation/depreciation of futures contracts as reported in the footnotes to the Funds’ Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The following tables present the amount of realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended December 31, 2010, on derivative instruments, as well as the primary risk exposure associated with each.
Realized gain (loss) from derivatives:
Core Bond Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | (7,385 | ) | $ | (846 | ) | $ | (8,231 | ) | |||
Credit Contracts | — | (238 | ) | (238 | ) | |||||||
High Income Bond Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | 529 | $ | — | $ | 529 | ||||||
Inflation Protected Securities Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | (30 | ) | $ | (99 | ) | $ | (129 | ) | |||
Foreign Exchange Contracts | (67 | ) | — | (67 | ) | |||||||
Intermediate Government Bond Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | 68 | $ | — | $ | 68 | ||||||
Intermediate Term Bond Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | (61 | ) | $ | (685 | ) | $ | (746 | ) | |||
Credit Contracts | — | — | — | |||||||||
Short Term Bond Fund | Futures | Swaps | Total | |||||||||
Interest Rate Contracts | $ | (4,119 | ) | $ | (388 | ) | $ | (4,507 | ) | |||
Credit Contracts | — | 69 | 69 |
Nuveen Investments | 97 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
Total Return Bond Fund | Options* | Futures | Swaps | Total | ||||||||||||
Interest Rate Contracts | $ | (793 | ) | $ | (5,127 | ) | $ | (213 | ) | $ | (6,133 | ) | ||||
Credit Contracts | — | — | 2,088 | 2,088 | ||||||||||||
Foreign Exchange Contracts | — | 1,499 | — | 1,499 |
* | Includes options purchased and written. |
Change in net unrealized appreciation (depreciation) of derivatives:
Core Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | 2,855 | $ | (125 | ) | $ | 2,730 | |||||||||
High Income Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | (276 | ) | $ | — | $ | (276 | ) | ||||||||
Inflation Protected Securities Fund | Foreign Forward Currency | Futures | Swaps | Total | ||||||||||||
Interest Rate Contracts | $ | — | $ | 161 | $ | (8 | ) | $ | 153 | |||||||
Foreign Exchange Contracts | (18 | ) | 9 | — | (9 | ) | ||||||||||
Intermediate Government Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | (257 | ) | $ | — | $ | (257 | ) | ||||||||
Intermediate Term Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | (1,201 | ) | $ | (68 | ) | $ | (1,269 | ) | |||||||
Short Term Bond Fund | Futures | Swaps | Total | |||||||||||||
Interest Rate Contracts | $ | 3,361 | $ | (70 | ) | $ | 3,291 | |||||||||
Credit Contracts | — | 467 | 467 | |||||||||||||
Total Return Bond Fund | Foreign Forward Currency | Futures | Swaps | Total | ||||||||||||
Interest Rate Contracts | $ | — | $ | 2,557 | $ | (560 | ) | $ | 1,997 | |||||||
Credit Contracts | — | — | 682 | 682 | ||||||||||||
Foreign Exchange Contracts | (150 | ) | 64 | — | (86 | ) |
4. Fund Shares
Transactions in Fund shares were as follows:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | ||||||||||||||||||||||
Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | |||||||||||||||||||
Class A: | ||||||||||||||||||||||||
Shares issued | 526 | 1,069 | 701 | 3,282 | 503 | 483 | ||||||||||||||||||
Shares issued in lieu of cash distributions | 116 | 303 | 88 | 212 | 6 | 15 | ||||||||||||||||||
Shares redeemed | (847 | ) | (1,255 | ) | (803 | ) | (3,521 | (273 | ) | (300 | ) | |||||||||||||
Total Class A transactions | (205 | ) | 117 | (14 | ) | (27 | ) | 236 | 198 | |||||||||||||||
Class B: | ||||||||||||||||||||||||
Shares issued | 10 | 10 | 8 | 25 | — | — | ||||||||||||||||||
Shares issued in lieu of cash distributions | 4 | 17 | 5 | 13 | — | — | ||||||||||||||||||
Shares redeemed | (102 | ) | (284 | ) | (37 | ) | (143 | ) | — | — | ||||||||||||||
Total Class B transactions | (88 | ) | (257 | ) | (24 | ) | (105 | ) | — | — | ||||||||||||||
Class C: | ||||||||||||||||||||||||
Shares issued | 42 | 81 | 228 | 264 | 214 | 550 | ||||||||||||||||||
Shares issued in lieu of cash distributions | 4 | 12 | 18 | 27 | 3 | 9 | ||||||||||||||||||
Shares redeemed | (64 | ) | (122 | ) | (59 | ) | (154 | ) | (178 | ) | (55 | ) | ||||||||||||
Total Class C transactions | (18 | ) | (29 | ) | 187 | 137 | 39 | 504 | ||||||||||||||||
Class R: | ||||||||||||||||||||||||
Shares issued | 15 | 10 | 8 | 12 | 9 | 13 | ||||||||||||||||||
Shares issued in lieu of cash distributions | 1 | 2 | 1 | 1 | 1 | 3 | ||||||||||||||||||
Shares redeemed | (7 | ) | (18 | ) | (13 | ) | (8 | ) | (138 | ) | (19 | ) | ||||||||||||
Total Class R transactions | 9 | (6 | ) | (4 | ) | 5 | (128 | ) | (3 | ) |
98 | Nuveen Investments |
Total Return Bond Fund (concluded)
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | ||||||||||||||||||||||
Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | |||||||||||||||||||
Class Y: | ||||||||||||||||||||||||
Shares issued | 9,574 | 20,683 | 13,611 | 23,104 | 4,451 | 5,733 | ||||||||||||||||||
Shares issued in lieu of cash distributions | 646 | 1,694 | 187 | 218 | 19 | 58 | ||||||||||||||||||
Shares redeemed | (20,465 | ) | (44,709 | ) | (5,629 | ) | (6,515 | ) | (1,841 | ) | (8,068 | ) | ||||||||||||
Total Class Y transactions | (10,245 | ) | (22,332 | ) | 8,169 | 16,807 | 2,629 | (2,277 | ) | |||||||||||||||
Net increase (decrease) in fund shares | (10,547 | ) | (22,507 | ) | 8,314 | 16,817 | 2,776 | (1,578 | ) |
Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short Term Bond Fund | Total Return Bond Fund | |||||||||||||||||||||||||||||
Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/09 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | |||||||||||||||||||||||||
Class A: | ||||||||||||||||||||||||||||||||
Shares issued | 105 | 415 | 132 | 588 | 1,242 | 3,251 | 793 | 1,622 | ||||||||||||||||||||||||
Shares issued from merger | — | 1,538 | — | — | — | — | — | — | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | 21 | 47 | 32 | 88 | 72 | 206 | 44 | 76 | ||||||||||||||||||||||||
Shares redeemed | (342 | ) | (1,044 | ) | (320 | ) | (651 | ) | (1,320 | ) | (1,476 | ) | (435 | ) | (504 | ) | ||||||||||||||||
Total Class A transactions | (216 | ) | 956 | (156 | ) | 25 | (6 | ) | 1,981 | 402 | 1,194 | |||||||||||||||||||||
Class B: | ||||||||||||||||||||||||||||||||
Shares issued | — | — | — | — | — | — | 7 | 14 | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | — | — | — | — | — | — | 2 | 6 | ||||||||||||||||||||||||
Shares redeemed | — | — | — | — | — | — | (20 | ) | (74 | ) | ||||||||||||||||||||||
Total Class B transactions | — | — | — | — | — | — | (11 | ) | (54 | ) | ||||||||||||||||||||||
Class C: | ||||||||||||||||||||||||||||||||
Shares issued | 12 | 10 | — | — | 267 | 345 | 159 | 408 | ||||||||||||||||||||||||
Shares issued from merger | — | 235 | — | — | — | — | — | — | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | 1 | 1 | — | — | 2 | 2 | 8 | 14 | ||||||||||||||||||||||||
Shares redeemed | (36 | ) | (25 | ) | — | — | (88 | ) | (36 | ) | (77 | ) | (70 | ) | ||||||||||||||||||
Total Class C transactions | (23 | ) | 221 | — | — | 181 | 311 | 90 | 352 | |||||||||||||||||||||||
Class R: | ||||||||||||||||||||||||||||||||
Shares issued | 8 | 15 | — | — | — | — | 55 | 33 | ||||||||||||||||||||||||
Shares issued from merger | — | 102 | — | — | — | — | — | — | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | 1 | 1 | — | — | — | — | 1 | 2 | ||||||||||||||||||||||||
Shares redeemed | (27 | ) | (44 | ) | — | — | — | — | (6 | ) | (52 | ) | ||||||||||||||||||||
Total Class R transactions | (18 | ) | 74 | — | — | — | — | 50 | (17 | ) | ||||||||||||||||||||||
Class Y: | ||||||||||||||||||||||||||||||||
Shares issued | 2,076 | 3,775 | 10,507 | 19,865 | 31,159 | 53,506 | 6,380 | 15,080 | ||||||||||||||||||||||||
Shares issued from merger | — | 9,456 | — | — | — | — | — | — | ||||||||||||||||||||||||
Shares issued in lieu of cash distributions | 85 | 288 | 285 | 799 | 169 | 370 | 368 | 956 | ||||||||||||||||||||||||
Shares redeemed | (7,800 | ) | (7,857 | ) | (11,171 | ) | (26,062 | ) | (20,900 | ) | (23,455 | ) | (10,399 | ) | (22,465 | ) | ||||||||||||||||
Total Class Y transactions | (5,639 | ) | 5,662 | (379 | ) | (5,398 | ) | 10,428 | 30,421 | (3,651 | ) | (6.429 | ) | |||||||||||||||||||
Net increase (decrease) in fund shares | (5,896 | ) | 6,913 | (535 | ) | (5,373 | ) | 10,603 | 32,713 | (3,120 | ) | (4,954 | ) |
Each Fund reserves the right to pay part or all of the proceeds from a redemption request in a proportionate share of readily marketable securities in the Fund instead of cash. Class B Shares converted to Class A Shares (reflected as Class A Shares issued and Class B Shares redeemed) during the six months ended December 31, 2010 and the fiscal year ended June 30, 2010, were as follows:
Fund | Six-Months Ended 12/31/10 | Year Ended 6/30/10 | ||||||
Core Bond Fund | $ | 68 | $ | 197 | ||||
High Income Bond Fund | 32 | 60 | ||||||
Total Return Bond Fund | 18 | 48 |
Nuveen Investments | 99 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments, derivative and dollar roll transactions) for the six months ended December 31, 2010, were as follows:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Fund | Intermediate Bond Fund | Short-Term Fund | Total Return Bond Fund | ||||||||||||||||||||||
Purchases: | ||||||||||||||||||||||||||||
Investment securities | $ | 271,310 | $ | 355,704 | $ | 11,205 | $ | 3,417 | $ | 189,144 | $ | 239,163 | $ | 204,258 | ||||||||||||||
U.S. Government and agency obligations | 291,221 | — | 52,880 | 48,591 | 72,545 | 24,776 | 135,183 | |||||||||||||||||||||
Sales and maturities: | ||||||||||||||||||||||||||||
Investment securities | 371,222 | 297,328 | 8,767 | 11,184 | 183,769 | 104,445 | 247,146 | |||||||||||||||||||||
U.S. Government and agency obligations | 362,174 | — | 28,097 | 91,965 | 99,178 | 42,108 | 141,718 |
Transactions in call and put options written during the six months ended December 31, 2010, were as follows:
Put Options Written | Call Options Written | |||||||||||||||
Total Return Bond Fund | Number of Contracts | Premium Amount | Number of Contracts | Premium Amount | ||||||||||||
Balance at June 30, 2010 | — | $ | — | — | $ | — | ||||||||||
Opened | 144 | 49 | — | — | ||||||||||||
Expired | (144 | ) | (49 | ) | — | — | ||||||||||
Closed | — | — | — | — | ||||||||||||
Balance at December 31, 2010 | — | $ | — | — | $ | — |
6. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds.
At December 31, 2010, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives), as determined on a federal income tax basis, were as follows:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Fund | Intermediate Bond Fund | Short-Term Fund | Total Return Bond Fund | ||||||||||||||||||||||
Cost of investments | $ | 1,322,646 | $ | 593,140 | $ | 206,660 | $ | 137,047 | $ | 835,832 | $ | 895,060 | $ | 779,325 | ||||||||||||||
Gross unrealized: | ||||||||||||||||||||||||||||
Appreciation | $ | 60,244 | $ | 20,712 | $ | 7,082 | $ | 3,971 | $ | 33,651 | $ | 18,442 | $ | 35,481 | ||||||||||||||
Depreciation | (17,073 | ) | (8,995 | ) | (1,053 | ) | (1,289 | ) | (3,462 | ) | (4,419 | ) | (16,445 | ) | ||||||||||||||
Net unrealized appreciation (depreciation) of investments | $ | 43,171 | $ | 11,717 | $ | 6,029 | $ | 2,682 | $ | 30,189 | $ | 14,023 | $ | 19,036 |
Permanent differences, primarily due to equalization debits, adjustments due to fund mergers, treatment of notional principal contracts and foreign currency reclassifications resulted in reclassifications among the Funds’ components of net assets at June 30, 2010, the Funds’ last tax year-end, as follows:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Fund | Intermediate Bond Fund | Short-Term Fund | Total Return Bond Fund | ||||||||||||||||||||||
Capital paid-in | $ | — | $ | — | $ | — | $ | 14,472 | $ | — | $ | — | $ | — | ||||||||||||||
Undistributed (Over-distribution of) net investment income | 2,333 | (36 | ) | (51 | ) | (169 | ) | 171 | (159 | ) | 2,096 | |||||||||||||||||
Accumulated net realized gain (loss) | (2,333 | ) | 36 | 51 | (14,303 | ) | (171 | ) | 159 | (2,096 | ) |
100 | Nuveen Investments |
Total Return Bond Fund (concluded)
The tax character of distributions paid during the Funds’ last tax year ended June 30, 2010, was designated for purposes of the dividends paid deduction as follows:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short-Term Bond Fund | Total Return Bond Fund | ||||||||||||||||||||||
Distributions from: | ||||||||||||||||||||||||||||
Ordinary income* | $ | 67,866 | $ | 26,351 | $ | 3,582 | $ | 4,765 | $ | 33,897 | $ | 18,434 | $ | 38,377 | ||||||||||||||
Long-term gain | — | — | — | 256 | — | — | — | |||||||||||||||||||||
Return of capital | — | — | — | 18 | — | — | — | |||||||||||||||||||||
Total | $ | 67,866 | $ | 26,351 | $ | 3,582 | $ | 5,039 | $ | 33,897 | $ | 18,434 | $ | 38,377 |
* | Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. |
The tax components of undistributed net ordinary income and net long-term capital gains at June 30, 2010, the Funds’ last tax year end, were as follows:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short-Term Fund | Total Return Bond Fund | ||||||||||||||||||||||
Undistributed ordinary income** | $ | 3,843 | $ | 2,342 | $ | 1,342 | $ | — | $ | 1,595 | $ | 373 | $ | 4,209 | ||||||||||||||
Undistributed net long term capital gain | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
** | Undistributed net ordinary income (on a tax basis) has not been reduced for the dividend declared during the period June 1, 2010 through June 30, 2010 and paid on July 1, 2010. Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. |
At June 30, 2010, the Funds’ last tax year end, the following Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:
Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short-Term Fund | Total Return Bond Fund | ||||||||||||||||||||||
Expiration year: | ||||||||||||||||||||||||||||
2011 | $ | — | $ | — | $ | — | $ | 2,293 | $ | — | $ | — | $ | — | ||||||||||||||
2012 | — | — | — | 1,293 | — | — | — | |||||||||||||||||||||
2013 | — | — | — | 554 | — | 1,315 | — | |||||||||||||||||||||
2014 | — | — | 256 | 1,629 | — | 8,101 | — | |||||||||||||||||||||
2015 | 994 | — | 5,928 | 2,447 | 3,607 | 7,433 | — | |||||||||||||||||||||
2016 | — | — | 953 | 165 | — | — | — | |||||||||||||||||||||
2017 | 25,107 | 23,659 | 4,724 | 3,538 | 11,744 | 839 | 41,302 | |||||||||||||||||||||
2018 | 17,128 | — | 2,807 | — | 4,697 | 2,980 | 37,557 | |||||||||||||||||||||
Total | $ | 43,229 | $ | 23,659 | $ | 14,668 | $ | 11,919 | $ | 20,048 | $ | 20,668 | $ | 78,859 |
The following Funds have elected to defer net realized losses from investments incurred from November 1, 2009 through June 30, 2010, the Funds’ last tax year end, (“post-October losses”) in accordance with federal income tax regulations. Post-October losses are treated as having arisen on the first day of the current fiscal year:
Core Bond Fund | Inflation Protected Securities Fund | Intermediate Government Bond Fund | Intermediate Term Bond Fund | Short-Term Fund | Total Return Bond Fund | |||||||||||||||||||
Post-October capital losses | $ | 10,619 | $ | 421 | $ | 1,191 | $ | 369 | $ | 2,374 | $ | 7,275 | ||||||||||||
Post-October currency losses | — | 3 | — | — | — | 530 |
Nuveen Investments | 101 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
7. Management Fees and Other Transactions with Affiliates
Investment Advisory Fees
During the six months ended December 31, 2010, pursuant to an investment advisory agreement (the “Agreement”), FAF Advisors managed each Fund’s assets and furnished related office facilities, equipment, research, and personnel. The Agreement required each Fund to pay FAF Advisors a monthly fee based upon average daily net assets. The annual fee for each Fund was as follows:
Fund | ||||
Core Bond Fund | 0.50 | % | ||
High Income Bond Fund | 0.70 | |||
Inflation Protected Securities Fund | 0.50 | |||
Intermediate Government Bond Fund | 0.50 | |||
Intermediate Term Bond Fund | 0.50 | |||
Short Term Bond Fund | 0.50 | |||
Total Return Bond Fund | 0.60 |
During the six months ended December 31, 2010, the Adviser agreed to waive fees and reimburse other fund expenses at least through October 31, 2010, so that total fund operating expenses, as a percentage of average daily net assets, did not exceed the following amounts:
Share Class | Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Fund | Intermediate Bond Fund | Short-Term Fund | Total Return Bond Fund | |||||||||||||||||||||
Class A | 0.95 | % | 1.10 | % | 0.85 | % | 0.75 | % | 0.85 | % | 0.75 | % | 0.89 | % | ||||||||||||||
Class B | 1.70 | 1.85 | N/A | N/A | N/A | N/A | 1.75 | |||||||||||||||||||||
Class C | 1.70 | 1.85 | 1.60 | 1.60 | N/A | 1.60 | 1.75 | |||||||||||||||||||||
Class R | 1.20 | 1.35 | 1.10 | 1.10 | N/A | N/A | 1.25 | |||||||||||||||||||||
Class Y | 0.70 | 0.85 | 0.60 | 0.60 | 0.70 | 0.60 | 0.75 |
N/A – Not applicable.
During the six months ended December 31, 2010, the Funds may have invested in related money market funds that are series of First American Funds, Inc., subject to certain limitations. In order to avoid the payment of duplicative investment advisory fees to FAF Advisors, which acted as the investment advisor to both the investing Funds and the related money market funds, FAF Advisors reimbursed each investing Fund an amount equal to that portion of the FAF Advisors’ investment advisory fee received from the related money market funds that was attributable to the assets of the investing Fund. This reimbursement, if any, is recognized as a component of “Fee waivers” on the Statement of Operations and terminated with respect to the Funds on December 31, 2010, in connection with the closing of the sale.
Effective January 1, 2011, pursuant to a new investment advisory agreement (the “New Agreement”), the Funds’ new investment adviser is Nuveen Fund Advisors. Under the New Agreement each Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by Nuveen Fund Advisors. This pricing structure enables Fund shareholders to benefit from growth in the assets within their Fund as well as from growth in the amount of complex-wide assets managed by Nuveen Fund Advisors.
The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:
Average Daily Net Assets | Core Bond Fund | High Income Bond Fund | Inflation Protected Securities Fund | Intermediate Fund | Intermediate Bond Fund | Short-Term Fund | Total Return Bond Fund | |||||||||||||||||||||
For the first $125 million | 0.4500 | % | 0.6000 | % | 0.4500 | % | 0.4500 | % | 0.4500 | % | 0.3000 | % | 0.4500 | % | ||||||||||||||
For the next $125 million | 0.4375 | 0.5875 | 0.4375 | 0.4375 | 0.4375 | 0.2875 | 0.4375 | |||||||||||||||||||||
For the next $250 million | 0.4250 | 0.5750 | 0.4250 | 0.4250 | 0.4250 | 0.2750 | 0.4250 | |||||||||||||||||||||
For the next $500 million | 0.4125 | 0.5625 | 0.4125 | 0.4125 | 0.4125 | 0.2625 | 0.4125 | |||||||||||||||||||||
For the next $1 billion | 0.4000 | 0.5500 | 0.4000 | 0.4000 | 0.4000 | 0.2500 | 0.4000 | |||||||||||||||||||||
For net assets over $2 billion | 0.3750 | 0.5250 | 0.3750 | 0.3750 | 0.3750 | 0.2225 | 0.3750 |
The annual complex-level fee for each Fund, payable monthly, is determined by taking the complex-level fee rate, which is based on the aggregate amount of “eligible assets” of all Nuveen Funds as set forth in the schedule below, and making, as appropriate, an
102 | Nuveen Investments |
Total Return Bond Fund (concluded)
adjustment to that rate based upon the percentage of the particular Fund’s assets that are not “eligible assets.” The complex-level fee schedule is as follows:
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 managed assets of all Nuveen Funds that constitute “eligible assets.” Eligible assets do not include assets attributable to investments in other Nuveen Funds and assets in excess of $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. Managed assets include closed-end fund assets managed by Nuveen Fund Advisors that are attributable to financial leverage. For these purposes, financial leverage includes the closed-end funds’ use of preferred stock and borrowings and 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 the TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by Nuveen Fund Advisors as to certain Funds to limit the amount of such assets for determining managed assets in certain circumstances. |
The management fee will compensate Nuveen Fund Advisors for the overall investment advisory and administrative services and general office facilities it provides to the Funds. Effective January 1, 2011, Nuveen Fund Advisors has entered into sub-advisory agreements with Nuveen Asset Management, LLC. Nuveen Asset Management, LLC will be compensated for the sub-advisory services it provides to the Funds from the management fee paid to Nuveen Fund Advisors.
Effective January 1, 2011, Nuveen Fund Advisors has contractually agreed to waive fees and reimburse expenses of the Funds so that total annual fund operating expenses, after waivers and excluding Acquired Fund Fees and Expenses, do not exceed the percent of each Fund’s average daily net assets, for each share class and for the time periods stated, as set forth in the following table:
Core Bond Fund | High Income Bond Fund | Inflation Fund | Intermediate Fund | Intermediate Bond Fund | Short-Term Fund | Total Return Bond Fund | ||||||||||||||||||||||
Class A | 0.9500 | % | 1.1000 | % | 0.8500 | % | 0.7500 | % | 0.8500 | % | 0.7500 | % | 0.8900 | % | ||||||||||||||
Class B | 1.7000 | 1.8500 | N/A | N/A | N/A | N/A | 1.7500 | |||||||||||||||||||||
Class C(1) | 1.7000 | 1.8500 | 1.6000 | 1.6000 | 1.7000 | 1.6000 | 1.7500 | |||||||||||||||||||||
Class R3(2) | 1.2000 | 1.3500 | 1.1000 | 1.1000 | N/A | N/A | 1.2500 | |||||||||||||||||||||
Class I(2) | 0.7000 | 0.8500 | 0.6000 | 0.6000 | 0.7000 | 0.6000 | 0.7500 | |||||||||||||||||||||
Expiration date | January 31, 2012 | January 31, 2012 | January 31, 2012 | January 31, 2012 | January 31, 2012 | January 31, 2012 | January 31, 2012 |
N/A – Not applicable.
(1) | Effective January 18, 2011, Intermediate Term Bond Fund begin offering Class C Shares. |
(2) | Effective January 18, 2011, Class R Shares were renamed Class R3 Shares and Class Y Shares were renamed Class I Shares. |
During the six months ended December 31, 2010, independent directors of the Funds may have participated and elected to defer receipt of part or all of their annual compensation under a deferred compensation plan (the “Plan”). Deferred amounts were treated as though equivalent dollar amounts had been invested in shares of selected open-end Funds as designated by each director. All amounts in the Plan were 100% vested and accounts under the Plan were obligations of the Funds. Deferred amounts remain in the Funds until distributed in accordance with the Plan.
Effective January 1, 2010, independent directors may elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Funds advised by Nuveen Fund Advisors. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Funds advised by Nuveen Fund Advisors.
Administration Fees
During the six months ended December 31, 2010, FAF Advisors served as the Funds’ administrator pursuant to an administration agreement between FAF Advisors and the Funds. U.S. Bancorp Fund Services, LLC (“USBFS”) served as sub-administrator pursuant to a sub-administration agreement between USBFS and FAF Advisors. FAF Advisors is a subsidiary of U.S. Bank National Association (“U.S. Bank”). Both U.S. Bank and USBFS are direct subsidiaries of U.S. Bancorp. Under the administration agreement, FAF Advisors
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Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
was compensated to provide, or compensated other entities to provide, services to the Funds. These services included various legal, oversight, and administrative and accounting services. The Funds paid FAF Advisors administration fees, which were calculated daily and paid monthly, equal to each Fund’s pro rata share of an amount equal, on an annual basis, to 0.25% of the aggregate average daily net assets of all open-end funds in the First American Funds family up to $8 billion, 0.235% on the next $17 billion of the aggregate average daily net assets, 0.22% on the next $25 billion of the aggregate average daily net assets, and 0.20% of the aggregate average daily net assets in excess of $50 billion. All fees paid to the sub-administrator were paid from the administration fee. In addition to these fees, the Funds may have reimbursed FAF Advisors and the sub-administrator for any out-of-pocket expenses incurred in providing administration services. Effective January 1, 2011, FAF Advisors and USBFS no longer serve as the Funds’ administrator and sub-administrator, respectively, and the Funds have not entered into any new administration or sub-administration agreements.
Transfer Agent Fees
During the six months ended December 31, 2010, USBFS served as the Funds’ transfer agent pursuant to a transfer agent agreement with FAIF. The Funds were charged transfer agent fees on a per shareholder account basis, subject to a minimum fee per share class. These fees were charged to each Fund based upon the number of accounts within that Fund. In addition to these fees, the Funds may have reimbursed USBFS for out-of-pocket expenses incurred in providing transfer agent services. Effective January 1, 2011, USBFS serves as the Funds’ transfer agent pursuant to a new transfer agent agreement with Nuveen Fund Advisors.
Custodian Fees
During the six months ended December 31, 2010, U.S. Bank served as the custodian for each Fund pursuant to a custodian agreement with FAIF. The custodian fee charged for each Fund was equal to an annual rate of 0.005% of average daily net assets. All fees were computed daily and paid monthly.
During the six months ended December 31, 2010, interest earned on uninvested cash balances was used to reduce a portion of each Fund’s custodian expenses. These credits, if any, are recognized as “Indirect payments from custodian” on the Statement of Operations. Conversely, the custodian charged a fee for any cash overdrafts incurred, which increased the Funds’ custodian expenses.
Effective January 1, 2011, U.S. Bank serves as the custodian for each Fund pursuant to a new custodian agreement with Nuveen Fund Advisors.
Distribution and Shareholder Servicing (12b-1) Fees
During the six months ended December 31, 2010, Quasar Distributors, LLC (“Quasar”), a subsidiary of U.S. Bancorp, served as the distributor of the Funds pursuant to a distribution agreement with FAIF. Under the distribution agreement, and pursuant to a plan adopted by each Fund under Rule 12b-1 of the Investment Company Act, each of the Funds paid Quasar a monthly distribution and/or shareholder servicing fee equal to an annual rate of 0.25%, 1.00%, 1.00% and 0.50% of each Fund’s average daily net assets of Class A, Class B, Class C and Class R Shares (renamed Class R3 Shares), respectively. No distribution or shareholder servicing fees were paid by Class Y Shares. These fees may have been used by Quasar to provide compensation for sales support, distribution activities, and/or shareholder servicing activities.
During the six months ended December 31, 2010, Quasar waived a portion of its 12b-1 fees for Class A Shares, limiting its fees to 0.15% of average daily net assets for Intermediate Government Bond Fund, Intermediate Term Bond Fund and Short Term Bond Fund, respectively. Effective October 28, 2009, the Adviser began waiving an additional amount of Class A Shares 12b-1 fees equal to 0.11% of average daily net assets of Class A Shares for Total Return Bond Fund.
During the six months ended December 31, 2010, total distribution and shareholder servicing fees waived by Quasar for the following Funds were as follows:
Fund | Amount | |||
Intermediate Government Bond Fund | $ | 9 | ||
Intermediate Term Bond Fund | 13 | |||
Short Term Bond Fund | 44 |
Under the distribution and shareholder servicing agreement, the following amounts were retained by affiliates of FAF Advisors during for the six months ended December 31, 2010:
Fund | Amount | |||
Core Bond Fund | $ | 71 | ||
High Income Bond Fund | 29 | |||
Inflation Protected Securities Fund | 33 | |||
Intermediate Government Bond Fund | 11 | |||
Intermediate Term Bond Fund | 10 | |||
Short Term Bond Fund | 49 | |||
Total Return Bond Fund | 43 |
104 | Nuveen Investments |
‘
Total Return Bond Fund (concluded)
Effective January 1, 2011, the Fund entered into a distribution agreement with Nuveen Investments LLC, who will serve as the Funds’ distributor. Class A Shares continue to incur a .25% annual 12b-1 service fee. Class B and Class C Shares continue to incur a .75% annual 12b-1 distribution fee and a .25% annual 12b-1 service fee. Class R3 Shares continue to incur a .25% annual 12b-1 distribution fee and a .25% annual 12b-1 service fee. Class I Shares will continue to not be subject to any sales charge or 12b-1 distribution or service fees. Nuveen Investments LLC has agreed to limit Class A Share annual 12b-1 service fees to .15% through January 31, 2012, for Intermediate Government Bond, Intermediate Term Bond and Short Term Bond. Annual distribution and services fees are based on average daily net assets.
Other Fees and Expenses
In addition to the investment advisory fees, administration fees, transfer agent fees, custodian fees, and distribution and shareholder servicing fees, each Fund was responsible for paying other operating expenses, including: legal, auditing, registration fees, postage and printing of shareholder reports, fees and expenses of independent directors, insurance, and other miscellaneous expenses during the six months ended December 31, 2010. During the six months ended December 31, 2010, legal fees and expenses of $17 were paid to a law firm of which an Assistant Secretary of the Funds was a partner.
Contingent Deferred Sales Charges
During the six months ended December 31, 2010, a contingent deferred sales charges (“CDSC”) was imposed on redemptions made in Class B Shares according to the table below. The CDSC varied depending on the number of years from time of payment for the purchase of Class B Shares until the redemption of such shares. Class B Shares automatically converted to Class A Shares after eight years.
Year Since Purchase | CDSC as a Percentage of Dollar Amount Subject to Charge | |||
First | 5.00 | % | ||
Second | 5.00 | |||
Third | 4.00 | |||
Fourth | 3.00 | |||
Fifth | 2.00 | |||
Sixth | 1.00 | |||
Seventh | — | |||
Eighth | — |
During the six months ended December 31, 2010, a CDSC of 1.00% was imposed on redemptions made in Class C Shares for the first twelve months.
The CDSC for Class B Shares and Class C Shares was imposed on the value of the purchased shares or the value at the time of redemption, whichever was less.
For the six months ended December 31, 2010, total front-end sales charges and CDSCs retained by affiliates of FAF Advisors for distributing the Funds’ shares were as follows:
Fund | ||||
Core Bond Fund | $ | 8 | ||
High Income Bond Fund | 15 | |||
Inflation Protected Securities Fund | 36 | |||
Intermediate Government Bond Fund | 1 | |||
Intermediate Term Bond Fund | 42 | |||
Short Term Bond Fund | 23 | |||
Total Return Bond Fund | 19 |
8. Regulatory Settlement
On August 23, 2010, Core Bond Fund, Intermediate Government Bond Fund, and Intermediate Term Bond Fund received settlement payments from the SEC related to the BISYS Fair Fund Settlement. The settlement was paid to funds that had used BISYS from June 1999 through June 2004. The Mercantile Funds, which subsequently merged into Core Bond Fund, Intermediate Government Bond Fund, and Intermediate Term Bond Fund, had used BISYS as an administrator during this period. Because the settlement was for the overcharging of expenses to these Funds, the amounts are recognized as “Expense reimbursement from Regulatory Settlement” on the Statements of Operations.
9. Fund Merger
As of the close of business on January 29, 2010, Intermediate Government Bond Fund acquired the assets and assumed the liabilities of U.S. Government Mortgage Fund. Intermediate Government Bond Fund was deemed to be the accounting survivor in the merger. Shareholders of U.S. Government Mortgage Fund approved the merger on January 21, 2010.
Nuveen Investments | 105 |
Notes to Financial Statements
December 31, 2010 (Unaudited) (continued), all dollars and shares are rounded to thousands (000)
Total Return Bond Fund (concluded)
The merger was accomplished by tax free exchanges as described below:
Intermediate Government Bond Fund | Class A | Class B | Class C | Class R | Class Y | Total | ||||||||||||||||||
Net assets of U.S. Government Mortgage Fund | $ | 10,604 | $ | 2,621 | $ | 2,023 | $ | 874 | $ | 81,335 | $ | 97,457 | ||||||||||||
U.S. Government Mortgage Fund shares exchanged | 1,045 | 258 | 200 | 86 | 8,012 | 9,601 | ||||||||||||||||||
Intermediate Government Bond Fund shares issued | 1,538 | — | 235 | 102 | 9,456 | 11,331 | ||||||||||||||||||
Net assets of Intermediate Government Bond Fund immediately before the merger | 8,063 | — | 1 | 1 | 87,606 | 95,671 | ||||||||||||||||||
Net assets of Intermediate Government Bond Fund immediately after the merger | 21,289 | — | 2,024 | 875 | 168,940 | 193,128 |
The components of U.S. Government Mortgage Fund’s net assets prior to adjustments for any permanent book-to-tax differences at the merger date were as follows:
Total Net Assets | Portfolio Capital | Undistributed Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
U.S. Government Mortgage Fund | $ | 97,457 | $ | 111,558 | $ | (474 | ) | $ | (13,746 | ) | $ | 119 |
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Total Return Bond Fund (concluded)
Investment Management Agreement Approval
Process (Unaudited)
A. Background
Prior to January 1, 2011, FAF Advisors, Inc. (“FAF”), a wholly-owned subsidiary of U.S. Bank National Association (“U.S. Bank”), served as investment adviser to each Fund pursuant to an investment advisory agreement between First American Investment Funds, Inc. (the “Company”) and FAF (the “Prior Advisory Agreement”), and as administrator to each Fund pursuant to an administrative agreement between the Company and FAF (the “Prior Administrative Agreement”). On July 29, 2010, U.S. Bank and FAF entered into a definitive agreement with Nuveen Investments, Inc. (“Nuveen”), Nuveen Asset Management (“NAM”) and certain Nuveen affiliates, whereby NAM would acquire a portion of the asset management business of FAF (the “Transaction”). The acquired business included the assets of FAF used in providing investment advisory services, research, sales and distribution in connection with equity, fixed income, real estate, global infrastructure and asset allocation investment products (other than the money market business and closed-end funds advised by FAF), including the Funds. In connection with the Transaction, the Board of Directors (the “Prior Board”) serving the Funds as directors at that time (each a “Prior Director” and, collectively, the “Prior Directors”) considered a number of proposals designed to integrate the Funds into the Nuveen family of funds, including the appointment of NAM as investment adviser and Nuveen Investments, LLC as distributor to the Funds. The Board also considered a proposal in connection with an internal restructuring of NAM (the “Restructuring”), for Nuveen Asset Management, LLC (“NAM LLC”), a wholly-owned subsidiary of NAM formed in anticipation of the Restructuring, to serve as sub-advisor for each Fund.
The Prior Board approved a new investment advisory agreement (the “New Advisory Agreement”) for each Fund with NAM and an investment sub-advisory agreement between NAM and NAM LLC (the “NAM Sub-Advisory Agreement”). At a meeting of the Funds’ stockholders held on December 17, 2010, stockholders of the Funds approved the New Advisory Agreement and the NAM Sub-Advisory Agreement. In addition, stockholders of the Company’s funds (including the Funds) elected ten directors, including one Prior Director, to the board of directors of the Company (the “New Board”).
On December 31, 2010, the Transaction closed and the New Board (which replaced the Prior Board) took effect. On January 1, 2011, the New Advisory Agreement and the NAM Sub-Advisory Agreement became effective. In addition, in connection with the Restructuring, NAM has changed its name to Nuveen Fund Advisors, Inc. (“NFA”). The following is a summary of the considerations of the Prior Board, which were set forth in a proxy statement dated November 10, 2010 (the “Proxy Statement”), in approving the New Advisory Agreement and the NAM Sub-Advisory Agreement for the Funds.
B. Prior Board Considerations
The New Advisory Agreement for each Fund was approved by the Prior Board after consideration of all factors determined to be relevant to its deliberations, including those discussed below. The Prior Board authorized the submission of the New Advisory Agreement for consideration by each Fund’s stockholders.
At meetings held in May and June of 2010, the Prior Board was apprised of the general terms of the Transaction and, as a result, began the process of considering the transition of services from FAF to NFA. In preparation for its September 21-23, 2010 meeting, the Prior Board received, in response to a written due diligence request prepared by the Prior Board and its independent legal counsel and provided to NFA and FAF, a significant amount of information covering a range of issues in advance of the meeting. To assist the Prior Board in its consideration of the New Advisory Agreement for each Fund, NFA provided materials and information about, among other things: (1) NFA and its affiliates, including their history and organizational structure, product lines, experience in providing investment advisory, administrative and other services, and financial condition, (2) the nature, extent and quality of services to be provided under the New Advisory Agreement, (3) proposed Fund fees and expenses and comparative information relating thereto, and (4) NFA’s compliance and risk management capabilities and processes. In addition, the Prior Board was provided with a memorandum from independent legal counsel outlining the legal duties of the Prior Board under the Investment Company Act of 1940, as amended (the “1940 Act”). In response to further requests from the Prior Board and its independent legal counsel, NFA and FAF provided additional information to the Prior Board following its September 21-23 meeting.
An additional in-person meeting of the Prior Board to consider the New Advisory Agreement was held on October 7, 2010, at which the members of the Prior Board in attendance, all of whom were not considered to be “interested persons” of the Company as defined in the 1940 Act (the “Independent Prior Directors”), approved the New Advisory Agreement with NFA for each Fund.
In considering the New Advisory Agreement for each Fund, the Prior Board, advised by independent legal counsel, reviewed and analyzed the factors it deemed relevant, including: (1) the nature, quality, and extent of services to be rendered to the Funds by NFA, (2) the cost of services to be provided, including Fund expense information, and (3) whether economies of scale may be realized as the Funds grow and whether fee levels are adjusted to enable Fund investors to share in these potential economies of scale.
In considering the New Advisory Agreement, the Prior Board did not identify any particular information that was all-important or controlling, and each Prior Director may have attributed different weights to the various factors discussed below. Where appropriate, the Prior Directors evaluated all information available to them regarding the Company’s funds on a fund-by-fund basis, and their determinations were made separately with respect to each such fund (including each of the Funds). The Prior Directors, all of whom
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Investment Management Agreement Approval Process (Unaudited) (continued)
were Independent Prior Directors, concluded that the terms of the New Advisory Agreement and the fee rates to be paid in light of the services to be provided to each Fund are in the best interests of each Fund, and that the New Advisory Agreement should be approved and recommended to stockholders for approval. In voting to approve the New Advisory Agreement with respect to each Fund, the Prior Board considered in particular the following factors:
Nature, Extent and Quality of Services. In considering approval of the New Advisory Agreement, the Prior Board considered the nature, extent and quality of services to be provided by NFA, including advisory services and administrative services. The Prior Board reviewed materials outlining, among other things, NFA’s organizational structure and business; the types of services that NFA or its affiliates are expected to provide to the Funds; the performance record of the applicable Fund (as described in further detail below); and fund product lines offered by NFA. The Prior Board considered that affiliation with a larger fund complex and well-recognized sponsor may result in a broader distribution network, potential economies of scale with respect to other services or fees and broader shareholder services including exchange options.
With respect to personnel, the Prior Board considered information regarding retention plans for current FAF employees who would be offered employment by NFA, and the background and experience of NFA employees who would become portfolio managers as of the closing of the Transaction. The Prior Board also reviewed information regarding portfolio manager compensation arrangements to evaluate NFA’s ability to attract and retain high quality investment personnel.
In evaluating the services of NFA, the Prior Board also considered NFA’s ability to supervise the Funds’ other service providers and, given the importance of compliance, NFA’s compliance program. Among other things, the Prior Board considered the report of NFA’s chief compliance officer regarding NFA’s compliance policies and procedures.
In addition to advisory services, the Prior Board considered the quality of administrative services expected to be provided by NFA and its affiliates including product management, fund administration, oversight of service providers, shareholder services, administration of Board relations, regulatory and portfolio compliance and legal support.
The Prior Board considered that, based on representations from FAF and NFA, the Transaction would allow stockholders to continue their investment in each of the Company’s funds with the same investment objective and principal strategies and, in most cases, the same portfolio management team. In light of the continuity of investment personnel in most cases (with respect to the Company’s funds in the aggregate), the Prior Board considered the historical investment performance of each of the Company’s funds (including each Fund) previously provided during the annual contract renewal process.
Cost of Services Provided by NFA. In evaluating the costs of the services to be provided by NFA under the New Advisory Agreement, the Prior Board received a comparison of each Fund’s annual operating expenses as of June 30, 2010 under the Prior Advisory Agreement and under the New Advisory Agreement, in each case adjusted to reflect a decrease in net assets for certain of the Company’s funds from redemptions by the U.S. Bank 401(k) Plan expected to occur prior to the closing of the Transaction. The Prior Board considered, among other things, that the advisory fee rates and other expenses would change as a result of NFA serving as investment adviser to each Fund. The Prior Board noted that the services provided by NFA under the New Advisory Agreement would include certain administrative services, which services (along with other services) were provided pursuant to the Prior Administrative Agreement and were charged separately from the advisory fee. Accordingly, the Prior Board considered that the fee rates paid under the New Advisory Agreement include bundled investment advisory and administrative fees and thus are higher than the fee rates paid under the Prior Advisory Agreement for most of the Company’s funds, but lower than the combined fee rates paid under the Prior Advisory Agreement and the Prior Administrative Agreement. The Prior Board also noted that certain administrative services provided under the Prior Administrative Agreement will not be provided under the New Advisory Agreement and will be delegated to other service providers. Similarly, certain fees paid by FAF under the Prior Administrative Agreement will not be paid by NFA under the New Advisory Agreement and will be paid directly by the Funds. However, immediately following the closing of the Transaction, the net expense ratio of each Fund was expected to be the same or lower than the Fund’s net expense ratio as of June 30, 2010, adjusted (where applicable) to reflect a decrease in net assets resulting from redemptions by the U.S. Bank 401(k) Plan expected to occur prior to the closing of the Transaction, assuming the Fund’s net assets at the time of the closing of the Transaction were no lower than their adjusted June 30 level. In addition, the Prior Board noted that NFA has committed to certain undertakings to maintain current fee caps and/or to waive fees or reimburse expenses to maintain net management fees at certain levels and Nuveen has represented to the Prior Board that Nuveen and its affiliates will not take any action that imposes an “unfair burden” on any Fund as a result of the Transaction. The Board also considered that fees payable under the New Advisory Agreement include both a fund-level fee and a complex-level fee, and that schedules for the fund-level and complex-level fees contain breakpoints that are based, respectively, on Fund assets and Nuveen complex-wide assets. The Board considered that breakpoints in the fund-level fee allow for the possibility that this portion of the advisory fee could decline in the future if Fund assets were to increase or increase in the future if Fund assets were to decline. The Prior Board also considered that breakpoints in the complex-level fee allow for the possibility that this portion of the advisory fee could decline in the future if complex-wide assets were to increase or increase in the future if complex-wide assets were to decline, regardless, in each case, of whether assets of the particular Fund had increased or decreased.
108 | Nuveen Investments |
In considering the compensation to be paid to NFA, the Prior Board also reviewed fee information regarding NFA-sponsored funds, to the extent such funds had similar investment objectives and strategies to the Funds. The Prior Board reviewed information provided by NFA regarding similar funds managed by NFA and noted that the fee rates payable by these funds were generally comparable to the fee rates proposed for the Company’s funds. The Prior Board also compared proposed fee and expense information to the median fees and expenses of comparable funds, using information provided by an independent data service.
In evaluating the compensation, the Prior Board also considered other amounts expected to be paid to NFA by the Funds as well as any indirect benefits (such as soft dollar arrangements, if any) NFA and its affiliates are expected to receive, that are directly attributable to the management of the Funds.
The Prior Board also considered that the Funds would not bear any of the costs relating to the Transaction, including the costs of preparing, printing and mailing the Proxy Statement.
Economies of Scale. The Prior Board reviewed information regarding potential economies of scale or other efficiencies that might result from the Funds’ potential association with Nuveen. The Prior Board noted that the New Advisory Agreement provides for breakpoints in the Funds’ fund-level and complex-level management fee rates as the assets of the Funds and the assets held by the various registered investment companies sponsored by Nuveen increase, respectively. The Prior Board concluded that the structure of the investment management fee rates, with the breakpoints for the Funds under the New Advisory Agreement, reflected sharing of potential economies of scale with the Funds’ stockholders.
Conclusion. After deliberating in executive session, the members of the Prior Board in attendance, all of whom were Independent Prior Directors, approved the New Advisory Agreement with respect to each Fund, concluding that the New Advisory Agreement was in the best interests of each Fund.
NAM Sub-Advisory Agreement. The Prior Board also approved the NAM Sub-Advisory Agreement between NFA and NAM LLC as a result of the Restructuring expected to occur with NFA. The Board considered that the services to be provided by NAM LLC under the NAM Sub-Advisory Agreement would not result in any material change in the nature or level of investment advisory services or administrative services provided to the Funds. In addition, the portfolio managers will continue to manage the Funds in their capacity as employees of NAM LLC. The Prior Board considered that NFA will pay a portion of the advisory fee it receives from each Fund to NAM LLC for its services as sub-advisor. The Prior Board concluded, based upon the conclusions that the Prior Board reached in connection with the approval of the New Advisory Agreement and after determining that it need not reconsider all of the factors that it had considered in connection with the approval of the New Advisory Agreement, to approve the NAM Sub-Advisory Agreement.
Nuveen Investments | 109 |
Used in this Report
| ||
n Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or offer price and reinvested dividends and capital gains distributions, if any) over the time period being considered. | ||
n Net Asset Value (NAV): A Fund’s NAV is the dollar value of one share in the Fund. It is calculated by subtracting the liabilities of the Fund from its total assets and then dividing the remainder by the number of shares outstanding. Fund NAVs are calculated at the end of each business day. |
110 | Nuveen Investments |
Fund Manager Nuveen Fund Advisors, Inc. 333 West Wacker Drive Chicago, IL 60606
Sub-Adviser Nuveen Asset Management, LLC 333 West Wacker Drive Chicago, IL 60606
Legal Counsel Chapman and Cutler LLP 111 West Monroe Street Chicago, IL 60603
Independent Registered Public Accounting Firm Ernst & Young 155 North Wacker Drive Chicago, IL 60606
Custodian U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55101
Transfer Agent and Shareholder Services U.S. Bancorp Fund Services, LLC 615 East Michigan Street Milwaukee, WI 53202 |
Quarterly Portfolio of Investments and Proxy Voting Information:
You may obtain (i) each Fund’s quarterly portfolio of investments, (ii) information regarding how the Funds voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that the Funds used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen Investments at (800) 257-8787 or on Nuveen’s website at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities and Exchange Commission (SEC). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street NE, Washington, D.C. 20549.
The Financial Industry Regulatory Authority (FINRA) provides a Public Disclosure Program which supplies certain information regarding the disciplinary history of FINRA members and their associated persons in response to either telephone inquiries at (800) 289-9999 or written inquiries at www.finra.org. FINRA also provides an investor brochure that includes information describing the Public Disclosure Program. |
Nuveen Investments | 111 |
Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. We market our growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen Asset Management, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, Nuveen Investments managed approximately $195 billion of assets as of December 31, 2010.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/mf
Nuveen makes things e-simple.
It only takes a minute to sign up for e-Reports. Once enrolled, you’ll receive an e-mail as soon as your Nuveen Fund information is ready—no more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report and save it on your computer if you wish.
Free e-Reports right to your e-mail!
www.investordelivery.com If you receive your Nuveen Fund distributions and statements from your financial advisor or brokerage account.
OR
www.nuveen.com/accountaccess If you receive your Nuveen Fund distributions and statements directly from Nuveen. | ||
Distributed by Nuveen Investments, LLC 333 West Wacker Drive Chicago, IL 60606 www.nuveen.com
MSA-FINC-1210D |
Mutual Funds
Nuveen Taxable Bond Funds
For investors seeking attractive monthly income and portfolio diversification potential.
Annual Report
September 30, 2010
Nuveen Short Duration Bond Fund | Nuveen Multi-Strategy Core Bond Fund | Nuveen High Yield Bond Fund | Nuveen Symphony Credit Opportunities Fund |
NUVEEN INVESTMENTS ANNOUNCES STRATEGIC COMBINATION WITH FAF ADVISORS
On July 29, 2010, Nuveen Investments announced that U.S. Bancorp will receive a 9.5% stake in Nuveen Investments and cash consideration in exchange for the long-term asset business of U.S. Bancorp’s FAF Advisors. Nuveen Investments is the parent of Nuveen Asset Management (NAM), the investment adviser for the Funds included in this report.
FAF Advisors, which currently manages about $25 billion of long-term assets and serves as the advisor of the First American Funds, will be combined with NAM, which currently manages about $75 billion in municipal fixed income assets. Upon completion of the transaction, Nuveen Investments, which currently manages about $160 billion of assets across several high-quality affiliates, will manage a combined total of about $185 billion in institutional and retail assets.
This combination will not affect the investment objectives, strategies or policies of the Funds in this report. Over time, Nuveen Investments expects that the combination will provide even more ways to meet the needs of investors who work with financial advisors and consultants by enhancing the multi-boutique model of Nuveen Investments, which also includes highly respected investment teams at HydePark, NWQ Investment Management, Santa Barbara Asset Management, Symphony Asset Management, Tradewinds Global Investors and Winslow Capital.
The transaction is expected to close late in 2010, subject to customary conditions.
Must be preceded by or accompanied by a prospectus. | NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Chairman’s
Letter to Shareholders
Dear Shareholder,
Recent months have revealed the fragility and disparity of the global economic recovery.
In the U.S., the rate of economic growth has slowed as various stimulus programs wind down, exposing weakness in the underlying economy. In contrast, many emerging market countries are experiencing a return to comparatively high rates of growth. Confidence in global financial markets has been undermined by concerns about high sovereign debt levels in Europe and the U.S. Until these countries can begin credible programs to reduce their budgetary deficits, market unease and hesitation will remain. On a more encouraging note, while the global recovery is expanding existing trade imbalances, policy makers in the leading economies are making a sustained effort to create a global framework through which various countries can take complimentary actions that should reduce those imbalances over time.
The U.S. economy is subject to unusually high levels of uncertainty as it struggles to recover from a devastating financial crisis. Unemployment remains stubbornly high, due to what appears to be both cyclical and structural forces. Federal Reserve policy makers are implementing another round of quantitative easing, a novel approach to provide support to the economy. However, the high levels of debt owed both by U.S. consumers and the U.S. government limit the Fed’s ability to engineer a stronger economic recovery.
The U.S. financial markets reflect the crosscurrents now impacting the U.S. economy.
Today’s historically low interest rates reflect the Fed’s intervention in the financial markets and the demand for U.S. government debt by U.S. and overseas investors looking for a safe haven for investment. The continued corporate earnings recovery and recent electoral results are giving a boost to equity markets. Encouragingly, financial institutions are rebuilding their balance sheets and the financial reform legislation enacted last summer has the potential to address many of the most significant contributors to the financial crisis, although the details still have to be worked out.
In this difficult environment your Nuveen investment team continues to seek sustainable
investment opportunities and, at the same time, remains alert for potential risks that may
result from a recovery still facing many headwinds. As your representative, the Nuveen
Fund Board monitors the activities of each investment team to assure that all maintain their investment disciplines. As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund.
On behalf of the other members of your Fund Board, we look forward to continuing to
earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
November 22, 2010
Nuveen Investments | 3 |
Portfolio Managers’ Comments
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Any reference to credit ratings for portfolio holdings refers to the highest rating assigned by a Nationally Recognized Statistical Rating Organization (“NRSRO”) such as Standard & Poor’s, Moody’s, or Fitch. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below investment grade. Holdings and ratings may change over time.
Effective January 31, 2010, the Nuveen Multi-Strategy Income Fund changed its name to Nuveen Multi-Strategy Core Bond Fund. There was no change in the Fund’s investment objectives, policies or portfolio management personnel.
The Nuveen Short Duration Bond Fund, Nuveen Multi-Strategy Core Bond Fund and Nuveen High Yield Bond Fund feature portfolio management by the Taxable Fixed Income group of Nuveen Asset Management. The Nuveen Symphony Credit Opportunities Fund, which commenced operations on April 28, 2010, features portfolio management by Symphony Asset Management LLC, an affiliate of Nuveen Investments. We recently spoke with Andrew Stenwall, Chief Investment Officer and Co-Director of Taxable Fixed Income at Nuveen Asset Management, who leads the portfolio management team for the Nuveen Short Duration Bond, Multi-Strategy Core Bond and High Yield Bond Funds, as well as Gunther Stein and Jenny Rhee who manage the Nuveen Symphony Credit Opportunities Fund. Each discussed economic and market conditions, the performance of the Funds and their management strategies for the twelve-month period ended September 30, 2010.
What were the general economic and market conditions throughout the twelve-month reporting period ended September 30, 2010?
During this period, the U.S. economy remained under considerable stress, and both the Federal Reserve (Fed) and the federal government continued their efforts to improve the overall economic environment. For its part, the Fed held the benchmark fed funds rate in a target range of zero to 0.25% after cutting it to this record low level in December 2008. At its September 2010 meeting, the central bank renewed its commitment to keep the fed funds rate at “exceptionally low levels” for an “extended period.” The Fed also stated that it was “prepared to take further policy actions as needed” to support economic recovery. The federal government continued to focus on implementing the economic stimulus package passed early in 2009 that was intended to provide job creation, tax relief, fiscal assistance to state and local governments, and expand unemployment benefits and other federal social welfare programs.
These and other measures produced some signs of economic improvement. In the third quarter of 2010, the U.S gross domestic product achieved a preliminary growth rate of 2.0% on an annualized basis, the fifth consecutive quarter of positive growth and the first time this has been achieved since 2007-2008. The housing market also saw some improvement, with the average home price in the Standard & Poor’s (S&P)/Case-Shiller index rising 1.7% over the twelve months ended August 2010 (the most recent data available at the time this report was produced). This put home prices nationally up 6.7%
4 | Nuveen Investments |
from their low point in April 2009 and back to levels on par with those of late 2003. At the same time, inflation remained relatively tame, as the Consumer Price Index rose just 1.1% year-over-year as of September 2010. However, unemployment remained at historically high levels. As of September 2010, the national unemployment rate was 9.6%, down from 9.8% in September 2009.
The high yield market, which significantly outperformed equities in 2009, continued to perform well through the first quarter of 2010. By the end of April, however, sovereign debt credit concerns in Europe, uncertainty about China’s growth, the impact of pending financial reform and anemic U.S. job growth led many investors to believe that the gradual global recovery might begin to take a turn for the worse. While the second quarter was dominated by fears surrounding the European sovereign debt crisis, largely benign results from the European bank stress tests helped provide some reassurance. More optimism returned in the third quarter of 2010, as many investors’ fears about a “double-dip recession” subsided. While U.S. growth continued to be sluggish through this period, emerging markets and core European nations showed signs of expansion, resulting in an increased willingness to invest in assets perceived to be riskier.
Despite the volatility in the markets throughout the twelve-month period, new issuance for high yield reached over $170 billion year-to-date, with approximately $140 billion of institutional loans. The new issuance was met by heavy demand from both institutional and retail investors and most new issues continue to trade favorably. Much of this debt issuance is also being used to refinance existing debt and therefore much of the overall supply increase is offset.
How did the Funds perform during the twelve-month period ended September 30, 2010?
The table on page eight provides performance information for the Funds for the one-year, five-year and since-inception periods ended September 30, 2010. The table also compares each Fund’s performance to various indexes. Over this period, the Class A Shares at net asset value of the Short Duration Bond and Multi-Strategy Core Bond Funds outperformed the comparative Citigroup indexes and underperformed the relevant Lipper group indexes. The Class A Shares at net asset value of the High Yield Bond Fund outperformed both the comparative Citigroup and Lipper indexes, while the same share class of the Credit Opportunities Fund outperformed its comparative indexes for the five-month period from the Fund’s inception on April 28, 2010, through September 30, 2010. A more detailed account of each Fund’s relative performance is provided later in this report.
What are the Funds’ investment strategies and how were they applied during the twelve-month period ended September 30, 2010? How did these strategies influence performance?
Nuveen Short Duration Bond Fund
Over the reporting period, the Nuveen Taxable Fixed Income team maintained its basic strategy of seeking to maximize total return through an active, risk managed approach that employed bottom-up analysis with deep specialization that looked at issuer fundamentals and relative value. By diversifying active investment strategies in the portfolio, we believe that we can manage portfolio returns across a wide array of economic and market environments. We employ fundamental credit analysis in an attempt to limit default risk and enhance returns throughout the credit cycle. We diversify
Nuveen Investments | 5 |
across global interest rates in an effort to capture value in non U.S. bonds on a currency-hedged basis. We also use a quantitative approach to mortgage- and asset-backed securities analysis designed to evaluate both prepayment and credit risk and capture relative value. Lastly, we actively manage our non-U.S. dollar positions, which are designed to take advantage of changes in the value of the dollar versus other currencies.
During this reporting period, the Fund benefited from our high yield positions, especially in the manufacturing, energy, service and financial sectors. Generally speaking, lower quality, higher yielding sectors outperformed higher quality, lower yielding sectors. Our positions in asset-backed securities (ABS) also performed well, particularly the ABS backed by credit cards and automobile loans. Our corporate bond positions in the finance, manufacturing, energy, services and utilities sectors all contributed positively to the Fund’s performance as well.
While our positions in commercial mortgage-backed securities (CMBS) aided the Fund’s performance on a relative basis, our significant underweight versus the Lipper group accounted for much of the Fund’s underperformance against that index. We believe there are opportunities in CMBS, especially in the well-structured senior tranches. However, we remain wary of the mezzanine bonds and junior tranches. Also contributing to the Fund’s underperformance versus its Lipper group was its slightly shorter duration.
The Fund also used interest rate swaps to manage its exposure to U.S. interest rates. Looking at global fixed-income markets during the period, we generally had long exposure to securities issued in Australia, Colombia, Canada, Mexico, New Zealand, Turkey, Taiwan, Israel and Brazil. We generally had short exposure to securities issued in South Africa, Sweden, Norway, South Korea, Hungary, Norway, the United Kingdom, Czech Republic, Switzerland and Chile. Combined, these positions positively contributed to the Fund’s performance during the reporting period. In particular, our long positions in Colombia and Mexico positively contributed to performance.
We also employed a currency overlay strategy, which involved taking both long (owning the actual security) and short (the Fund does not own the security, but has sold short through the delivery of a borrowed security) positions to manage the Fund’s currency exposure risk. Throughout the period, we were generally long the Australian dollar, Colombian peso, Canadian dollar, Mexican peso, New Zealand dollar, Turkish lira, Taiwan dollar, Israeli shekel and Brazilian real. We generally had short exposure to the South African rand, Swedish krona, Norwegain krone, South Korean won, Hungarian forint, British pound, Czech koruna, Swiss franc and Chilean peso. The strategy slightly detracted from performance. In particular, our positions in the Swedish krona, Swiss franc and Hungarian forint detracted from performance.
As of September 30, 2010, the Fund was using derivatives to reduce its sensitivity to overall interest rate movements and increase its exposure to certain currencies. On balance, the use of derivatives slightly reduced the Fund’s overall risk of loss, but made it more likely that the Fund’s performance might underperform its comparative indexes.
Nuveen Multi-Strategy Core Bond Fund
During the reporting period, we continued to employ an investment strategy similar to the one used for the Nuveen Short Duration Bond Fund. We sought to maximize total return through an active, risk managed, relative value approach. By diversifying active investment strategies in the portfolio, we believed that we could better manage portfolio returns across a wide array of economic and market environments.
6 | Nuveen Investments |
As with the Nuveen Short Duration Bond Fund, our high yield positions benefited performance, especially in the manufacturing, finance, energy and service sectors. Generally speaking, lower quality, higher yielding sectors outperformed higher quality, lower yielding sectors throughout the period. Also, our positions in asset-backed securities (ABS) performed well during the reporting period, particularly the ABS backed by credit cards and automobile loans. Our corporate bond positions in the finance, manufacturing, energy, services and utilities sctors all contributed positively to the Fund’s performance as well.
While our positions in commercial mortgage-backed securities (CMBS) aided the Fund’s performance on a relative basis, our significant underweight versus the Lipper group accounted for the Fund’s underperformance compared with this index. We believe there are opportunities in CMBS, especially in the well-structured senior tranches. However, we remain wary of the mezzanine bonds and junior tranches.
The Fund also used interest rate swaps to manage its exposure to U.S. interest rates. Looking at global fixed-income markets during the period, we generally had long exposure to securities issued in Australia, Colombia, Canada, Mexico, New Zealand, Turkey, Taiwan, Israel and Brazil. We generally had short exposure to securities issued in South Africa, Sweden, Norway, South Korea, Hungary, Norway, the United Kingdom, Czech Republic, Switzerland and Chile. Combined, these positions positively contributed to the Fund’s performance during the reporting period. In particular, our long positions in Colombia and Mexico positively contributed to performance.
We also employed a currency overlay strategy, which involved taking both long (owning the actual security) and short (the Fund does not own the security, but has sold short through the delivery of a borrowed security) positions to manage the Fund’s currency exposure risk. Throughout the period, we were generally long the Australian dollar, Colombian peso, Canadian dollar, Mexican peso, New Zealand dollar, Turkish lira, Taiwan dollar, Israeli shekel and Brazilian real. We generally had short exposure to the South African rand, Swedish krona, Norwegain krone, South Korean won, Hungarian forint, British pound, Czech koruna, Swiss franc and Chilean peso. The strategy slightly detracted from performance. In particular our positions in the Swedish krona, Swiss franc and Hungarian forint detracted from performance.
As of September 30, 2010, the Fund was using derivatives in some cases to reduce its sensitivity to overall interest rate movements and in other cases to add exposure to certain currencies. On balance, the use of derivatives slightly increased the Fund’s risk of loss, but reduced the risk that it would underperform its comparative indexes.
Nuveen High Yield Bond Fund
Throughout the reporting period, we sought to maximize total return by investing in a diversified portfolio of high yield corporate debt securities. We continued to employ a disciplined, analytical, bottom-up approach with deep specialization that looked at issuer fundamentals and relative value. The Fund focused on BB/B rated credits, seeking securities with improving fundamentals and relatively strong cash flows that appeared underpriced compared to industry peers.
Sector selection continues to play an important role in navigating the high yield market, particularly during periods of high market volatility. The high yield market as a whole performed extremely well over the reporting period, as investors looked to invest in higher-yielding, lower quality sectors.
Nuveen Investments | 7 |
Our sector selection versus the Citigroup High Yield BB/B Index positively impacted the Fund’s performance. In particular, our overweight in the manufacturing and transportation sectors helped the Fund’s return. Our security selection in the service sector also aided performance. However, our underweight in the banking/finance sector negatively impacted relative performance, as well as security selection in the utilities sector.
The Fund is limited in the amount of CCC-rated issues it can buy. Therefore, in many cases, we could not fully participate in CCC-rated sectors or issues that showed strong performance over the reporting period. While our smaller CCC-rated allocation may have detracted from relative performance during the strong rally in the high yield market during this period, we believe shareholders may benefit from these lower allocations if the market begins to sell off.
As of September 30, 2010, the only derivative products in use by the Fund were credit default swaps. The Fund received income for entering into these transactions, but they did increase the Fund’s risk of loss and risk that it would underperform its comparative indexes.
Nuveen Symphony Credit Opportunities Fund
Launched in April 2010, the Fund was still in its initial invest up phase at the end of this initial reporting period. In this start-up process, we targeted predominantly non-investment grade corporate debt obligations — high yield bonds, senior loans, and convertible bonds — in an opportunistic fashion. The Fund is designed to leverage Symphony Asset Management’s industry-focused research process in a fully-integrated approach to non-investment grade corporate credit. The Fund’s investment team looks actively across the debt side of a company’s balance sheet in search of total return opportunities.
The Fund utilizes a catalyst-driven approach to making investments, seeking an attractive level of income while focusing on near-term agents or events that might lead to additional total return. Catalysts might include restructurings, refinancings, mergers & acquisitions, or near-term maturity/liquidity events, as well as earnings announcements, or credit rating changes. Symphony believes these types of events will continue to occur as the credit market looks to restructure and de-lever following the credit crisis.
The Fund is managed by an integrated team of industry specialists that makes investments across the entire capital structure of companies in a wide range of sectors. Symphony believes that aggregating and analyzing information across these interrelated markets and understanding industry dynamics is critical to managing total return credit strategies.
The Fund’s portfolio holdings are not designed to look like an index fund. While the Fund has a blended benchmark it will seek to outperform, Symphony does not seek to achieve results by tweaking an index with a “top-down” optimization. The Fund has been built from the “bottom up,” using Symphony’s internal fundamental research process and risk-management capabilities. This may result in a lower correlation to indexes than other funds with similar mandates.
The Fund seeks to take advantage of what Symphony believes will be an expanding market that is well suited for “credit pickers” for the foreseeable future, a market that lends itself well to deep fundamental research.
This outperformance for this initial period was largely the result of individual credit selection. The Fund-level yield was, on average, slightly lower than many other funds within the peer group. Our outperformance for this initial period was primarily a result of
8 | Nuveen Investments |
* | Since inception returns for the Short Duration Bond Fund, Multi-Strategy Core Bond Fund, High Yield Bond Fund and their comparative indexes are from 12/20/04. Cumulative since inception returns for the Symphony Credit Opportunities Fund and its comparative indexes are from 4/28/10. |
1 | The Lipper Short Investment Grade Debt Funds Index represents the average total return for the 30 largest funds in the Lipper Short Investment Grade Debt Funds Category for the period ended September 30, 2010. The returns account for the effects of management fees and assume reinvestment of dividends, but do not reflect any applicable sales charges. You cannot invest directly in a Lipper index. |
strong total return and also keeping enough cash on hand to remain nimble as opportunities presented themselves.
For this Fund, “bottom up” means two things. First, when we constructed the Fund’s portfolio we built it on a name-by-name basis and did not optimize from an index or blended index. Second, we analyzed each company in the Fund’s portfolio very closely and looked holistically at the company and how various situations in the future may play out at each point in its capital structure. In the current environment, we expect balance sheets to be highly fluid — which can create catalysts. Pure relative value analysis generally ignores catalysts. We believe both elements are very important.
During the first five months of operations, we had three issuers in particular that generated outsize performance within a defined period of time. One was Skilled Healthcare (SKH), where the Fund owned the 2015 Term Loan and an 11% 2014 Senior Notes. Skilled Healthcare operates assisted living facilities in a number of western states, including 22 facilities in California. The company was hit with a $670 million legal judgment in July 2010 relating to a class-action lawsuit that was filed against the company in California. Upon the news, SKH senior loans and unsecured high yield bonds both traded down precipitously within a short period of time.
Skilled Healthcare is a company with which we are very familiar. One very important piece of public information that was not immediately known to the broader market is that within the company’s senior credit agreement there was language which effectively subordinated much of this legal risk, mitigating exposure of the senior lenders to the judgment. Further, the unsecured holders also had less risk than many initially thought due to high probability of settlement.
Reacting to the ruling and subsequent sell off, we began to buy the firm’s senior loans and high yield bonds for the Fund. The position paid off as SKH debt recovered quickly ahead of a $50 million settlement announced in early September.
Another holding that performed well involved Western Refining Floating Rate 2014 Senior Secured Notes. Western Refining operates refineries mostly in the Southwestern United States and has been undergoing a restructuring/deleveraging plan that benefited the company and helped the valuation of our positions.
Another strategy that has paid off was targeting firms that have debt levels that are either being refinanced or paid down entirely. Some of these companies include Delta Airlines and Burlington Coat Factory, where the Fund held positions in the Second Lien Loans and Term Loan B, respectively, during the period.
There were also a few positions we purchased that detracted from performance within the first five months of operation. One such situation was Edgen Murray 12.25% 2015 Senior Secured Notes. Edgen Murray is a global distributor of steel products to the oil & gas industry. The company has been negatively impacted by volatile steel prices and an uncertain economic outlook, which has led its customers to reduce inventories and the size of orders.
Another holding that detracted from performance during the period was Open Solutions 9.75% 2015 Senior Subordinated Notes. Open Solutions develops enterprise data and technology solutions for financial firms. This is a position where there was no company-specific news that drove the bonds marginally lower during the quarter, but instead poor technical conditions during the period following our initial purchase.
Nuveen Investments | 9 |
2 | The Citigroup 1-3 Year Treasury Index is an index comprised of U.S. Treasury Notes and Bonds with maturities of one year or greater, but less than three years (minimum amount outstanding is $1 billion per issue). The returns assume reinvestment of dividends, but do not reflect any sales charges or management fees. An index is not available for direct investment. |
3 | The Lipper Intermediate Investment Grade Debt Funds Index represents the average total return for the 30 largest funds in the Lipper Intermediate Investment Grade Debt Funds Category for the period ended September 30, 2010. The returns account for the effects of management fees and assume reinvestment of dividends, but do not reflect any applicable sales charges. You cannot invest directly in a Lipper index. |
4 | The Citigroup Broad Investment Grade Bond Index is an unmanaged index generally considered representative of the U.S. investment grade bond market. The returns assume reinvestment of dividends, but do not reflect any sales charges or management fees. An index is not available for direct investment. |
5 | The Lipper High Current Yield Funds Index represents the average total return for the 30 largest funds in the Lipper High Current Yield Funds Category for the period ended September 30, 2010. The returns account for the effects of management fees and assume reinvestment of dividends, but do not reflect any applicable sales charges. You cannot invest directly in a Lipper index. |
6 | The Citigroup High Yield BB/B Index is a market capitalization-weighted index that comprises all high-yield issues rated BB or B by Standard & Poor’s for which Citigroup calculates a monthly return. The returns assume reinvestment of dividends, but do not reflect any sales charges or management fees. An index is not available for direct investment. |
7 | The Merrill Lynch/Credit Suisse Blended Index is comprised 60% of the Merrill Lynch High Yield Master II Index and 40% Credit Suisse Leveraged Loan Index. The Merrill Lynch U.S. High Yield Master II Index is a market value-weighted index of all domestic and yankee high-yield bonds having maturities of one year or more and a credit rating lower than BBB-/Baa3, but are not in default. The Credit Suisse Leveraged Loan Index is a representative, unmanaged index of tradeable, senior, U.S. dollar-denominated leveraged loans. Index returns do not include the effects of any sales charges or management fees. It is not possible to invest directly in an index. |
One other position where we had mixed results was with Avaya, a telecommunications firm. We had exposure to both the 12.125% 2015 Payment-in-Kind (PIK) Notes and the Term Loan B-3. During the period, Avaya’s PIK Notes were off slightly, but that was offset by the Fund’s exposure to Avaya’s Term Loan, which we owned in addition to the PIK notes. The net effect was a small positive for our overall exposure to Avaya.
Class A Shares – Average Annual Total Returns as of 9/30/10
Average Annual | ||||||||||||
1-Year | 5-Year | Since Inception* | ||||||||||
Nuveen Short Duration Bond Fund | ||||||||||||
A Shares at NAV | 4.36% | 4.83% | 4.28% | |||||||||
A Shares at Offer | 2.29% | 4.41% | 3.91% | |||||||||
Lipper Short Investment Grade Debt Funds Index1 | 6.15% | 3.89% | 3.58% | |||||||||
Citigroup 1-3 Year Treasury Index2 | 2.47% | 4.30% | 3.92% | |||||||||
Nuveen Multi-Strategy Core Bond Fund | ||||||||||||
A Shares at NAV | 9.49% | 6.84% | 6.13% | |||||||||
A Shares at Offer | 5.37% | 6.03% | 5.43% | |||||||||
Lipper Intermediate Investment Grade Debt Funds Index3 | 11.33% | 5.75% | 5.31% | |||||||||
Citigroup Broad investment Grade Bond Index4 | 7.77% | 6.40% | 6.04% | |||||||||
Nuveen High Yield Bond Fund | ||||||||||||
A Shares at NAV | 17.31% | 6.41% | 5.80% | |||||||||
A Shares at Offer | 11.71% | 5.38% | 4.91% | |||||||||
Lipper High Current Yield Funds Index5 | 17.16% | 6.00% | 5.59% | |||||||||
Citigroup High Yield BB/B Index6 | 15.69% | 5.83% | 5.61% | |||||||||
Nuveen Symphony Credit Opportunities Fund | ||||||||||||
A Shares at NAV | N/A | N/A | 4.48% | |||||||||
A Shares at Offer | N/A | N/A | -0.49% | |||||||||
Merrill Lynch/Credit Suisse Blended Index7 | N/A | N/A | 3.48% | |||||||||
Lipper High Current Yield Funds Index5 | N/A | N/A | 3.48% | |||||||||
Merrill Lynch U. S. High Yield Master II Index7 | N/A | N/A | 4.45% |
Returns less than one year are cumulative; all other returns are annualized.
Returns quoted represent past performance which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. The Class A Share maximum sales charge is 4.75% for the High Yield Fund, 3.75% for the Multi-Strategy Core Bond Fund, 2.00% for the Short Duration Fund, and 4.75% for the Credit Opportunities Fund. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares. Returns may reflect a contractual agreement between certain Funds and the investment adviser to waive certain fees and expenses; see Notes to Financial Statements, Footnote 7 — Management Fees and Other Transactions with Affiliates for more information. In addition, returns may reflect a voluntary expense limitation by the Funds’ investment adviser that may be modified or discontinued at any time without notice. For the most recent month-end performance, visit www.nuveen.com or call (800) 257-8787.
Please see each Fund’s Spotlight Page later in this report for more complete performance data and expense ratios.
10 | Nuveen Investments |
Nuveen Short Duration Bond Fund
Growth of an Assumed $10,000 Investment
Nuveen Multi-Strategy Core Bond Fund
Growth of an Assumed $10,000 Investment
The graphs do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares.
The index comparisons show the change in value of a $10,000 investment in the Class A shares of the Nuveen Funds compared with their corresponding indexes. Returns would be different for other share classes. The inception date for both Funds is 12/20/04. The Lipper Short Investment Grade Debt Funds Index represents the average total return for the 30 largest funds in the Lipper Short Investment Grade Debt Funds Category. The Citigroup 1-3 Year Treasury Index is an index comprised of U.S. Treasury Notes and Bonds with maturities of one year or greater, but less than three years (minimum amount outstanding is $1 billion per issue). The Lipper Intermediate Investment Grade Debt Funds Index represents the average total return of the 30 largest funds in the Lipper Intermediate Investment Grade Debt Funds Category. The Citigroup Broad Investment Grade Bond Index is an unmanaged index generally considered representative of the U.S. investment grade bond market. The index returns assume reinvestment of dividends, but do not reflect any sales charges or management fees. The indexes do not reflect any initial or ongoing expenses. You cannot invest directly in an index. The Nuveen Funds’ returns include reinvestment of all dividends and distributions, and the Funds’ returns at the offer price depicted in the charts reflect the initial maximum sales charge applicable to Class A shares (2.00% for the Short Duration Bond Fund and 3.75% for the Multi-Strategy Core Bond Fund) and all ongoing Fund expenses. The performance data quoted represents past performance, which is not indicative of future results. Current performance may be lower or higher than the performance shown.
Nuveen Investments | 11 |
Nuveen High Yield Bond Fund
Growth of an Assumed $10,000 Investment
Nuveen Symphony Credit Opportunities Fund
Growth of an Assumed $10,000 Investment
The graphs do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares.
The index comparisons show the change in value of a $10,000 investment in the Class A shares of the Nuveen Funds compared with the corresponding indexes. Returns would be different for other share classes. The inception date for the High Yield Bond Fund is 12/20/04, and for Symphony Credit Opportunities Fund is 4/28/10. The Lipper High Current Yield Funds Index represents the average total return of the 30 largest funds in the Lipper High Current Yield Funds Category. The Citigroup High Yield BB/B Index is a market capitalization weighted index that comprises all high-yield issues rated BB or B by Standard & Poor’s for which Citigroup calculates a monthly return. The Merrill Lynch/Credit Suisse Blended Index is comprised 60% of the Merrill Lynch High Yield Master II Index and 40% Credit Suisse Leveraged Loan Index. The Merrill Lynch U.S. High Yield Master II Index is a market value-weighted index of all domestic and yankee high-yield bonds having maturities of one year or more and a credit rating lower than BBB-/Baa3, but are not in default. The Credit Suisse Leveraged Loan Index is a representative, unmanaged index of tradeable, senior, U.S. dollar-denominated leveraged loans. The index returns assume reinvestment of dividends, but do not reflect any sales charges or management fees. The indexes do not reflect any initial or ongoing expenses. You cannot invest directly in an index. Both Nuveen Funds’ returns include reinvestment of all dividends and distributions, and both Funds’ returns at the offer price depicted in the chart reflect the initial maximum sales charge applicable to Class A shares (4.75%) and all ongoing Fund expenses. The performance data quoted represents past performance, which is not indicative of future results. Current performance may be lower or higher than the performance shown.
12 | Nuveen Investments |
Fund Spotlight as of 9/30/10 Nuveen Short Duration Bond Fund
Quick Facts | ||||||||||||||||
A Shares | C Shares | R3 Shares | I Shares | |||||||||||||
Fund Symbol | NSDAX | NSCDX | NSDTX | NSDRX | ||||||||||||
Net Asset Value (NAV) | $19.82 | $19.85 | $19.80 | $19.78 | ||||||||||||
Latest Dividend1 | $0.0510 | $0.0390 | $0.0470 | $0.0550 | ||||||||||||
Inception Date | 12/20/04 | 12/20/04 | 8/04/08 | 12/20/04 |
Returns quoted represent past performance which is no guarantee of future results. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Current performance may be higher or lower than the performance shown. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Class A, C and I Share returns are actual. The returns for Class R3 Shares are actual for the period since class inception on 8/04/08; returns prior to class inception are Class I Share returns adjusted for differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 2.00% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a backend sales charge, if redeemed within twelve months of purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available to only certain retirement plan clients of financial intermediaries. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Average Annual Total Returns as of 9/30/10 | ||||||||
A Shares | NAV | Offer | ||||||
1-Year | 4.36% | 2.29% | ||||||
5-Year | 4.83% | 4.41% | ||||||
Since Inception | 4.28% | 3.91% | ||||||
C Shares | NAV | |||||||
1-Year | 3.65% | |||||||
5-Year | 4.06% | |||||||
Since Inception | 3.52% | |||||||
R3 Shares | NAV | |||||||
1-Year | 4.06% | |||||||
5-Year | 4.57% | |||||||
Since Inception | 4.01% | |||||||
I Shares | NAV | |||||||
1-Year | 4.52% | |||||||
5-Year | 5.07% | |||||||
Since Inception | 4.50% | |||||||
Yields | ||||||||
A Shares | NAV | Offer | ||||||
Dividend Yield4 | 3.09% | 3.03% | ||||||
30-Day Yield4 | 1.39% | — | ||||||
SEC 30-Day Yield5 | — | 1.37% | ||||||
C Shares | NAV | |||||||
Dividend Yield4 | 2.36% | |||||||
SEC 30-Day Yield4 | 0.63% | |||||||
R3 Shares | NAV | |||||||
Dividend Yield4 | 2.85% | |||||||
SEC 30-Day Yield4 | 1.14% | |||||||
I Shares | NAV | |||||||
Dividend Yield4 | 3.34% | |||||||
SEC 30-Day Yield4 | 1.65% |
Portfolio Credit Quality2
Ratings shown are the highest of Standard & Poor’s Group, Moody’s Investor Service, Inc. or Fitch, Inc. AAA includes bonds with an implied AAA rating since they are backed by U.S. Government or agency securities. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below-investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
Portfolio Allocation3
Net Assets ($000) | $187,311 |
Expense Ratios | ||||||||
Share Class | Gross Expense Ratios | Net Expense Ratios | ||||||
Class A | 1.14% | 0.85% | ||||||
Class C | 1.88% | 1.60% | ||||||
Class R3 | 1.38% | 1.10% | ||||||
Class I | 0.86% | 0.60% |
The expense ratios shown factor in Total Annual Fund Operating Expenses including management fees and other fees and expenses. The Net Expense Ratios reflect a contractual commitment by the Fund’s investment adviser to waive fees and reimburse certain expenses through January 31, 2011. The expense ratios are those shown in the most recent Fund prospectus.
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Spotlight page. |
1 | Paid October 1, 2010. This is the latest monthly dividend declared during the period covered by this report. Effective April 1, 2010, the Fund changed its declaration, record and ex-dividend date to daily. The Fund will continue to pay dividends monthly. See Notes to Financial Statements, Footnote 1 — General Information and Significant Accounting Policies, Dividends and Distributions to Shareholders for further information. |
2 | As a percentage of total investments (excluding structured notes, short-term investments and investments in derivatives) as of September 30, 2010. Holdings are subject to change. |
3 | As a percentage of total investments (excluding investments in derivatives) as of September 30, 2010. Holdings are subject to change. |
4 | Dividend Yield is the most recent dividend per share (annualized) divided by the appropriate price per share. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. The 30-Day Yield is computed under the same formula but is based on the Net Asset Value (NAV) per share. The Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium. |
5 | The SEC 30-Day Yield on A Shares at NAV applies only to A Shares purchased at no-load pursuant to the Fund’s policy permitting waiver of the A Share load in certain specified circumstances. |
Nuveen Investments | 13 |
Fund Spotlight as of 9/30/10 Nuveen Short Duration Bond Fund
Corporate Debt: Industries1 | ||||
Oil, Gas & Consumable Fuels | 12.2% | |||
Diversified Telecommunication Services | 10.3% | |||
Commercial Banks | 9.5% | |||
Media | 5.1% | |||
Diversified Financial Services | 4.5% | |||
Wireless Telecommunication Services | 4.2% | |||
Capital Markets | 4.1% | |||
Insurance | 3.6% | |||
Chemicals | 3.6% | |||
Multi-Line Retail | 3.4% | |||
Electric Utilities | 3.4% | |||
Commercial Services & Supplies | 3.0% | |||
Aerospace & Defense | 2.2% | |||
Energy Equipment & Services | 2.1% | |||
Metals & Mining | 1.9% | |||
IT Services | 1.9% | |||
Auto Components | 1.9% | |||
Machinery | 1.8% | |||
Specialty Retail | 1.7% | |||
Hotels, Restaurants & Leisure | 1.7% | |||
Electronic Equipment & Instruments | 1.5% | |||
Household Products | 1.5% | |||
Tobacco | 1.5% | |||
Other | 13.4% |
1 | As a percentage of total corporate debt holdings as of September 30, 2010. Corporate debt holdings include corporate bonds (high-yield investment grade rated), senior loans, convertible bonds, and any other debt instruments issued by a corporation (or that references a corporation) held by the Fund at the end of the reporting period. The percentage of “Other” corporate debt represents the total of all corporate debt industries that recalculated to less than 1.5% of total corporate debt holdings. Holdings are subject to change. |
Risk Considerations
An investment in the Fund is subject to credit risk, the risk that an issuer of a bond will be unable to make interest and principal payments when due; and interest rate risk, the risk that interest rates will rise, causing bond prices to fall. The Fund is also subject to income risk, the risk that the portfolio’s income will decline when market interest rates fall. The value of the Fund’s mortgage-related securities can fall if the owners of the underlying mortgages pay off their mortgages sooner than expected, which could happen when interest rates fall; and later than expected, which could happen when interest rates rise. The Fund’s potential investments in non-U.S. securities presents risks not typically associated with domestic investments such as adverse political, currency, social or regulatory developments in a country including excessive taxation, lack of liquidity or differing legal and accounting standards. These risks are magnified in emerging markets. As with any mutual fund, possible loss of principal is also a risk.
An investor should carefully consider the Fund’s objectives, risks, charges and expenses before investing. For a prospectus containing this and other information about the Fund, please contact your financial advisor or Nuveen Investments at (800) 257-8787. Read the prospectus carefully before you invest or send money.
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including up-front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as up-front and back-end sales charges (loads) or redemption fees, where applicable. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transactional costs were included, your costs would have been higher.
Hypothetical Performance | ||||||||||||||||||||||||||||||||||
Actual Performance | (5% return before expenses) | |||||||||||||||||||||||||||||||||
A Shares | C Shares | R3 Shares | I Shares | A Shares | C Shares | R3 Shares | I Shares | |||||||||||||||||||||||||||
Beginning Account Value (4/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||
Ending Account Value (9/30/10) | $ | 1,022.50 | $ | 1,018.80 | $ | 1,021.30 | $ | 1,023.80 | $ | 1,020.91 | $ | 1,017.10 | $ | 1,019.60 | $ | 1,022.16 | ||||||||||||||||||
Expenses Incurred During Period | $ | 4.21 | $ | 8.05 | $ | 5.52 | $ | 2.94 | $ | 4.20 | $ | 8.04 | $ | 5.52 | $ | 2.94 |
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .83%, 1.59%, 1.09% and .58% for Classes A, C, R3 and I, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
14 | Nuveen Investments |
Fund Spotlight as of 9/30/10 Nuveen Multi-Strategy Core Bond Fund
Quick Facts | ||||||||||||||||||||
A Shares | B Shares | C Shares | R3 Shares | I Shares | ||||||||||||||||
Fund Symbol | NCBAX | NBCBX | NCBCX | NMSTX | NCBRX | |||||||||||||||
Net Asset Value (NAV) | $21.25 | $21.36 | $21.30 | $21.26 | $21.23 | |||||||||||||||
Latest Dividend1 | $0.0760 | $0.0635 | $0.0635 | $0.0720 | $0.0805 | |||||||||||||||
Latest Capital Gain Distribution2 | $0.0191 | $0.0191 | $0.0191 | $0.0191 | $0.0191 | |||||||||||||||
Inception Date | 12/20/04 | 12/20/04 | 12/20/04 | 8/04/08 | 12/20/04 |
Returns quoted represent past performance which is no guarantee of future results. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Current performance may be higher or lower than the performance shown. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Class A, B, C and I Share returns are actual. The returns for Class R3 Shares are actual for the period since class inception on 8/04/08; returns prior to class inception are Class I Share returns adjusted for differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 3.75% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a backend sales charge, if redeemed within twelve months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available to only certain retirement plan clients of financial intermediaries. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Average Annual Total Returns as of 9/30/10 | ||||||||
A Shares | NAV | Offer | ||||||
1-Year | 9.49% | 5.37% | ||||||
5-Year | 6.84% | 6.03% | ||||||
Since Inception | 6.13% | 5.43% | ||||||
B Shares | w/o CDSC | w/CDSC | ||||||
1-Year | 8.74% | 4.74% | ||||||
5-Year | 6.14% | 5.98% | ||||||
Since Inception | 5.43% | 5.29% | ||||||
C Shares | NAV | |||||||
1-Year | 8.85% | |||||||
5-Year | 6.08% | |||||||
Since Inception | 5.38% | |||||||
R3 Shares | NAV | |||||||
1-Year | 9.35% | |||||||
5-Year | 6.60% | |||||||
Since Inception | 5.89% | |||||||
I Shares | NAV | |||||||
1-Year | 9.73% | |||||||
5-Year | 7.11% | |||||||
Since Inception | 6.39% | |||||||
Yields | ||||||||
A Shares | NAV | Offer | ||||||
Dividend Yield5 | 4.29% | 4.13% | ||||||
30-Day Yield5 | 2.39% | — | ||||||
SEC 30-Day Yield6 | — | 2.30% | ||||||
B Shares | NAV | |||||||
Dividend Yield5 | 3.57% | |||||||
SEC 30-Day Yield5 | 1.62% | |||||||
C Shares | NAV | |||||||
Dividend Yield5 | 3.58% | |||||||
SEC 30-Day Yield5 | 1.62% | |||||||
R3 Shares | NAV | |||||||
Dividend Yield5 | 4.06% | |||||||
SEC 30-Day Yield5 | 2.13% | |||||||
I Shares | NAV | |||||||
Dividend Yield5 | 4.55% | |||||||
SEC 30-Day Yield5 | 2.64% |
Portfolio Credit Quality3
Ratings shown are the highest of Standard & Poor’s Group, Moody’s Investor Service, Inc. or Fitch, Inc. AAA includes bonds with an implied AAA rating since they are backed by U.S. Government or agency securities. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below-investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
Portfolio Allocation4
Net Assets ($000) | $90,483 |
Expense Ratios | ||||||||
Share Class | Gross Expense Ratios | Net Expense Ratios | ||||||
Class A | 1.38% | 0.95% | ||||||
Class B | 2.12% | 1.70% | ||||||
Class C | 2.16% | 1.70% | ||||||
Class R3 | 1.61% | 1.20% | ||||||
Class I | 1.06% | 0.70% |
The expense ratios shown factor in Total Annual Fund Operating Expenses including management fees and other fees and expenses. The Net Expense Ratios reflect a contractual commitment by the Fund’s investment adviser to waive fees and reimburse certain expenses through January 31, 2011. The expense ratios are those shown in the most recent Fund prospectus.
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Spotlight page. |
1 | Paid October 1, 2010. This is the latest monthly dividend declared during the period covered by this report. Effective April 1, 2010, the Fund changed its declaration, record and ex-dividend date to daily. The Fund will continue to pay dividends monthly. See Notes to Financial Statements, Footnote 1 — General Information and Significant Accounting Policies, Dividends and Distributions to Shareholders for further information. |
2 | Paid December 16, 2009. Capital gains are subject to federal taxation. |
3 | As a percentage of total investments (excluding structured notes, short-term investments and investments in derivatives) as of September 30, 2010. Holdings are subject to change. |
4 | As a percentage of total investments (excluding investments in derivatives) as of September 30, 2010. Holdings are subject to change. |
5 | Dividend Yield is the most recent dividend per share (annualized) divided by the appropriate price per share. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. The 30-Day Yield is computed under the same formula but is based on the Net Asset Value (NAV) per share. The Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium. |
6 | The SEC 30-Day Yield on A Shares at NAV applies only to A Shares purchased at no-load pursuant to the Fund’s policy permitting waiver of the A Share load in certain specified circumstances. |
* | Rounds to less than 0.1%. |
Nuveen Investments | 15 |
Fund Spotlight as of 9/30/10 Nuveen Multi-Strategy Core Bond Fund
Corporate Debt: Industries1 | ||||
Oil, Gas & Consumable Fuels | 16.5% | |||
Diversified Telecommunication Services | 10.0% | |||
Media | 7.4% | |||
Capital Markets | 5.5% | |||
Diversified Financial Services | 5.2% | |||
Commercial Banks | 4.9% | |||
Multi-Line Retail | 3.7% | |||
Energy Equipment & Services | 3.7% | |||
Wireless Telecommunication Services | 3.4% | |||
Chemicals | 3.3% | |||
Electric Utilities | 3.0% | |||
Industrial Conglomerates | 2.9% | |||
Specialty Retail | 2.5% | |||
Commercial Services & Supplies | 2.3% | |||
Food & Staples Retailing | 2.2% | |||
Hotels, Restaurants & Leisure | 2.0% | |||
Aerospace & Defense | 2.0% | |||
Metals & Mining | 1.8% | |||
Auto Components | 1.6% | |||
Household Durables | 1.6% | |||
IT Services | 1.5% | |||
Other | 13.0% |
1 | As a percentage of total corporate debt holdings as of September 30, 2010. Corporate debt holdings include corporate bonds (high-yield investment grade rated), senior loans, convertible bonds, and any other debt instruments issued by a corporation (or that references a corporation) held by the Fund at the end of the reporting period. The percentage of “Other” corporate debt represents the total of all corporate debt industries that recalculated to less than 1.5% of total corporate debt holdings. Holdings are subject to change. |
Risk Considerations
An investment in the Fund is subject to credit risk, the risk that an issuer of a bond will be unable to make interest and principal payments when due; and interest rate risk, the risk that interest rates will rise, causing bond prices to fall. The Fund is also subject to income risk, the risk that the portfolio’s income will decline when market interest rates fall. The value of the Fund’s mortgage-related securities can fall if the owners of the underlying mortgages pay off their mortgages sooner than expected, which could happen when interest rates fall; and later than expected, which could happen when interest rates rise. The Fund’s potential investments in non-U.S. securities presents additional risks such as adverse political, currency, social or regulatory developments in a country including excessive taxation, lack of liquidity or differing legal and accounting standards. These risks are magnified in emerging markets. As with any mutual fund, possible loss of principal is also a risk.
An investor should carefully consider the Fund’s objectives, risks, charges and expenses before investing. For a prospectus containing this and other information about the Fund, please contact your financial advisor or Nuveen Investments at (800) 257-8787. Read the prospectus carefully before you invest or send money.
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including up-front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as up-front and back-end sales charges (loads) or redemption fees, where applicable. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transactional costs were included, your costs would have been higher.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||||||||||||||||||||||||||||||||||||
A Shares | B Shares | C Shares | R3 Shares | I Shares | A Shares | B Shares | C Shares | R3 Shares | I Shares | |||||||||||||||||||||||||||||||||
Beginning Account Value (4/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||||||
Ending Account Value (9/30/10) | $ | 1,063.80 | $ | 1,059.80 | $ | 1,059.90 | $ | 1,062.60 | $ | 1,065.20 | $ | 1,020.41 | $ | 1,016.60 | $ | 1,016.60 | $ | 1,019.15 | $ | 1,021.66 | ||||||||||||||||||||||
Expenses Incurred During Period | $ | 4.81 | $ | 8.73 | $ | 8.73 | $ | 6.10 | $ | 3.52 | $ | 4.71 | $ | 8.54 | $ | 8.54 | $ | 5.97 | $ | 3.45 |
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .93%, 1.69%, 1.69%, 1.18% and ..68% for Classes A, B, C, R3 and I, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
16 | Nuveen Investments |
Fund Spotlight as of 9/30/10 Nuveen High Yield Bond Fund
Quick Facts | ||||||||||||||||||||
A Shares | B Shares | C Shares | R3 Shares | I Shares | ||||||||||||||||
Fund Symbol | NHYAX | NHBYX | NHYCX | NHYTX | NHYRX | |||||||||||||||
Net Asset Value (NAV) | $17.44 | $17.42 | $17.40 | $17.42 | $17.42 | |||||||||||||||
Latest Dividend1 | $0.1165 | $0.1060 | $0.1055 | $0.1130 | $0.1200 | |||||||||||||||
Inception Date | 12/20/04 | 12/20/04 | 12/20/04 | 8/04/08 | 12/20/04 |
Returns quoted represent past performance which is no guarantee of future results. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Current performance may be higher or lower than the performance shown. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Class A, B, C and I Share returns are actual. The returns for Class R3 Shares are actual for the period since class inception on 8/04/08; returns prior to class inception are Class I Share returns adjusted for differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 4.75% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a backend sales charge, if redeemed within twelve months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available to only certain retirement plan clients of financial intermediaries. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Average Annual Total Returns as of 9/30/10 | ||||||||
A Shares | NAV | Offer | ||||||
1-Year | 17.31% | 11.71% | ||||||
5-Year | 6.41% | 5.38% | ||||||
Since Inception | 5.80% | 4.91% | ||||||
B Shares | w/o CDSC | w/CDSC | ||||||
1-Year | 16.48% | 12.48% | ||||||
5-Year | 5.58% | 5.44% | ||||||
Since Inception | 4.98% | 4.86% | ||||||
C Shares | NAV | |||||||
1-Year | 16.49% | |||||||
5-Year | 5.56% | |||||||
Since Inception | 4.97% | |||||||
R3 Shares | NAV | |||||||
1-Year | 17.05% | |||||||
5-Year | 6.12% | |||||||
Since Inception | 5.52% | |||||||
I Shares | NAV | |||||||
1-Year | 17.62% | |||||||
5-Year | 6.65% | |||||||
Since Inception | 6.05% | |||||||
Yields | ||||||||
A Shares | NAV | Offer | ||||||
Dividend Yield4 | 8.02% | 7.64% | ||||||
30-Day Yield4 | 7.45% | — | ||||||
SEC 30-Day Yield5 | — | 7.09% | ||||||
B Shares | NAV | |||||||
Dividend Yield4 | 7.30% | |||||||
SEC 30-Day Yield4 | 6.63% | |||||||
C Shares | NAV | |||||||
Dividend Yield4 | 7.28% | |||||||
SEC 30-Day Yield4 | 6.64% | |||||||
R3 Shares | NAV | |||||||
Dividend Yield4 | 7.78% | |||||||
SEC 30-Day Yield4 | 7.14% | |||||||
I Shares | NAV | |||||||
Dividend Yield4 | 8.27% | |||||||
SEC 30-Day Yield4 | 7.68% |
Portfolio Credit Quality2
Ratings shown are the highest of Standard & Poor’s Group, Moody’s Investor Service, Inc. or Fitch, Inc. AAA includes bonds with an implied AAA rating since they are backed by U.S. Government or agency securities. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below-investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
Portfolio Allocation3
Net Assets ($000) | $147,145 |
Expense Ratios | ||||||||
Share Class | Gross Expense Ratios | Net Expense Ratios | ||||||
Class A | 1.23% | 1.20% | ||||||
Class B | 1.95% | 1.95% | ||||||
Class C | 1.97% | 1.95% | ||||||
Class R3 | 1.46% | 1.45% | ||||||
Class I | 0.97% | 0.95% |
The expense ratios shown factor in Total Annual Fund Operating Expenses including management fees and other fees and expenses. The Net Expense Ratios reflect a contractual commitment by the Fund’s investment adviser to waive fees and reimburse certain expenses through January 31, 2011. The expense ratios are those shown in the most recent Fund prospectus.
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Spotlight page. |
1 | Paid October 1, 2010. This is the latest monthly dividend declared during the period covered by this report. Effective April 1, 2010, the Fund changed its declaration, record and ex-dividend date to daily. The Fund will continue to pay dividends monthly. See Notes to Financial Statements, Footnote 1 — General Information and Significant Accounting Policies, Dividends and Distributions to Shareholders for further information. |
2 | As a percentage of total investments (excluding short-term investments and investments in derivatives) as of September 30, 2010. Holdings are subject to change. |
3 | As a percentage of total investments (excluding investments in derivatives) as of September 30, 2010. Holdings are subject to change. |
4 | Dividend Yield is the most recent dividend per share (annualized) divided by the appropriate price per share. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. The 30-Day Yield is computed under the same formula but is based on the Net Asset Value (NAV) per share. The Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium. |
5 | The SEC 30-Day Yield on A Shares at NAV applies only to A Shares purchased at no-load pursuant to the Fund’s policy permitting waiver of the A Share load in certain specified circumstances. |
Nuveen Investments | 17 |
Fund Spotlight as of 9/30/10 Nuveen High Yield Bond Fund
Corporate Debt: Industries1 | ||||
Oil, Gas & Consumable Fuels | 18.2% | |||
Diversified Telecommunication Services | 11.4% | |||
Media | 8.1% | |||
Commercial Services & Supplies | 6.4% | |||
Wireless Telecommunication Services | 6.1% | |||
Auto Components | 5.0% | |||
Metals & Mining | 4.5% | |||
Containers & Packaging | 3.5% | |||
Aerospace & Defense | 3.2% | |||
IT Services | 3.1% | |||
Multi-Line Retail | 3.1% | |||
Hotels, Restaurants & Leisure | 3.0% | |||
Chemicals | 2.7% | |||
Household Durables | 2.6% | |||
Machinery | 2.1% | |||
Energy Equipment & Services | 1.8% | |||
Paper & Forest Products | 1.8% | |||
Electric Utilities | 1.7% | |||
Electronic Equipment & Instruments | 1.7% | |||
Building Products | 1.7% | |||
Multi-Utilities | 1.6% | |||
Trading Companies & Distributors | 1.6% | |||
Other | 5.1% |
1 | As a percentage of total corporate debt holdings as of September 30, 2010. Corporate debt holdings include corporate bonds (high-yield investment grade rated), senior loans, convertible bonds and any other debt instruments issued by a corporation (or that references a corporation) held by the Fund at the end of the reporting period. The percentage of “Other” corporate debt represents the total of all corporate debt industries that recalculated to less than 1.6% of total corporate debt holdings. Holdings are subject to change. |
Risk Considerations
An investment in the Fund is subject to certain risks, including credit risk; the risk that an issuer of a bond will be unable to make interest and principal payments when due. Lower-rated bonds such as those held by the Fund are generally considered speculative and carry greater credit risk. The Fund also exposes you to interest rate risk. Interest rate risk is the risk that interest rates will rise, causing bond prices to fall. The Fund’s potential investments in non-U.S. securities presents risks not typically associated with domestic investments such as adverse political, currency, social or regulatory developments in a country including excessive taxation, lack of liquidity or differing legal and accounting standards. These risks are magnified in emerging markets. As with any mutual fund, possible loss of principal is also a risk.
An investor should carefully consider the Fund’s objectives, risks, charges and expenses before investing. For a prospectus containing this and other information about the Fund, please contact your financial advisor or Nuveen Investments at (800) 257-8787. Read the prospectus carefully before you invest or send money.
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including up-front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example below is based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as up-front and back-end sales charges (loads) or redemption fees, where applicable. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transactional costs were included, your costs would have been higher.
Hypothetical Performance | ||||||||||||||||||||||||||||||||||||||||||
Actual Performance | (5% return before expenses) | |||||||||||||||||||||||||||||||||||||||||
A Shares | B Shares | C Shares | R3 Shares | I Shares | A Shares | B Shares | C Shares | R3 Shares | I Shares | |||||||||||||||||||||||||||||||||
Beginning Account Value (4/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||||||
Ending Account Value (9/30/10) | $ | 1,070.10 | $ | 1,065.60 | $ | 1066.20 | $ | 1,068.30 | $ | 1,070.90 | $ | 1,019.15 | $ | 1,015.39 | $ | 1,015.39 | $ | 1,017.85 | $ | 1,020.41 | ||||||||||||||||||||||
Expenses Incurred During Period | $ | 6.12 | $ | 10.05 | $ | 10.00 | $ | 7.41 | $ | 4.83 | $ | 5.97 | $ | 9.75 | $ | 9.75 | $ | 7.28 | $ | 4.71 |
For each Class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of 1.18%, 1.93%, 1.93%, 1.44%, and ..93% for Classes A, B, C, R3 and I, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
18 | Nuveen Investments |
Fund Spotlight as of 9/30/10 Nuveen Symphony Credit Opportunities Fund
Quick Facts | ||||||||||||||||
A Shares | C Shares | R3 Shares | I Shares | |||||||||||||
Fund Symbol | NCOAX | NCFCX | NCORX | NCOIX | ||||||||||||
Net Asset Value (NAV) | $20.42 | $20.40 | $20.41 | $20.43 | ||||||||||||
Latest Dividend1 | $0.1150 | $0.1025 | $0.1110 | $0.1190 | ||||||||||||
Inception Date | 4/28/10 | 4/28/10 | 4/28/10 | 4/28/10 |
Returns quoted represent past performance which is no guarantee of future results. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Current performance may be higher or lower than the performance shown. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of shares. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains. Class A Shares have a 4.75% maximum sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a backend sales charge, if redeemed within twelve months of purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available to only certain retirement plan clients of financial intermediaries. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors. Returns may reflect an expense limitation by the Fund’s investment adviser.
Cumulative Total Returns as of 9/30/10 | ||||||||
A Shares | NAV | Offer | ||||||
Since Inception | 4.48% | -0.49% | ||||||
C Shares | NAV | |||||||
Since Inception | 4.12% | 3.12% | ||||||
R3 Shares | NAV | |||||||
Since Inception | 4.34% | |||||||
I Shares | NAV | |||||||
Since Inception | 4.61% | |||||||
Yields | ||||||||
A Shares | NAV | Offer | ||||||
Dividend Yield4 | 6.76% | 6.44% | ||||||
30-Day Yield4 | 5.89% | — | ||||||
SEC 30-Day Yield5 | — | 5.61% | ||||||
C Shares | NAV | |||||||
Dividend Yield4 | 6.03% | |||||||
SEC 30-Day Yield4 | 5.12% | |||||||
R3 Shares | NAV | |||||||
Dividend Yield4 | 6.53% | |||||||
SEC 30-Day Yield4 | 5.64% | |||||||
I Shares | NAV | |||||||
Dividend Yield4 | 6.99% | |||||||
SEC 30-Day Yield4 | 6.14% |
Portfolio Credit Quality2
Ratings shown are the highest of Standard & Poor’s Group, Moody’s Investor Service, Inc. or Fitch, Inc. AAA includes bonds with an implied AAA rating since they are backed by U.S. Government or agency securities. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below-investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
Portfolio Allocation3
Net Assets ($000) | $23,456 |
Expense Ratios | ||||||||
Share Class | Gross Expense Ratios | Net Expense Ratios | ||||||
Class A | 1.32% | 1.10% | ||||||
Class C | 2.07% | 1.85% | ||||||
Class R3 | 1.57% | 1.35% | ||||||
Class I | 1.07% | 0.85% |
The expense ratios shown factor in Total Annual Fund Operating Expenses including management fees and other fees and expenses and are based on an estimated $50 million average net assets for the Fund’s first full fiscal year. The Net Expense Ratios reflect a contractual commitment by the Fund’s investment adviser to waive fees and reimburse certain expenses through January 31, 2013. The expense ratios are those shown in the most recent Fund prospectus.
Refer to the Glossary of Terms used in this Report for further definition of the terms used within this Fund’s Spotlight page. |
1 | Paid October 1, 2010. This is the latest monthly dividend declared during the period covered by this report. |
2 | As a percentage of total investments (excluding short-term investments) as of September 30, 2010. Holdings are subject to change. |
3 | As a percentage of total investments as of September 30, 2010. Holdings are subject to change. |
4 | Dividend Yield is the most recent dividend per share (annualized) divided by the appropriate price per share. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. The 30-Day Yield is computed under the same formula but is based on the Net Asset Value (NAV) per share. The Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium. |
5 | The SEC 30-Day Yield on A Shares at NAV applies only to A Shares purchased at no-load pursuant to the Fund’s policy permitting waiver of the A Share load in certain specified circumstances. |
Nuveen Investments | 19 |
Fund Spotlight as of 9/30/10 Nuveen Symphony Credit Opportunities Fund
Corporate Debt: Industries1 | ||||
Health Care Providers & Services | 9.7% | |||
Media | 8.0% | |||
Hotels, Restaurants & Leisure | 7.5% | |||
Chemicals | 6.6% | |||
Oil, Gas & Consumable Fuels | 6.1% | |||
Diversified Financial Services | 5.8% | |||
Food Products | 4.6% | |||
Pharmaceuticals | 4.2% | |||
Semiconductors & Equipment | 3.5% | |||
Auto Components | 3.5% | |||
Containers & Packaging | 3.3% | |||
IT Services | 3.1% | |||
Communications Equipment | 2.8% | |||
Aerospace & Defense | 2.8% | |||
Multi-Line Retail | 2.6% | |||
Wireless Telecommunication Services | 2.5% | |||
Food & Staples Retailing | 2.3% | |||
Machinery | 2.2% | |||
Diversified Telecommunication Services | 2.1% | |||
Airlines | 2.1% | |||
Specialty Retail | 2.0% | |||
Electric Utilities | 1.9% | |||
Other | 10.8% |
1 | As a percentage of total corporate debt holdings as of September 30, 2010. Corporate debt holdings include corporate bonds (high-yield investment grade rated), senior loans, convertible bonds and any other debt instruments issued by a corporation (or that references a corporation) held by the Fund at the end of the reporting period. The percentage of “Other” corporate debt represents the total of all corporate debt industries that recalculated to less than 1.9% of total corporate debt holdings. Holdings are subject to change. |
Risk Considerations
Bonds and other fixed income debt securities, such as those held by the Fund, are subject to credit risk and interest rate risk. The value of, and income generated by debt securities will decrease or increase based on changes in market interest rates and other factors. Credit risk refers to an issuer’s ability to make interest and principal payments when due. High yield or lower rated debt securities, commonly referred to as junk bonds, are generally considered speculative and carry heightened credit risk and potential for volatility. The risk of volatility is heightened for alternative or complex investment strategies.
An investment in foreign debt securities presents additional risks not typically associated with domestic investments such as adverse political, currency, economic, social or regulatory developments in a country. This Fund is subject to loan settlement risk due to the lack of established settlement standards or remedies for failure to settle. Because the Fund currently has less assets than a larger fund, large inflows and outflows may impact the Fund’s market exposure and subsequently its performance. Redemption of a large number of shares may subject the Fund and its shareholders to leverage risk and disrupt the overall composition of the Fund’s portfolio and thereby impede the ability to pursue the investment strategy. As with any mutual fund, possible loss of principal is also a risk.
An investor should carefully consider the Fund’s objectives, risks, charges and expenses before investing. For a prospectus containing this and other information about the Fund, please contact your financial advisor or Nuveen Investments at (800) 257-8787. Read the prospectus carefully before you invest or send money.
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including up-Front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Since the expense examples below reflect only the first 156 days of the Fund’s operations they may not provide a meaningful understanding of the Fund’s ongoing expenses.
The Example below is based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as up-Front and back-end sales charges (loads) or redemption fees, where applicable. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transactional costs were included, your costs would have been higher.
Hypothetical Performance | ||||||||||||||||||||||||||||||||||
Actual Performance | (5% return before expenses) | |||||||||||||||||||||||||||||||||
A Shares | C Shares | R3 Shares | I Shares | A Shares | C Shares | R3 Shares | I Shares | |||||||||||||||||||||||||||
Beginning Account Value (4/28/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||
Ending Account Value (9/30/10) | $ | 1,044.80 | $ | 1,041.20 | $ | 1,043.40 | $ | 1,046.10 | $ | 1,016.75 | $ | 1,013.51 | $ | 1,015.64 | $ | 1,017.82 | ||||||||||||||||||
Expenses Incurred During Period | $ | 4.72 | $ | 8.03 | $ | 5.85 | $ | 3.63 | $ | 4.65 | $ | 7.92 | $ | 5.77 | $ | 3.58 |
For each Class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of 1.08%, 1.84%, 1.34%, and .83% for Classes A, C, R3 and I, respectively, multiplied by the average account value over the period, multiplied by 156/365 (to reflect the 156 days in the period since the Fund’s commencement of operations).
20 | Nuveen Investments |
Report of
Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
Nuveen Investment Trust III:
In our opinion, the accompanying statement of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Nuveen Short Duration Bond Fund, Nuveen Multi-Strategy Core Bond Fund, Nuveen High Yield Bond Fund, and Nuveen Symphony Credit Opportunities Fund (each a series of the Nuveen Investment Trust III, hereafter referred to as the “Funds”) at September 30, 2010, the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Chicago, IL
November 26, 2010
Nuveen Investments | 21 |
Portfolio of Investments
Nuveen Short Duration Bond Fund
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CORPORATE BONDS – 26.1% | ||||||||||||||||||||
Aerospace & Defense – 0.6% | ||||||||||||||||||||
$ | 120 | BAE Systems Holdings | 6.400% | 12/15/11 | BBB+ | $ | 126,428 | |||||||||||||
100 | Boeing Capital Corporation | 6.500% | 2/15/12 | A | 107,786 | |||||||||||||||
235 | Global Aviation Holdings, 144A | 14.000% | 8/15/13 | BB– | 252,625 | |||||||||||||||
215 | Kratos Defense & Security Solutions Inc. | 10.000% | 6/01/17 | B+ | 228,975 | |||||||||||||||
325 | Northrop Grumman Corporation | 3.700% | 8/01/14 | BBB | 348,863 | |||||||||||||||
995 | Total Aerospace & Defense | 1,064,677 | ||||||||||||||||||
Auto Components – 0.5% | ||||||||||||||||||||
340 | American & Axle Manufacturing Inc. | 7.875% | 3/01/17 | B– | 338,725 | |||||||||||||||
210 | ArvinMeritor Inc. | 10.625% | 3/15/18 | Caa1 | 233,625 | |||||||||||||||
325 | Lear Corporation | 7.875% | 3/15/18 | BB+ | 346,125 | |||||||||||||||
875 | Total Auto Components | 918,475 | ||||||||||||||||||
Beverages – 0.3% | ||||||||||||||||||||
225 | Anheuser Busch InBev, 144A | 5.375% | 11/15/14 | BBB+ | 252,786 | |||||||||||||||
125 | Diageo Finance BV | 3.875% | 4/01/11 | A– | 127,079 | |||||||||||||||
240 | Miller Brewing Company, 144A | 5.500% | 8/15/13 | BBB+ | 264,102 | |||||||||||||||
590 | Total Beverages | 643,967 | ||||||||||||||||||
Building Products – 0.2% | ||||||||||||||||||||
460 | Ryland Group Inc. | 6.625% | 5/01/20 | BB– | 447,350 | |||||||||||||||
Capital Markets – 1.1% | ||||||||||||||||||||
200 | Bank of New York Mellon | 4.300% | 5/15/14 | Aa2 | 219,779 | |||||||||||||||
325 | Goldman Sachs Group, Inc. | 6.600% | 1/15/12 | A1 | 346,485 | |||||||||||||||
585 | Goldman Sachs Group, Inc. | 5.500% | 11/15/14 | A1 | 643,437 | |||||||||||||||
150 | Morgan Stanley | 5.250% | 11/02/12 | A | 160,226 | |||||||||||||||
575 | Morgan Stanley | 6.000% | 5/13/14 | A | 631,779 | |||||||||||||||
1,835 | Total Capital Markets | 2,001,706 | ||||||||||||||||||
Chemicals – 0.9% | ||||||||||||||||||||
365 | Airgas, Inc. | 4.500% | 9/15/14 | BBB | 390,178 | |||||||||||||||
340 | CF Industries Inc. | 6.875% | 5/01/18 | BB+ | 366,775 | |||||||||||||||
250 | E.I. Du Pont de Nemours and Company | 4.750% | 11/15/12 | A | 269,245 | |||||||||||||||
110 | E.I. Du Pont de Nemours and Company | 3.250% | 1/15/15 | A | 117,780 | |||||||||||||||
205 | Methanex Corporation | 8.750% | 8/15/12 | BBB– | 218,325 | |||||||||||||||
375 | Potash Corporation of Saskatchewan | 3.750% | 9/30/15 | A– | 388,603 | |||||||||||||||
1,645 | Total Chemicals | 1,750,906 | ||||||||||||||||||
Commercial Banks – 2.5% | ||||||||||||||||||||
350 | BB&T Corporation | 5.700% | 4/30/14 | A1 | 393,442 | |||||||||||||||
225 | Citigroup Inc. | 6.000% | 2/21/12 | A | 238,741 | |||||||||||||||
400 | Citigroup Inc. | 5.850% | 7/02/13 | A | 432,873 | |||||||||||||||
325 | Citigroup Inc. | 6.500% | 8/19/13 | A | 359,320 | |||||||||||||||
225 | Credit Suisse First Boston, Note | 6.125% | 11/15/11 | Aa1 | 238,121 | |||||||||||||||
260 | Fifth Third Bancorp. | 6.250% | 5/01/13 | Baa1 | 284,850 | |||||||||||||||
300 | Household Finance Corporation | 6.375% | 11/27/12 | A | 328,280 | |||||||||||||||
335 | KeyCorp. | 6.500% | 5/14/13 | BBB+ | 367,362 | |||||||||||||||
200 | PNC Funding Corporation | 5.400% | 6/10/14 | A | 223,380 |
22 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Commercial Banks (continued) | ||||||||||||||||||||
$ | 500 | Regions Financial Corporation of the Bank of America | 7.000% | 3/01/11 | BB+ | $ | 505,904 | |||||||||||||
230 | US Bancorp | 4.200% | 5/15/14 | Aa3 | 252,258 | |||||||||||||||
675 | Wells Fargo & Company | 5.250% | 10/23/12 | AA– | 730,827 | |||||||||||||||
275 | Wells Fargo & Company | 4.950% | 10/16/13 | A+ | 297,975 | |||||||||||||||
4,300 | Total Commercial Banks | 4,653,333 | ||||||||||||||||||
Commercial Services & Supplies – 0.8% | ||||||||||||||||||||
60 | Allied Waste North America | 6.500% | 11/15/10 | BBB | 60,396 | |||||||||||||||
230 | Browning Ferris-Allied Waste | 9.250% | 5/01/21 | BBB | 294,324 | |||||||||||||||
310 | GATX Corporation | 4.750% | 10/01/12 | Baa1 | 326,014 | |||||||||||||||
310 | Geokinetics Holdings Inc., 144A | 9.750% | 12/15/14 | B– | 272,800 | |||||||||||||||
220 | PHI Inc., 144A | 8.625% | 10/15/18 | B+ | 217,250 | |||||||||||||||
300 | West Corporation | 11.000% | 10/15/16 | B– | 320,250 | |||||||||||||||
1,430 | Total Commercial Services & Supplies | 1,491,034 | ||||||||||||||||||
Communications Equipment – 0.1% | ||||||||||||||||||||
125 | Cisco Systems, Inc. | 5.250% | 2/22/11 | A+ | 127,293 | |||||||||||||||
Computers & Peripherals – 0.3% | ||||||||||||||||||||
170 | Dell Inc. | 3.375% | 6/15/12 | A2 | 177,075 | |||||||||||||||
100 | Hewlett Packard Company | 6.500% | 7/01/12 | A | 109,748 | |||||||||||||||
225 | Hewlett Packard Company | 4.750% | 6/02/14 | A | 252,417 | |||||||||||||||
125 | International Business Machines Corporation (IBM) | 4.950% | 3/22/11 | A+ | 127,563 | |||||||||||||||
620 | Total Computers & Peripherals | 666,803 | ||||||||||||||||||
Consumer Finance – 0.3% | ||||||||||||||||||||
275 | American Express Credit Corporation | 7.300% | 8/20/13 | A2 | 316,302 | |||||||||||||||
300 | Provident Funding Associates, 144A | 10.250% | 4/15/17 | Ba3 | 310,500 | |||||||||||||||
575 | Total Consumer Finance | 626,802 | ||||||||||||||||||
Containers & Packaging – 0.1% | ||||||||||||||||||||
135 | Rock-Tenn Company | 5.625% | 3/15/13 | BBB– | 138,713 | |||||||||||||||
60 | Tekni-Plex Inc. | 10.875% | 8/15/12 | N/R | 57,600 | |||||||||||||||
195 | Total Containers & Packaging | 196,313 | ||||||||||||||||||
Diversified Financial Services – 1.2% | ||||||||||||||||||||
225 | Capital One Financial Corporation | 7.375% | 5/23/14 | Baa1 | 262,867 | |||||||||||||||
700 | General Electric Capital Corporation | 5.250% | 10/19/12 | AA+ | 754,023 | |||||||||||||||
850 | JP Morgan Chase & Company | 5.750% | 1/02/13 | A1 | 925,761 | |||||||||||||||
250 | National Rural Utilities Cooperative Finance Corporation | 7.250% | 3/01/12 | A | 272,161 | |||||||||||||||
2,025 | Total Diversified Financial Services | 2,214,812 | ||||||||||||||||||
Diversified Telecommunication Services – 2.7% | ||||||||||||||||||||
325 | Cequel Communication Holdings I, 144A | 8.625% | 11/15/17 | B– | 344,500 | |||||||||||||||
100 | Charter Communications, CCO Holdings LLC | 7.250% | 10/30/17 | B | 101,875 | |||||||||||||||
455 | Cincinnati Bell Inc. | 8.750% | 3/15/18 | B– | 445,900 | |||||||||||||||
575 | Citizens Communications Company | 9.000% | 8/15/31 | BB | 615,969 | |||||||||||||||
312 | Cox Communications, Inc. | 5.500% | 10/01/15 | Baa2 | 351,499 | |||||||||||||||
250 | France Telecom | 7.750% | 3/01/11 | A– | 257,363 | |||||||||||||||
225 | Insight Communications, 144A | 9.375% | 7/15/18 | B– | 240,188 | |||||||||||||||
480 | Paetec Holding Corporation | 8.875% | 6/30/17 | B1 | 504,000 |
Nuveen Investments | 23 |
Portfolio of Investments
Nuveen Short Duration Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Diversified Telecommunication Services (continued) | ||||||||||||||||||||
$ | 790 | Qwest Communications International Inc., 144A | 7.125% | 4/01/18 | Ba2 | $ | 833,450 | |||||||||||||
310 | Telecom Italia Capital | 5.250% | 10/01/15 | BBB | 334,900 | |||||||||||||||
200 | Telefonica Emisiones SAU | 4.949% | 1/15/15 | A– | 219,049 | |||||||||||||||
150 | Verizon Communications | 5.875% | 1/17/12 | A | 158,923 | |||||||||||||||
400 | Verizon Global Funding Company | 4.900% | 9/15/15 | A | 455,723 | |||||||||||||||
165 | Windstream Corporation, 144A, (WI/DD) | 7.750% | 10/15/20 | Ba3 | 167,063 | |||||||||||||||
4,737 | Total Diversified Telecommunication Services | 5,030,402 | ||||||||||||||||||
Electric Utilities – 0.9% | ||||||||||||||||||||
325 | American Electric Power | 5.250% | 6/01/15 | BBB | 360,536 | |||||||||||||||
198 | Dominion Resources Inc. | 5.700% | 9/17/12 | A– | 215,970 | |||||||||||||||
455 | Edison Mission Energy | 7.625% | 5/15/27 | B– | 308,263 | |||||||||||||||
200 | Exelon Generation Company LLC | 5.350% | 1/15/14 | A3 | 221,941 | |||||||||||||||
4 | FirstEnergy Corporation | 6.450% | 11/15/11 | Baa3 | 4,193 | |||||||||||||||
400 | Niagara Mohawk Power Company, 144A | 3.553% | 10/01/14 | A– | 422,410 | |||||||||||||||
110 | West Corporation, 144A, (WI/DD) | 8.625% | 10/01/18 | B | 110,000 | |||||||||||||||
1,692 | Total Electric Utilities | 1,643,313 | ||||||||||||||||||
Electronic Equipment & Instruments – 0.4% | ||||||||||||||||||||
365 | Agilent Technologies Inc. | 5.500% | 9/14/15 | BBB– | 410,808 | |||||||||||||||
315 | ViaSystems Inc., 144A | 12.000% | 1/15/15 | B+ | 345,319 | |||||||||||||||
680 | Total Electronic Equipment & Instruments | 756,127 | ||||||||||||||||||
Energy Equipment & Services – 0.6% | ||||||||||||||||||||
150 | Halliburton Company | 5.500% | 10/15/10 | A | 150,193 | |||||||||||||||
275 | Kinder Morgan Energy Partners, L.P. | 5.850% | 9/15/12 | BBB | 297,068 | |||||||||||||||
335 | Linn Energy LLC Finance Corporation, 144A | 7.750% | 2/01/21 | B | 339,606 | |||||||||||||||
225 | Rockies Express Pipeline Company, 144A | 6.250% | 7/15/13 | BBB– | 244,602 | |||||||||||||||
985 | Total Energy Equipment & Services | 1,031,469 | ||||||||||||||||||
Food & Staples Retailing – 0.3% | ||||||||||||||||||||
325 | Kroger Co. | 3.900% | 10/01/15 | BBB | 353,122 | |||||||||||||||
250 | Safeway Inc. | 6.250% | 3/15/14 | BBB | 287,112 | |||||||||||||||
575 | Total Food & Staples Retailing | 640,234 | ||||||||||||||||||
Food Products – 0.1% | ||||||||||||||||||||
175 | Kraft Foods Inc. | 5.625% | 11/01/11 | Baa2 | 183,844 | |||||||||||||||
Hotels, Restaurants & Leisure – 0.4% | ||||||||||||||||||||
345 | Brunswick Corporation | 7.375% | 9/01/23 | Caa1 | 291,525 | |||||||||||||||
410 | MGM Mirage Inc. | 5.875% | 2/27/14 | CCC+ | 352,600 | |||||||||||||||
175 | Tricon Global Restaurants Incorporated | 8.875% | 4/15/11 | BBB– | 182,299 | |||||||||||||||
930 | Total Hotels, Restaurants & Leisure | 826,424 | ||||||||||||||||||
Household Durables – 0.3% | ||||||||||||||||||||
305 | Meritage Homes Corporation | 7.150% | 4/15/20 | B+ | 289,750 | |||||||||||||||
310 | Norcraft Companies Finance | 10.500% | 12/15/15 | B2 | 325,500 | |||||||||||||||
615 | Total Household Durables | 615,250 | ||||||||||||||||||
Household Products – 0.4% | ||||||||||||||||||||
350 | Clorox Company | 3.550% | 11/01/15 | BBB+ | 376,135 | |||||||||||||||
350 | Procter and Gamble Company | 3.150% | 9/01/15 | AA– | 377,766 | |||||||||||||||
700 | Total Household Products | 753,901 |
24 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Industrial Conglomerates – 0.4% | ||||||||||||||||||||
$ | 125 | Textron Financial Corporation | 5.125% | 2/03/11 | Baa3 | $ | 125,961 | |||||||||||||
365 | Timken Company | 6.000% | 9/15/14 | BBB– | 406,211 | |||||||||||||||
155 | Tyco International Group | 6.000% | 11/15/13 | A– | 175,802 | |||||||||||||||
645 | Total Industrial Conglomerates | 707,974 | ||||||||||||||||||
Insurance – 0.9% | ||||||||||||||||||||
225 | Allstate Life Global Funding | 5.375% | 4/30/13 | AA– | 248,800 | |||||||||||||||
250 | Berkshire Hathaway Inc. | 5.000% | 8/15/13 | AA+ | 276,787 | |||||||||||||||
400 | Genworth Life Institution Funding | 5.875% | 5/03/13 | A | 423,875 | |||||||||||||||
275 | Met Life Global Funding I | 5.125% | 4/10/13 | AA– | 299,487 | |||||||||||||||
475 | Prudential Financial Inc. | 5.100% | 9/20/14 | A | 519,684 | |||||||||||||||
1,625 | Total Insurance | 1,768,633 | ||||||||||||||||||
IT Services – 0.5% | ||||||||||||||||||||
455 | First Data Corporation | 9.875% | 9/24/15 | B- | 374,238 | |||||||||||||||
230 | Fiserv Inc. | 6.125% | 11/20/12 | Baa2 | 251,123 | |||||||||||||||
300 | Seagate HDD Cayman, 144A | 6.875% | 5/01/20 | BB+ | 294,750 | |||||||||||||||
985 | Total IT Services | 920,111 | ||||||||||||||||||
Machinery – 0.5% | ||||||||||||||||||||
250 | Caterpillar Financial Services Corporation | 6.200% | 9/30/13 | A | 286,279 | |||||||||||||||
250 | Greenbrier Companies, Inc. | 8.375% | 5/15/15 | CCC | 243,750 | |||||||||||||||
125 | John Deere Capital Corporation | 5.650% | 7/25/11 | A | 130,155 | |||||||||||||||
200 | John Deere Capital Corporation | 5.250% | 10/01/12 | A | 217,502 | |||||||||||||||
825 | Total Machinery | 877,686 | ||||||||||||||||||
Media – 1.3% | ||||||||||||||||||||
205 | Allbritton Communications Company, 144A | 8.000% | 5/15/18 | B | 206,538 | |||||||||||||||
20 | Clear Channel Worldwide Holdings Inc., 144A | 9.250% | 12/15/17 | B | 21,300 | |||||||||||||||
110 | Clear Channel Worldwide Holdings Inc., 144A | 9.250% | 12/15/17 | B | 117,975 | |||||||||||||||
150 | Comcast Corporation | 5.450% | 11/15/10 | BBB+ | 150,823 | |||||||||||||||
350 | Comcast Corporation | 5.850% | 11/15/15 | BBB+ | 406,065 | |||||||||||||||
150 | Cox Communications, Inc. | 7.750% | 11/01/10 | Baa2 | 150,730 | |||||||||||||||
185 | Nielsen Finance LLC Co | 11.625% | 2/01/14 | B | 210,900 | |||||||||||||||
420 | Sinclair Television Group, 144A | 9.250% | 11/01/17 | Ba3 | 452,550 | |||||||||||||||
50 | Sinclair Television Group, (WI/DD) | 8.375% | 10/15/18 | B2 | 50,625 | |||||||||||||||
150 | Time Warner Cable Inc. | 5.400% | 7/02/12 | BBB | 160,772 | |||||||||||||||
105 | Time Warner Cable Inc. | 6.200% | 7/01/13 | BBB | 118,363 | |||||||||||||||
250 | TL Acquisitions Inc., 144A | 13.250% | 7/15/15 | CCC+ | 249,375 | |||||||||||||||
125 | Walt Disney Company | 5.700% | 7/15/11 | A | 130,449 | |||||||||||||||
75 | WMG Acquisition Group | 9.500% | 6/15/16 | BB | 80,625 | |||||||||||||||
2,345 | Total Media | 2,507,090 | ||||||||||||||||||
Metals & Mining – 0.5% | ||||||||||||||||||||
150 | ArcelorMittal | 5.375% | 6/01/13 | BBB | 161,157 | |||||||||||||||
200 | BHP Billiton Finance Limited | 5.500% | 4/01/14 | A+ | 225,229 | |||||||||||||||
240 | Essar Steel Algoma Inc., 144A | 9.375% | 3/15/15 | B+ | 242,400 | |||||||||||||||
140 | Steel Dynamics, Inc., 144A | 7.625% | 3/15/20 | BB+ | 145,950 | |||||||||||||||
160 | Steel Dynamics, Inc. | 7.375% | 11/01/12 | BB+ | 171,800 | |||||||||||||||
890 | Total Metals & Mining | 946,536 |
Nuveen Investments | 25 |
Portfolio of Investments
Nuveen Short Duration Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Multi-Line Retail – 0.9% | ||||||||||||||||||||
$ | 150 | Costco Wholesale Corporation | 5.300% | 3/15/12 | A+ | $ | 160,071 | |||||||||||||
585 | CVS Caremark Corporation | 3.250% | 5/18/15 | BBB+ | 611,700 | |||||||||||||||
200 | Home Depot, Inc. | 5.400% | 3/01/16 | BBB+ | 227,987 | |||||||||||||||
50 | Sears Holding Corporation, 144A, (WI/DD) | 6.625% | 10/15/18 | BB+ | 50,391 | |||||||||||||||
250 | Target Corporation | 5.875% | 3/01/12 | A+ | 267,232 | |||||||||||||||
200 | Toys R Us Property Company Inc., 144A | 10.750% | 7/15/17 | B+ | 227,000 | |||||||||||||||
110 | Visant Corporation, 144A | 10.000% | 10/01/17 | Caa1 | 115,225 | |||||||||||||||
1,545 | Total Multi-Line Retail | 1,659,606 | ||||||||||||||||||
Multi-Utilities – 0.2% | ||||||||||||||||||||
450 | Bon-Ton Department Stores Inc. | 10.250% | 3/15/14 | CCC+ | 445,500 | |||||||||||||||
Oil, Gas & Consumable Fuels – 3.2% | ||||||||||||||||||||
125 | Anadarko Petroleum Corporation | 7.625% | 3/15/14 | BBB– | 141,561 | |||||||||||||||
335 | Anadarko Petroleum Corporation | 6.375% | 9/15/17 | BBB– | 369,678 | |||||||||||||||
100 | Apache Corporation | 6.250% | 4/15/12 | A– | 108,210 | |||||||||||||||
345 | ATP Oil & Gas Corporation, 144A | 11.875% | 5/01/15 | CCC+ | 299,288 | |||||||||||||||
210 | BP Capital Markets PLC | 3.625% | 5/08/14 | A | 217,420 | |||||||||||||||
405 | Cenovus Energy Inc. | 4.500% | 9/15/14 | BBB+ | 446,258 | |||||||||||||||
100 | Chevron Corporation | 3.950% | 3/03/14 | Aa1 | 109,439 | |||||||||||||||
154 | Energy XXI Gulf Coast Inc. | 16.000% | 6/15/14 | B+ | 175,682 | |||||||||||||||
240 | Enterprise Products Operating Group LLP | 4.600% | 8/01/12 | BBB– | 252,865 | |||||||||||||||
220 | Exco Resources Inc. | 7.500% | 9/15/18 | B | 219,725 | |||||||||||||||
225 | McMoran Exploration Corporation | 11.875% | 11/15/14 | B | 248,625 | |||||||||||||||
450 | NFR Energy LLC / Finance Corporation, 144A | 9.750% | 2/15/17 | B | 452,250 | |||||||||||||||
220 | Offshore Group Investment Limited, 144A | 11.500% | 8/01/15 | B3 | 232,100 | |||||||||||||||
310 | OPTI Canada Inc. | 8.250% | 12/15/14 | B– | 237,150 | |||||||||||||||
330 | RAAM Global Energy Company | 12.500% | 10/01/15 | B | 328,763 | |||||||||||||||
390 | Sabine Pass LNG LP | 7.500% | 11/30/16 | B+ | 357,825 | |||||||||||||||
180 | Sandridge Energy Inc. | 8.625% | 4/01/15 | B+ | 180,900 | |||||||||||||||
260 | Sandridge Energy Inc., 144A | 8.750% | 1/15/20 | B+ | 258,700 | |||||||||||||||
300 | StatOilHydro ASA | 2.900% | 10/15/14 | Aa2 | 315,010 | |||||||||||||||
365 | Tesoro Petroleum Corporation | 6.250% | 11/01/12 | BB+ | 380,513 | |||||||||||||||
150 | Valero Energy Corporation | 6.875% | 4/15/12 | BBB | 161,164 | |||||||||||||||
205 | W&T Offshore, Inc., 144A | 8.250% | 6/15/14 | B+ | 197,825 | |||||||||||||||
250 | XTO Energy, Inc. | 5.900% | 8/01/12 | AAA | 272,910 | |||||||||||||||
5,869 | Total Oil, Gas & Consumable Fuels | 5,963,861 | ||||||||||||||||||
Paper & Forest Products – 0.3% | ||||||||||||||||||||
455 | McClatchy Company | 11.500% | 2/15/17 | B1 | 486,281 | |||||||||||||||
Pharmaceuticals – 0.1% | ||||||||||||||||||||
125 | American Home Products Corporation, Wyeth | 6.950% | 3/15/11 | AA | 128,656 | |||||||||||||||
Real Estate – 0.1% | ||||||||||||||||||||
205 | Potlatch Corporation | 7.500% | 11/01/19 | Ba1 | 211,150 | |||||||||||||||
Road & Rail – 0.1% | ||||||||||||||||||||
255 | DynCorp International Inc., 144A | 10.375% | 7/01/17 | B1 | 254,999 | |||||||||||||||
Software – 0.1% | ||||||||||||||||||||
125 | Oracle Corporation | 5.000% | 1/15/11 | A | 126,561 |
26 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Specialty Retail – 0.5% | ||||||||||||||||||||
$ | 380 | Michael’s Stores | 13.000% | 11/01/16 | CCC | $ | 367,649 | |||||||||||||
435 | TJX Companies, Inc. | 4.200% | 8/15/15 | A | 482,280 | |||||||||||||||
815 | Total Specialty Retail | 849,929 | ||||||||||||||||||
Tobacco – 0.4% | ||||||||||||||||||||
225 | Altria Group Inc. | 8.500% | 11/10/13 | Baa1 | 269,613 | |||||||||||||||
400 | Reynolds American Inc. | 7.250% | 6/01/13 | BBB | 449,612 | |||||||||||||||
625 | Total Tobacco | 719,225 | ||||||||||||||||||
Wireless Telecommunication Services – 1.1% | ||||||||||||||||||||
250 | AT&T/Cingular Wireless Services | 8.125% | 5/01/12 | A | 277,843 | |||||||||||||||
455 | Cricket Communications Inc. | 10.000% | 7/15/15 | B– | 493,674 | |||||||||||||||
473 | IntelSat Bermuda Limited | 11.500% | 2/04/17 | CCC+ | 514,773 | |||||||||||||||
490 | Sprint Capital Corporation | 6.900% | 5/01/19 | BB– | 494,899 | |||||||||||||||
125 | Vodafone Group PLC | 5.500% | 6/15/11 | A– | 129,201 | |||||||||||||||
150 | Vodafone Group PLC | 5.000% | 12/16/13 | A– | 165,025 | |||||||||||||||
1,943 | Total Wireless Telecommunication Services | 2,075,415 | ||||||||||||||||||
$ | 46,486 | Total Corporate Bonds (cost $46,288,291) | 48,933,648 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
U.S. GOVERNMENT AND AGENCY OBLIGATIONS – 44.3% | ||||||||||||||||||||
U.S. Treasury Bonds/Notes – 44.3% | ||||||||||||||||||||
$ | 500 | United States of America Treasury Bonds/Notes | 4.875% | 7/31/11 | AAA | $ | 519,180 | |||||||||||||
1,200 | United States of America Treasury Bonds/Notes (3) | 4.625% | 8/31/11 | AAA | 1,247,813 | |||||||||||||||
1,700 | United States of America Treasury Bonds/Notes | 4.500% | 11/30/11 | AAA | 1,782,742 | |||||||||||||||
13,800 | United States of America Treasury Bonds/Notes | 1.125% | 12/15/11 | AAA | 13,935,309 | |||||||||||||||
18,800 | United States of America Treasury Bonds/Notes (3) | 1.125% | 1/15/12 | AAA | 18,996,817 | |||||||||||||||
1,400 | United States of America Treasury Bonds/Notes | 4.750% | 1/31/12 | AAA | 1,483,289 | |||||||||||||||
400 | United States of America Treasury Bonds/Notes | 4.875% | 2/15/12 | AAA | 424,969 | |||||||||||||||
1,300 | United States of America Treasury Bonds/Notes | 4.500% | 3/31/12 | AAA | 1,381,505 | |||||||||||||||
200 | United States of America Treasury Bonds/Notes (3) | 4.875% | 6/30/12 | AAA | 215,797 | |||||||||||||||
2,000 | United States of America Treasury Bonds/Notes | 1.750% | 8/15/12 | AAA | 2,050,548 | |||||||||||||||
1,250 | United States of America Treasury Bonds/Notes | 4.125% | 8/31/12 | AAA | 1,339,014 | |||||||||||||||
3,500 | United States of America Treasury Bonds/Notes | 1.375% | 9/15/12 | AAA | 3,564,943 | |||||||||||||||
4,000 | United States of America Treasury Bonds/Notes | 1.125% | 12/15/12 | AAA | 4,056,876 | |||||||||||||||
6,000 | United States of America Treasury Bonds/Notes (3) | 2.750% | 2/28/13 | AAA | 6,327,660 | |||||||||||||||
1,000 | United States of America Treasury Bonds/Notes | 1.750% | 4/15/13 | AAA | 1,030,386 | |||||||||||||||
6,500 | United States of America Treasury Bonds/Notes | 1.375% | 5/15/13 | AAA | 6,637,124 | |||||||||||||||
2,000 | United States of America Treasury Bonds/Notes | 3.375% | 6/30/13 | AAA | 2,154,062 | |||||||||||||||
1,250 | United States of America Treasury Bonds/Notes | 1.000% | 7/15/13 | AAA | 1,263,869 | |||||||||||||||
700 | United States of America Treasury Bonds/Notes | 6.125% | 8/15/29 | AAA | 974,094 | |||||||||||||||
100 | United States of America Treasury Bonds/Notes | 5.375% | 2/15/31 | AAA | 128,766 | |||||||||||||||
3,362 | United States of America Treasury Inflation Indexed Obligations | 1.875% | 7/15/15 | AAA | 3,659,564 | |||||||||||||||
5,998 | United States of America Treasury Inflation Indexed Obligations | 1.250% | 7/15/20 | AAA | 6,302,012 | |||||||||||||||
55 | United States of America Treasury Securities, STRIPS (I/O) | 0.000% | 5/15/14 | AAA | 53,298 | |||||||||||||||
3,500 | United States of America Treasury Securities, STRIPS (P/O) | 0.000% | 2/15/12 | AAA | 3,485,440 | |||||||||||||||
$ | 80,515 | Total U.S. Government and Agency Obligations (cost $81,832,530) | 83,015,077 |
Nuveen Investments | 27 |
Portfolio of Investments
Nuveen Short Duration Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
ASSET-BACKED SECURITIES – 20.9% | ||||||||||||||||||||
Autos – 10.8% | ||||||||||||||||||||
$ | 700 | Bank of America Auto Trust | 2.670% | 7/15/13 | AAA | $ | 710,089 | |||||||||||||
700 | Bank of America Auto Trust, Series 2009- 2A, 144A | 2.130% | 9/15/13 | AAA | 708,784 | |||||||||||||||
950 | Bank of America Auto Trust, Series 2010-1A | 1.390% | 3/15/14 | AAA | 958,643 | |||||||||||||||
1,935 | BMW Vehicle Owners Trust, Series 2010-A | 2.100% | 10/25/16 | AAA | 1,993,960 | |||||||||||||||
149 | Capital Auto Receivable Asset Trust, 2008-2, A3A | 4.680% | 10/15/12 | AAA | 152,307 | |||||||||||||||
1,000 | CarMax Auto Owner Trust Series 2009 | 1.740% | 4/15/14 | AAA | 1,013,306 | |||||||||||||||
872 | Chrysler Financial Auto Securtization Trust, Series 2010A | 1.650% | 11/08/13 | AA | 872,785 | |||||||||||||||
102 | Daimler Chrysler Auto Trust 2008-A A3 | 3.700% | 6/08/12 | AAA | 102,539 | |||||||||||||||
158 | Daimler Chrysler Auto Trust 2008B | 5.320% | 11/10/14 | AA | 165,937 | |||||||||||||||
700 | Ford Credit Auto Owner Trust 2006B-C | 5.680% | 6/15/12 | AAA | 715,155 | |||||||||||||||
140 | Ford Credit Auto Owner Trust 2008A-3A | 3.960% | 4/15/12 | AAA | 141,329 | |||||||||||||||
1,000 | Ford Credit Auto Owner Trust 2009E | 2.420% | 11/15/14 | AAA | 1,033,340 | |||||||||||||||
710 | Ford Credit Auto Owners Trust | 2.930% | 11/15/15 | AA | 736,088 | |||||||||||||||
1,480 | Ford Credit Floorplan Master Owner Trust Series 2010-3 | 4.200% | 2/15/17 | AAA | 1,609,688 | |||||||||||||||
863 | Hertz Vehicle Financing LLC Series 2009 | 4.260% | 3/25/14 | Aaa | 905,934 | |||||||||||||||
4 | Hyundai Auto Receivables Trust 2007A, Class A3A | 5.040% | 1/17/12 | AAA | 4,533 | |||||||||||||||
700 | Hyundai Auto Receivables Trust 2009A | 2.030% | 8/15/13 | AAA | 710,574 | |||||||||||||||
1,115 | Mercedes-Benz Auto Receivables Trust, Series 2010-1 | 2.140% | 8/15/13 | AAA | 1,150,370 | |||||||||||||||
195 | Nissan Auto Receivables Owner Trust 2008-B A3 | 4.460% | 4/16/12 | AAA | 197,564 | |||||||||||||||
307 | Nissan Auto Receivables Owners Trust 2008-C | 5.930% | 7/16/12 | AAA | 312,721 | |||||||||||||||
2,290 | Nissan Auto Receivables Owners Trust, Series 2009-1 | 5.000% | 9/15/14 | AAA | 2,359,418 | |||||||||||||||
1,028 | Toyota Auto Receivables Owner Trust, Class A3, Series 2003B | 1.860% | 5/16/16 | AAA | 1,046,180 | |||||||||||||||
145 | USAA Auto Owner Trust 2007-2 | 5.070% | 6/15/13 | AAA | 148,123 | |||||||||||||||
1,000 | USAA Auto Owner Trust 2010-1 | 2.140% | 9/15/15 | AAA | 1,028,248 | |||||||||||||||
811 | Volkswagen Auto Loan Enhanced Trust, 2008-2, Class A3A | 5.470% | 3/20/13 | AAA | 837,253 | |||||||||||||||
620 | World Omni Auto Receeivables Trust, Series 2010A | 1.340% | 12/16/13 | AAA | 625,149 | |||||||||||||||
19,674 | Total Autos | 20,240,017 | ||||||||||||||||||
Credit Cards – 4.4% | ||||||||||||||||||||
1,140 | Chase Issuance Trust Series 2008-A9 | 4.260% | 5/15/13 | AAA | 1,167,049 | |||||||||||||||
650 | CitiBank Credit Card Issuance Trust, Series 2006-A4 | 5.450% | 5/10/13 | AAA | 669,602 | |||||||||||||||
270 | CitiBank Credit Card Issuance Trust, Series 2007 | 5.000% | 11/08/12 | AA | 271,059 | |||||||||||||||
2,300 | CitiBank Credit Card Issuance Trust, Series 2009-A5 | 2.250% | 12/23/14 | AAA | 2,367,809 | |||||||||||||||
234 | Discover Card Master Trust 2008, Class A3 | 5.100% | 10/15/13 | AAA | 239,916 | |||||||||||||||
557 | General Electric Capital Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2002-2 | 5.349% | 8/11/36 | AAA | 588,640 | |||||||||||||||
1,840 | General Electric Capital Credit Card Master Note Trust Series 2010-3 | 2.210% | 6/15/16 | Aaa | 1,886,410 | |||||||||||||||
1,080 | General Electric Master Credit Card Trust, Series 2009-3A | 2.540% | 9/15/14 | AAA | 1,099,569 | |||||||||||||||
8,071 | Total Credit Cards | 8,290,054 | ||||||||||||||||||
Home Equity – 5.7% | ||||||||||||||||||||
1,548 | Ally Master Owner Trust 2010-3 | 2.880% | 4/15/15 | AAA | 1,598,188 | |||||||||||||||
850 | Banc of America Commercial Mortgage Pass-Through Certificates, Series 2005 | 4.933% | 7/10/45 | AAA | 903,203 | |||||||||||||||
1,000 | CNH Agriculture Equipment Trust, Series 2009C | 1.850% | 12/16/13 | AAA | 1,012,134 | |||||||||||||||
850 | CNH Equipment Trust 2010-A | 1.540% | 7/15/14 | AAA | 860,558 |
28 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Home Equity (continued) | ||||||||||||||||||||
$ | 1,085 | Credit Suisse First Boston Mortgage Securities Corporation, Mortgage-Backed Pass-Through Certificates, Series 2003-23 | 5.750% | 9/25/33 | AAA | $ | 1,110,709 | |||||||||||||
930 | CS First Boston Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2004-C1 | 4.750% | 1/15/37 | AAA | 983,189 | |||||||||||||||
4,395 | Federal National Mortgage Interest Strip Series 366-25 | 5.000% | 10/01/35 | AAA | 469,358 | |||||||||||||||
163 | Federal National Mortgage Pool 838948 | 2.074% | 8/01/35 | AAA | 169,168 | |||||||||||||||
1,000 | Federal Home Loan Banks, Discount Notes | 1.000% | 2/03/11 | AAA | 999,479 | |||||||||||||||
1,552 | Government National Mortgage Assocation, Guaranteed REMIC Pass Through Securities and MX Securities Trust 2006-062 | 4.500% | 5/16/38 | AAA | 1,639,864 | |||||||||||||||
– | (4) | Master Asset Backed Securities Trust 2005-WMC1, Mortgage Pass Through Certificates, Class N-1 | 4.940% | 3/26/35 | CC | – | ||||||||||||||
833 | Salomon Brothers Commercial Mortgage Trust Pass-Through Certificates, Series 2002-KEY2 | 4.865% | 3/18/36 | AAA | 874,473 | |||||||||||||||
46 | Wells Fargo Mortgage Backed Securties, 2005-AR16 Class 3A2 | 2.921% | 10/25/35 | AAA | 41,217 | |||||||||||||||
14,252 | Total Home Equity | 10,661,540 | ||||||||||||||||||
$ | 41,997 | Total Asset-Backed Securities (cost $38,450,061) | 39,191,611 | |||||||||||||||||
Principal Amount (000) (5) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
SOVEREIGN DEBT – 5.9% | ||||||||||||||||||||
Colombia – 2.7% | ||||||||||||||||||||
7,824,000 | COP | Republic of Colombia | 7.750% | 4/14/21 | BB+ | $ | 5,108,932 | |||||||||||||
Germany – 2.2% | ||||||||||||||||||||
$ | 4,000 | KFW Bankegruppe | 4.625% | 1/20/11 | AAA | 4,045,512 | ||||||||||||||
Peru – 1.0% | ||||||||||||||||||||
4,800 | PEN | Republic of Peru | 6.950% | 8/12/31 | Baa3 | 1,821,366 | ||||||||||||||
Total Sovereign Debt (cost $10,123,355) | 10,975,810 | |||||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Value | ||||||||||||||||
STRUCTURED NOTES – 0.9% | ||||||||||||||||||||
$ | 1,750 | FDIC Structured Sales Guaranteed Notes, Series 2010-L1A | 0.000% | 10/25/13 | $ | 1,671,134 | ||||||||||||||
$ | 1,750 | Total Structured Notes (cost $1,634,355) | 1,671,134 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Value | ||||||||||||||||
SHORT-TERM INVESTMENTS – 0.6% | ||||||||||||||||||||
$ | 1,012 | Repurchase Agreement with Fixed Income Clearing Corporation, dated 9/30/10, repurchase price $1,012,451, collateralized by $950,000 U.S. Treasury Notes, 3.375%, due 11/15/19, value $1,036,688 | 0.080% | 10/01/10 | $ | 1,012,449 | ||||||||||||||
Total Short-Term Investments (cost $1,012,449) | 1,012,449 | |||||||||||||||||||
Total Investments (cost $179,341,041) – 98.7% | 184,799,729 | |||||||||||||||||||
Other Assets Less Liabilities – 1.3% | 2,511,756 | |||||||||||||||||||
Net Assets – 100% | $ | 187,311,485 |
Nuveen Investments | 29 |
Portfolio of Investments
Nuveen Short Duration Bond Fund (continued)
September 30, 2010
Investments in Derivatives
Forward Foreign Currency Exchange Contracts outstanding at September 30, 2010:
Counterparty | Currency Contracts to Deliver | Amount (Local Currency) | In Exchange For Currency | Amount (Local Currency) | Settlement Date | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||
Citigroup | Colombian Peso | 8,307,440,000 | U.S. Dollar | 4,587,211 | 12/15/10 | $ | (22,904 | ) | ||||||||||||||
Morgan Stanley | Euro | 1,820,000 | U.S. Dollar | 2,339,064 | 10/18/10 | (141,797 | ) | |||||||||||||||
JPMorgan Chase | Peruvian Nuevo Sol | 4,920,000 | U.S. Dollar | 1,728,742 | 1/12/11 | (36,140 | ) | |||||||||||||||
Morgan Stanley | Pound Sterling | 1,500,000 | U.S. Dollar | 2,335,358 | 10/18/10 | (20,755 | ) | |||||||||||||||
Deutsche Bank | U.S. Dollar | 2,190,893 | Indonesian Rupiah | 20,112,400,000 | 10/01/10 | 62,597 | ||||||||||||||||
BNP Paribas | U.S. Dollar | 2,452,348 | Euro | 1,820,000 | 10/18/10 | 28,513 | ||||||||||||||||
BNP Paribas | U.S. Dollar | 2,367,424 | Mexican Peso | 30,000,000 | 11/12/10 | 5,813 | ||||||||||||||||
HSBC | U.S. Dollar | 2,364,077 | New Turkish Lira | 3,511,111 | 11/15/10 | 44,903 | ||||||||||||||||
Deutsche Bank | U.S. Dollar | 175,000 | Indian Rupee | 7,920,500 | 12/06/10 | (664 | ) | |||||||||||||||
Morgan Stanley | U.S. Dollar | 562,500 | South African Rand | 3,956,878 | 12/15/10 | (1,207 | ) | |||||||||||||||
RBC | U.S. Dollar | 15,235 | Swedish Krona | 104,515 | 1/31/11 | 218 | ||||||||||||||||
$ | (81,423 | ) |
Interest Rate Swaps outstanding at September 30, 2010:
Counterparty | Notional Amount | Fund Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate* | Fixed Rate Payment Frequency | Term- ination Date | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||
Citibank | 8,350,000 | PLN | Pay | 6-Month WIBOR | 5.340 | % | Annually | 7/06/20 | $ | 100,226 | $ | 100,226 | ||||||||||||||||||
Credit Suisse | 689,500,000 | JPY | Pay | 6-Month LIBOR-BBA | 0.543 | Semi-Annually | 11/26/11 | 12,509 | 12,509 | |||||||||||||||||||||
Credit Suisse | 1,153,000,000 | JPY | Receive | 6-Month LIBOR-BBA | 0.793 | Semi-Annually | 11/26/14 | (212,438 | ) | (212,438 | ) | |||||||||||||||||||
Credit Suisse | 463,500,000 | JPY | Pay | 6-Month LIBOR-BBA | 1.406 | Semi-Annually | 11/26/19 | 259,919 | 259,919 | |||||||||||||||||||||
Deutsche Bank AG | 72,000,000 | MXN | Pay | 28-Day MXN-TIIE | 8.225 | 28-Day | 12/30/19 | 761,397 | 761,397 | |||||||||||||||||||||
Deutsche Bank AG | 14,200,000 | ILS | Pay | 3-Month TELBOR | 4.850 | Annually | 5/20/20 | 216,422 | 216,422 | |||||||||||||||||||||
JPMorgan | 355,000,000 | ZAR | Pay | 3-Month JIBAR | 6.300 | Quarterly | 9/20/12 | 42,851 | 42,851 | |||||||||||||||||||||
JPMorgan | 3,268,000,000 | CLP | Pay | 6-Month CLICP | 4.580 | Semi-Annually | 8/11/14 | (46,406 | ) | (44,431 | ) | |||||||||||||||||||
JPMorgan | 10,831,000,000 | KRW | Receive | 3-Month KRW-CD-KSDA | 4.250 | Quarterly | 3/11/15 | (271,847 | ) | (271,847 | ) | |||||||||||||||||||
JPMorgan (6) | 22,500,000 | BRL | Pay | BRL-CDI | 12.000 | 1/02/17 | 1/02/17 | 149,496 | 149,496 | |||||||||||||||||||||
JPMorgan | 95,500,000 | ZAR | Receive | 3-Month JIBAR | 7.560 | Quarterly | 9/20/20 | (101,822 | ) | (101,822 | ) | |||||||||||||||||||
Morgan Stanley | 71,750,000 | SEK | Receive | 3-Month STIBOR | 2.535 | Annually | 5/06/15 | (153,480 | ) | (153,480 | ) | |||||||||||||||||||
Morgan Stanley | 5,500,000 | CHF | Receive | 6-Month LIBOR-BBA | 2.358 | Annually | 4/12/20 | (355,895 | ) | (355,895 | ) | |||||||||||||||||||
RBC | 47,820,000 | CAD | Receive | 3-Month CAD-BA-CDOR | 1.650 | Semi-Annually | 7/23/12 | (197,975 | ) | (197,975 | ) | |||||||||||||||||||
RBC | 10,900,000 | CAD | Pay | 3-Month CAD-BA-CDOR | 3.460 | Semi-Annually | 7/23/20 | 595,988 | 595,988 | |||||||||||||||||||||
UBS AG | 156,300,000 | MXN | Pay | 28-Day MXN-TIIE | 5.270 | 28-Day | 9/06/12 | 11,002 | 11,002 | |||||||||||||||||||||
UBS AG | 286,000,000 | MXN | Receive | 28-Day MXN-TIIE | 5.960 | 28-Day | 9/03/15 | (106,133 | ) | (106,133 | ) | |||||||||||||||||||
UBS AG | 108,000,000 | CZK | Receive | 6-Month PRIBOR | 3.000 | Annually | 6/21/20 | (275,476 | ) | (275,476 | ) | |||||||||||||||||||
UBS AG | 129,700,000 | MXN | Pay | 28-Day MXN-TIIE | 6.600 | 28-Day | 8/27/20 | 94,122 | 94,122 | |||||||||||||||||||||
$ | 524,435 |
* | Annualized. |
Credit Default Swaps outstanding at September 30, 2010:
Counterparty | Referenced Entity | Buy/Sell Protection (8) | Current Credit Spread (7) | Notional Amount | Fixed Rate* | Termination Date | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||
Bank of America | Boyd Gaming Corporation | Sell | 10.34 | % | $ | 600,000 | 5.000 | % | 3/20/15 | $ | (98,032 | ) | $ | 39,967 | ||||||||||||||||
Goldman Sachs | K. Hovnanian Enterprises, Inc. | Sell | 16.75 | 460,000 | 5.000 | 6/20/14 | (123,911 | ) | (50,311 | ) | ||||||||||||||||||||
Goldman Sachs | Ford Motor Company | Sell | 4.59 | 545,000 | 5.000 | 6/20/15 | 9,686 | 47,836 | ||||||||||||||||||||||
JPMorgan | DJ High Yield CDX | Sell | 4.33 | 940,000 | 5.000 | 6/20/14 | 22,396 | 277,959 | ||||||||||||||||||||||
JPMorgan | DJ Investment Grade CDX | Sell | .94 | 2,000,000 | 1.000 | 12/20/14 | 5,601 | (15,115 | ) | |||||||||||||||||||||
JPMorgan | DJ High Yield CDX | Buy | 5.23 | 4,000,000 | 5.000 | 6/20/15 | 30,163 | (219,837 | ) | |||||||||||||||||||||
UBS AG | Freescale Semiconductor, Inc. | Sell | 9.76 | 330,000 | 5.000 | 6/20/15 | (50,750 | ) | 11,950 | |||||||||||||||||||||
$ | 92,449 |
* | Annualized. |
30 | Nuveen Investments |
Investments in Derivatives (continued)
Futures Contracts outstanding at September 30, 2010:
Type | Contract Position | Number of Contracts | Contract Expiration | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | |||||||||||||||
U.S. 2-Year Treasury Note | Long | 185 | 12/10 | $ | 40,604,610 | $ | 98,476 | |||||||||||||
U.S. 5-Year Treasury Note | Short | (112 | ) | 12/10 | (13,537,125 | ) | (114,524 | ) | ||||||||||||
U.S. 10-Year Treasury Note | Short | (115 | ) | 12/10 | (14,495,391 | ) | (181,118 | ) | ||||||||||||
U.S. 30-Year Treasury Bond | Short | (22 | ) | 12/10 | (2,941,813 | ) | (31,175 | ) | ||||||||||||
$ | (228,341 | ) |
For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) | All percentages shown in the Portfolio of Investments are based on net assets. |
(2) | Ratings (not covered by the report of independent registered public accounting firm): Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
(3) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives. |
(4) | Principal Amount (000) rounds to less than $1,000. |
(5) | Principal Amount (000) denominated in U.S. Dollars, unless otherwise noted. |
(6) | Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
(7) | The credit spread generally serves as an indication of the current status of the payment/performance risk and therefore the likelihood of default of the credit derivative. The credit spread also reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into a credit default swap contract. Higher credit spreads are indicative of a higher likelihood of performance by the seller of protection. |
(8) | The Fund entered into the credit default swaps to gain investment exposure to the referenced entity. Selling protection has a similar credit risk position to owning the referenced entity. Buying protection has a similar credit risk position to selling the referenced entity short. |
N/R | Not rated. |
I/O | Interest only investment. |
P/O | Principal only investment. |
WI/DD | Purchased on a when-issued or delayed delivery basis. |
144A | Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
BRL | Brazilian Real |
CAD | Canadian Dollar |
CHF | Swiss Franc |
CLP | Chilean Peso |
COP | Colombian Peso |
CZK | Czech Koruna |
ILS | Israeli Shekel |
JPY | Japanese Yen |
KRW | South Korean Won |
MXN | Mexican Peso |
PEN | Peruvian Nuevo Sol |
PLN | Polish Zloty |
SEK | Swedish Krona |
ZAR | South African Rand |
BRL-CDI | Brazilian Average Overnight Inter-Bank Deposit Offered Rate |
CAD-BA-CDOR | Canadian Dollar-Bankers Acceptance-Canadian Deposit Offered Rate |
CLICP | Sinacofi Chile Inter-Bank Rate Average |
JIBAR | Johannesburg Inter-Bank Agreed Rate |
KRW-CD-KSDA | Korean Won-Certificates of Deposit-Korean Securities Dealers Association |
LIBOR-BBA | London Inter-Bank Offered Rate-British Bankers’ Association |
MXN-TIIE | Mexican Peso Inter-Bank Equilibrium Interest Rate |
PRIBOR | Prague Inter-Bank Offered Rate |
STIBOR | Stockholm Inter-Bank Offered Rate |
TELBOR | Tel-Aviv Inter-Bank Offered Rate |
WIBOR | Warsaw Inter-Bank Offered Rate |
See accompanying notes to financial statements.
Nuveen Investments | 31 |
Portfolio of Investments
Nuveen Multi-Strategy Core Bond Fund
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CONVERTIBLE BONDS – 0.1% | ||||||||||||||||||||
Diversified Telecommunication Services – 0.1% | ||||||||||||||||||||
$ | 100 | Qwest Communications International Inc. | 7.500% | 2/15/14 | Ba2 | $ | 102,500 | |||||||||||||
$ | 100 | Total Convertible Bonds (cost $94,590) | 102,500 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CORPORATE BONDS – 27.1% | ||||||||||||||||||||
Aerospace & Defense – 0.5% | ||||||||||||||||||||
$ | 50 | BE Aerospace Inc. | 8.500% | 7/01/18 | BB | $ | 54,625 | |||||||||||||
12 | Boeing Capital Corporation | 5.800% | 1/15/13 | A | 13,291 | |||||||||||||||
35 | General Dynamics Corporation | 4.250% | 5/15/13 | A | 38,083 | |||||||||||||||
140 | Global Aviation Holdings, 144A | 14.000% | 8/15/13 | BB– | 150,500 | |||||||||||||||
95 | Kratos Defense & Security Solutions Inc. | 10.000% | 6/01/17 | B+ | 101,175 | |||||||||||||||
20 | Lockheed Martin Corporation | 7.650% | 5/01/16 | A– | 25,405 | |||||||||||||||
85 | Raytheon Company | 4.400% | 2/15/20 | A– | 94,831 | |||||||||||||||
8 | United Technologies Corporation | 7.500% | 9/15/29 | A | 10,870 | |||||||||||||||
445 | Total Aerospace & Defense | 488,780 | ||||||||||||||||||
Auto Components – 0.4% | ||||||||||||||||||||
155 | American & Axle Manufacturing Inc. | 7.875% | 3/01/17 | B– | 154,419 | |||||||||||||||
80 | ArvinMeritor Inc. | 10.625% | 3/15/18 | Caa1 | 89,000 | |||||||||||||||
140 | Lear Corporation | 7.875% | 3/15/18 | BB+ | 149,100 | |||||||||||||||
375 | Total Auto Components | 392,519 | ||||||||||||||||||
Beverages – 0.4% | ||||||||||||||||||||
140 | Anheuser Busch InBev, 144A | 5.375% | 11/15/14 | BBB+ | 157,289 | |||||||||||||||
7 | Coca-Cola Enterprises Inc. | 6.750% | 9/15/28 | A | 8,940 | |||||||||||||||
5 | Diageo Capital, PLC | 5.750% | 10/23/17 | A– | 5,910 | |||||||||||||||
55 | Miller Brewing Company, 144A | 5.500% | 8/15/13 | BBB+ | 60,523 | |||||||||||||||
10 | �� | Pepsi Bottling Group LLC | 5.500% | 4/01/16 | A | 11,807 | ||||||||||||||
65 | PepsiCo Inc. | 3.750% | 3/01/14 | Aa3 | 70,366 | |||||||||||||||
282 | Total Beverages | 314,835 | ||||||||||||||||||
Building Products – 0.2% | ||||||||||||||||||||
40 | Dayton Superior Corporation, (3) (4) | 13.000% | 6/15/11 | Caa3 | 6,000 | |||||||||||||||
4 | Masco Corporation | 5.875% | 7/15/12 | BBB | 4,153 | |||||||||||||||
185 | Ryland Group Inc. | 6.625% | 5/01/20 | BB– | 179,913 | |||||||||||||||
229 | Total Building Products | 190,066 | ||||||||||||||||||
Capital Markets – 1.5% | ||||||||||||||||||||
105 | Bank of New York Mellon | 4.300% | 5/15/14 | Aa2 | 115,384 | |||||||||||||||
505 | Goldman Sachs Group, Inc. | 5.500% | 11/15/14 | A1 | 555,445 | |||||||||||||||
170 | Jefferies Group Inc. | 8.500% | 7/15/19 | BBB | 197,703 | |||||||||||||||
185 | Morgan Stanley | 6.000% | 5/13/14 | A | 203,268 | |||||||||||||||
150 | Morgan Stanley | 5.625% | 9/23/19 | A | 156,447 | |||||||||||||||
120 | Morgan Stanley | 5.950% | 12/28/17 | A | 129,091 | |||||||||||||||
1,235 | Total Capital Markets | 1,357,338 | ||||||||||||||||||
Chemicals – 0.9% | ||||||||||||||||||||
190 | Airgas, Inc. | 4.500% | 9/15/14 | BBB | 203,106 |
32 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Chemicals (continued) | ||||||||||||||||||||
$ | 145 | CF Industries Inc. | 6.875% | 5/01/18 | BB+ | $ | 156,419 | |||||||||||||
75 | E.I. Du Pont de Nemours and Company | 3.250% | 1/15/15 | A | 80,305 | |||||||||||||||
80 | Methanex Corporation | 8.750% | 8/15/12 | BBB– | 85,200 | |||||||||||||||
195 | Potash Corporation of Saskatchewan | 3.750% | 9/30/15 | A– | 202,073 | |||||||||||||||
75 | Praxair, Inc. | 4.500% | 8/15/19 | A | 82,827 | |||||||||||||||
760 | Total Chemicals | 809,930 | ||||||||||||||||||
Commercial Banks – 1.4% | ||||||||||||||||||||
150 | Barlcays Bank PLC | 5.000% | 9/22/16 | AA– | 164,332 | |||||||||||||||
115 | BB&T Corporation | 5.700% | 4/30/14 | A1 | 129,274 | |||||||||||||||
6 | Charter One Bank FSB | 6.375% | 5/15/12 | A3 | 6,362 | |||||||||||||||
140 | Credit Suisse New York | 5.500% | 5/01/14 | Aa1 | 156,953 | |||||||||||||||
110 | Fifth Third Bancorp. | 6.250% | 5/01/13 | Baa1 | 120,513 | |||||||||||||||
4 | Key Bank NA | 7.000% | 2/01/11 | A3 | 4,073 | |||||||||||||||
140 | KeyCorp. | 6.500% | 5/14/13 | BBB+ | 153,525 | |||||||||||||||
25 | National City Bank | 6.200% | 12/15/11 | A | 26,389 | |||||||||||||||
60 | PNC Funding Corporation | 6.700% | 6/10/19 | A | 71,076 | |||||||||||||||
6 | SunTrust Banks Inc. | 6.375% | 4/01/11 | A3 | 6,162 | |||||||||||||||
95 | US Bancorp | 4.200% | 5/15/14 | Aa3 | 104,193 | |||||||||||||||
9 | US Bank NA Minnesota | 6.375% | 8/01/11 | Aa2 | 9,430 | |||||||||||||||
74 | Wachovia Corporation | 5.250% | 8/01/14 | A+ | 80,506 | |||||||||||||||
170 | Wells Fargo & Company | 5.250% | 10/23/12 | AA– | 184,060 | |||||||||||||||
1,104 | Total Commercial Banks | 1,216,848 | ||||||||||||||||||
Commercial Services & Supplies – 0.6% | ||||||||||||||||||||
85 | Browning Ferris-Allied Waste | 9.250% | 5/01/21 | BBB | 108,772 | |||||||||||||||
110 | GATX Corporation | 4.750% | 10/01/12 | Baa1 | 115,682 | |||||||||||||||
110 | Geokinetics Holdings Inc., 144A | 9.750% | 12/15/14 | B– | 96,800 | |||||||||||||||
100 | PHI Inc., 144A | 8.625% | 10/15/18 | B+ | 98,750 | |||||||||||||||
135 | West Corporation | 11.000% | 10/15/16 | B– | 144,113 | |||||||||||||||
540 | Total Commercial Services & Supplies | 564,117 | ||||||||||||||||||
Communications Equipment – 0.0% | ||||||||||||||||||||
10 | Cisco Systems, Inc. | 5.500% | 2/22/16 | A+ | 11,810 | |||||||||||||||
1 | Motorola, Inc. | 7.625% | 11/15/10 | Baa3 | 1,008 | |||||||||||||||
3 | Motorola, Inc. | 7.500% | 5/15/25 | Baa3 | 3,566 | |||||||||||||||
14 | Total Communications Equipment | 16,384 | ||||||||||||||||||
Computers & Peripherals – 0.1% | ||||||||||||||||||||
20 | Dell Inc. | 3.375% | 6/15/12 | A2 | 20,832 | |||||||||||||||
35 | Hewlett Packard Company | 4.500% | 3/01/13 | A | 37,901 | |||||||||||||||
35 | International Business Machines Corporation (IBM) | 4.750% | 11/29/12 | A+ | 38,076 | |||||||||||||||
90 | Total Computers & Peripherals | 96,809 | ||||||||||||||||||
Consumer Finance – 0.4% | ||||||||||||||||||||
185 | American Express Credit Corporation | 7.300% | 8/20/13 | A2 | 212,785 | |||||||||||||||
120 | Provident Funding Associates, 144A | 10.250% | 4/15/17 | Ba3 | 124,200 | |||||||||||||||
305 | Total Consumer Finance | 336,985 |
Nuveen Investments | 33 |
Portfolio of Investments
Nuveen Multi-Strategy Core Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Containers & Packaging – 0.2% | ||||||||||||||||||||
$ | 95 | Intertape Polymer US Inc. | 8.500% | 8/01/14 | Caa1 | $ | 81,463 | |||||||||||||
50 | Rock-Tenn Company | 5.625% | 3/15/13 | BBB– | 51,375 | |||||||||||||||
40 | Tekni-Plex Inc. | 10.875% | 8/15/12 | N/R | 38,400 | |||||||||||||||
185 | Total Containers & Packaging | 171,238 | ||||||||||||||||||
Diversified Financial Services – 1.4% | ||||||||||||||||||||
185 | Capital One Financial Corporation | 7.375% | 5/23/14 | Baa1 | 216,135 | |||||||||||||||
225 | Citigroup Inc. | 6.125% | 11/21/17 | A | 246,136 | |||||||||||||||
65 | Citigroup Inc. | 6.000% | 10/31/33 | A– | 62,896 | |||||||||||||||
65 | General Electric Capital Corporation | 5.625% | 9/15/17 | AA+ | 72,717 | |||||||||||||||
225 | General Electric Capital Corporation | 6.875% | 1/10/39 | AA+ | 259,256 | |||||||||||||||
80 | JP Morgan Chase & Company | 5.375% | 10/01/12 | Aa3 | 86,602 | |||||||||||||||
210 | JP Morgan Chase & Company | 6.000% | 1/15/18 | Aa3 | 240,175 | |||||||||||||||
90 | National Rural Utilities Cooperative Finance Corporation | 7.250% | 3/01/12 | A | 97,978 | |||||||||||||||
1,145 | Total Diversified Financial Services | 1,281,895 | ||||||||||||||||||
Diversified Telecommunication Services – 2.6% | ||||||||||||||||||||
240 | AT&T, Inc. | 6.800% | 5/15/36 | A | 285,818 | |||||||||||||||
140 | Cequel Communication Holdings I, 144A | 8.625% | 11/15/17 | B– | 148,400 | |||||||||||||||
50 | Charter Communications, CCO Holdings LLC | 7.250% | 10/30/17 | B | 50,938 | |||||||||||||||
190 | Cincinnati Bell Inc. | 8.750% | 3/15/18 | B– | 186,200 | |||||||||||||||
240 | Citizens Communications Company | 9.000% | 8/15/31 | BB | 257,100 | |||||||||||||||
145 | Cox Communications, Inc. | 5.500% | 10/01/15 | Baa2 | 163,357 | |||||||||||||||
90 | France Telecom | 5.375% | 7/08/19 | A– | 105,504 | |||||||||||||||
100 | Insight Communications, 144A | 9.375% | 7/15/18 | B– | 106,750 | |||||||||||||||
180 | Paetec Holding Corporation | 8.875% | 6/30/17 | B1 | 189,000 | |||||||||||||||
130 | Qwest Communications International Inc., 144A | 7.125% | 4/01/18 | Ba2 | 137,150 | |||||||||||||||
215 | Telecom Italia Capital | 5.250% | 10/01/15 | BBB | 232,270 | |||||||||||||||
130 | Telefonica Emisiones SAU | 4.949% | 1/15/15 | A– | 142,382 | |||||||||||||||
260 | Verizon Communications | 6.250% | 4/01/37 | A | 294,822 | |||||||||||||||
75 | Windstream Corporation, 144A, (WI/DD) | 7.750% | 10/15/20 | Ba3 | 75,938 | |||||||||||||||
2,185 | Total Diversified Telecommunication Services | 2,375,629 | ||||||||||||||||||
Electric Utilities – 0.8% | ||||||||||||||||||||
35 | American Electric Power | 5.250% | 6/01/15 | BBB | 38,827 | |||||||||||||||
20 | Carolina Power and Light Company | 5.125% | 9/15/13 | A1 | 22,225 | |||||||||||||||
14 | Duke Capital LLC | 5.668% | 8/15/14 | BBB | 15,649 | |||||||||||||||
105 | Duke Energy Corporation | 6.250% | 1/15/12 | A– | 112,414 | |||||||||||||||
190 | Edison Mission Energy | 7.625% | 5/15/27 | B– | 128,725 | |||||||||||||||
75 | Exelon Corporation | 4.900% | 6/15/15 | Baa1 | 82,289 | |||||||||||||||
2 | FirstEnergy Corporation | 6.450% | 11/15/11 | Baa3 | 2,096 | |||||||||||||||
5 | FirstEnergy Corporation | 7.375% | 11/15/31 | Baa3 | 5,448 | |||||||||||||||
250 | Niagara Mohawk Power Company, 144A | 3.553% | 10/01/14 | A– | 264,006 | |||||||||||||||
10 | Progress Energy, Inc. | 7.000% | 10/30/31 | BBB | 12,342 | |||||||||||||||
5 | PSE&G Power LLC | 8.625% | 4/15/31 | Baa1 | 6,784 | |||||||||||||||
50 | West Corporation, 144A, (WI/DD) | 8.625% | 10/01/18 | B | 50,000 | |||||||||||||||
761 | Total Electric Utilities | 740,805 |
34 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Electrical Equipment – 0.0% | ||||||||||||||||||||
$ | 25 | Emerson Electric Company | 5.250% | 10/15/18 | A | $ | 29,249 | |||||||||||||
Electronic Equipment & Instruments – 0.4% | ||||||||||||||||||||
190 | Agilent Technologies Inc. | 5.500% | 9/14/15 | BBB– | 213,845 | |||||||||||||||
120 | ViaSystems Inc., 144A | 12.000% | 1/15/15 | B+ | 131,550 | |||||||||||||||
310 | Total Electronic Equipment & Instruments | 345,395 | ||||||||||||||||||
Energy Equipment & Services – 1.0% | ||||||||||||||||||||
33 | Halliburton Company | 5.500% | 10/15/10 | A | 33,042 | |||||||||||||||
250 | Kinder Morgan Energy Partners, L.P. | 6.500% | 9/01/39 | BBB | 271,222 | |||||||||||||||
160 | Linn Energy LLC Finance Corporation, 144A | 7.750% | 2/01/21 | B | 162,200 | |||||||||||||||
85 | Nabors Industries Inc. | 9.250% | 1/15/19 | BBB | 108,932 | |||||||||||||||
200 | Plains All American Pipeline L.P. | 5.750% | 1/15/20 | BBB– | 221,254 | |||||||||||||||
50 | Rockies Express Pipeline Company, 144A | 6.250% | 7/15/13 | BBB– | 54,356 | |||||||||||||||
55 | Transocean Sedco Inc. | 6.000% | 3/15/18 | BBB | 58,586 | |||||||||||||||
833 | Total Energy Equipment & Services | 909,592 | ||||||||||||||||||
Food & Staples Retailing – 0.6% | ||||||||||||||||||||
165 | Kroger Co. | 3.900% | 10/01/15 | BBB | 179,277 | |||||||||||||||
2 | Kroger Co. | 7.500% | 4/01/31 | BBB | 2,589 | |||||||||||||||
135 | Safeway Inc. | 6.250% | 3/15/14 | BBB | 155,041 | |||||||||||||||
135 | Wal-Mart Stores, Inc. | 3.200% | 5/15/14 | AA | 144,663 | |||||||||||||||
50 | Wal-Mart Stores, Inc. | 5.800% | 2/15/18 | AA | 60,242 | |||||||||||||||
487 | Total Food & Staples Retailing | 541,812 | ||||||||||||||||||
Food Products – 0.2% | ||||||||||||||||||||
27 | Kellogg Company | 7.450% | 4/01/31 | A3 | 36,721 | |||||||||||||||
85 | Kraft Foods Inc. | 6.125% | 2/01/18 | Baa2 | 100,367 | |||||||||||||||
112 | Total Food Products | 137,088 | ||||||||||||||||||
Gas Utilities – 0.0% | ||||||||||||||||||||
2 | Consolidated Natural Gas Company | 5.000% | 12/01/14 | A– | 2,244 | |||||||||||||||
Hotels, Restaurants & Leisure – 0.6% | ||||||||||||||||||||
145 | Brunswick Corporation | 7.375% | 9/01/23 | Caa1 | 122,525 | |||||||||||||||
85 | McDonald’s Corporation | 5.800% | 10/15/17 | A | 103,041 | |||||||||||||||
190 | MGM Mirage Inc. | 5.875% | 2/27/14 | CCC+ | 163,400 | |||||||||||||||
100 | Tricon Global Restaurants Incorporated | 8.875% | 4/15/11 | BBB– | 104,171 | |||||||||||||||
520 | Total Hotels, Restaurants & Leisure | 493,137 | ||||||||||||||||||
Household Durables – 0.4% | ||||||||||||||||||||
155 | MDC Holdings Inc. | 5.625% | 2/01/20 | BBB– | 152,561 | |||||||||||||||
120 | Meritage Homes Corporation | 7.150% | 4/15/20 | B+ | 114,000 | |||||||||||||||
115 | Norcraft Companies Finance | 10.500% | 12/15/15 | B2 | 120,750 | |||||||||||||||
390 | Total Household Durables | 387,311 | ||||||||||||||||||
Household Products – 0.2% | ||||||||||||||||||||
150 | Clorox Company | 3.550% | 11/01/15 | BBB+ | 161,201 | |||||||||||||||
20 | Procter and Gamble Company | 4.850% | 12/15/15 | AA– | 23,104 | |||||||||||||||
170 | Total Household Products | 184,305 |
Nuveen Investments | 35 |
Portfolio of Investments
Nuveen Multi-Strategy Core Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Industrial Conglomerates – 0.8% | ||||||||||||||||||||
$ | 300 | Textron Inc. | 7.250% | 10/01/19 | BBB– | $ | 355,922 | |||||||||||||
190 | Timken Company | 6.000% | 9/15/14 | BBB– | 211,453 | |||||||||||||||
125 | Tyco International Group | 6.000% | 11/15/13 | A– | 141,776 | |||||||||||||||
615 | Total Industrial Conglomerates | 709,151 | ||||||||||||||||||
Insurance – 0.3% | ||||||||||||||||||||
100 | Berkshire Hathaway Inc. | 5.400% | 5/15/18 | AA+ | 114,522 | |||||||||||||||
75 | MetLife Inc. | 7.717% | 2/15/19 | A– | 95,607 | |||||||||||||||
55 | Prudential Financial Inc. | 4.750% | 4/01/14 | A | 59,098 | |||||||||||||||
230 | Total Insurance | 269,227 | ||||||||||||||||||
IT Services – 0.4% | ||||||||||||||||||||
210 | First Data Corporation | 9.875% | 9/24/15 | B– | 172,725 | |||||||||||||||
70 | Fiserv Inc. | 6.125% | 11/20/12 | Baa2 | 76,429 | |||||||||||||||
125 | Seagate HDD Cayman, 144A | 6.875% | 5/01/20 | BB+ | 122,813 | |||||||||||||||
405 | Total IT Services | 371,967 | ||||||||||||||||||
Machinery – 0.2% | ||||||||||||||||||||
5 | Caterpillar Inc. | 6.050% | 8/15/36 | A | 6,068 | |||||||||||||||
15 | Deere & Company | 6.950% | 4/25/14 | A | 17,902 | |||||||||||||||
150 | Greenbrier Companies, Inc. | 8.375% | 5/15/15 | CCC | 146,250 | |||||||||||||||
170 | Total Machinery | 170,220 | ||||||||||||||||||
Media – 2.0% | ||||||||||||||||||||
80 | Allbritton Communications Company | 8.000% | 5/15/18 | B | 80,600 | |||||||||||||||
10 | Clear Channel Worldwide Holdings Inc. | 9.250% | 12/15/17 | B | 10,650 | |||||||||||||||
40 | Clear Channel Worldwide Holdings Inc. | 9.250% | 12/15/17 | B | 42,900 | |||||||||||||||
340 | Comcast Corporation | 5.850% | 11/15/15 | BBB+ | 394,463 | |||||||||||||||
55 | Comcast Corporation | 6.450% | 3/15/37 | BBB+ | 61,302 | |||||||||||||||
40 | News America, Inc. | 6.150% | 3/01/37 | BBB+ | 43,215 | |||||||||||||||
115 | Nielsen Finance LLC Co | 11.625% | 2/01/14 | B | 131,100 | |||||||||||||||
195 | Sinclair Television Group, 144A | 9.250% | 11/01/17 | Ba3 | 210,113 | |||||||||||||||
25 | Sinclair Television Group, (WI/DD) | 8.375% | 10/15/18 | B2 | 25,313 | |||||||||||||||
170 | Thomson Reuters Corporation | 4.700% | 10/15/19 | A– | 188,001 | |||||||||||||||
130 | Time Warner Cable Inc. | 6.200% | 7/01/13 | BBB | 146,545 | |||||||||||||||
35 | Time Warner Cable Inc. | 6.550% | 5/01/37 | BBB | 39,604 | |||||||||||||||
210 | Time Warner Inc. | 4.875% | 3/15/20 | BBB | 228,256 | |||||||||||||||
150 | TL Acquisitions Inc., 144A | 13.250% | 7/15/15 | CCC+ | 149,625 | |||||||||||||||
25 | Walt Disney Company | 6.000% | 7/17/17 | A | 30,540 | |||||||||||||||
2 | Walt Disney Company | 7.000% | 3/01/32 | A | 2,628 | |||||||||||||||
45 | WMG Acquisition Group | 9.500% | 6/15/16 | BB | 48,375 | |||||||||||||||
1,667 | Total Media | 1,833,230 | ||||||||||||||||||
Metals & Mining – 0.5% | ||||||||||||||||||||
45 | Algoma Acquisition Corporation, 144A | 9.875% | 6/15/15 | CCC+ | 40,331 | |||||||||||||||
80 | BHP Billiton Finance Limited | 5.500% | 4/01/14 | A+ | 90,092 | |||||||||||||||
95 | Essar Steel Algoma Inc., 144A | 9.375% | 3/15/15 | B+ | 95,950 | |||||||||||||||
50 | Steel Dynamics, Inc., 144A | 7.625% | 3/15/20 | BB+ | 52,125 | |||||||||||||||
75 | Steel Dynamics, Inc. | 7.375% | 11/01/12 | BB+ | 80,531 |
36 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Metals & Mining (continued) | ||||||||||||||||||||
$ | 25 | Steel Dynamics, Inc. | 7.750% | 4/15/16 | BB+ | $ | 26,125 | |||||||||||||
60 | United States Steel Corporation | 6.050% | 6/01/17 | BB | 59,775 | |||||||||||||||
430 | Total Metals & Mining | 444,929 | ||||||||||||||||||
Multi-Line Retail – 1.0% | ||||||||||||||||||||
120 | Costco Wholesale Corporation | 5.300% | 3/15/12 | A+ | 128,057 | |||||||||||||||
260 | CVS Caremark Corporation | 3.250% | 5/18/15 | BBB+ | 271,867 | |||||||||||||||
8 | Federated Department Stores, Inc. | 6.900% | 4/01/29 | BB+ | 8,140 | |||||||||||||||
75 | Home Depot, Inc. | 5.400% | 3/01/16 | BBB+ | 85,495 | |||||||||||||||
25 | Sears Holding Corporation, 144A, (WI/DD) | 6.625% | 10/15/18 | BB+ | 25,195 | |||||||||||||||
170 | Target Corporation | 5.375% | 5/01/17 | A+ | 198,389 | |||||||||||||||
125 | Toys R Us Property Company Inc., 144A | 10.750% | 7/15/17 | B+ | 141,875 | |||||||||||||||
50 | Visant Corporation, 144A | 10.000% | 10/01/17 | Caa1 | 52,375 | |||||||||||||||
833 | Total Multi-Line Retail | 911,393 | ||||||||||||||||||
Multi-Utilities – 0.3% | ||||||||||||||||||||
190 | Bon-Ton Department Stores Inc. | 10.250% | 3/15/14 | CCC+ | 188,100 | |||||||||||||||
45 | Dominion Resources Inc. | 6.250% | 6/30/12 | A– | 49,064 | |||||||||||||||
16 | Pacific Gas and Electric Company | 6.050% | 3/01/34 | A3 | 18,198 | |||||||||||||||
11 | Reliant Energy, Centerpoint Energy Inc. | 7.750% | 2/15/11 | BBB | 11,275 | |||||||||||||||
9 | Virginia Electric and Power Company | 4.750% | 3/01/13 | A– | 9,741 | |||||||||||||||
271 | Total Multi-Utilities | 276,378 | ||||||||||||||||||
Oil, Gas & Consumable Fuels – 4.5% | ||||||||||||||||||||
95 | Anadarko Petroleum Corporation | 7.625% | 3/15/14 | BBB– | 107,586 | |||||||||||||||
150 | Anadarko Petroleum Corporation | 6.375% | 9/15/17 | BBB– | 165,527 | |||||||||||||||
40 | Apache Corporation | 6.000% | 1/15/37 | A– | 45,524 | |||||||||||||||
150 | ATP Oil & Gas Corporation, 144A | 11.875% | 5/01/15 | CCC+ | 130,125 | |||||||||||||||
100 | BP Capital Markets PLC | 3.625% | 5/08/14 | A | 103,533 | |||||||||||||||
210 | Cenovus Energy Inc., 144A | 4.500% | 9/15/14 | BBB+ | 231,393 | |||||||||||||||
125 | Chevron Corporation | 3.950% | 3/03/14 | Aa1 | 136,798 | |||||||||||||||
10 | Devon Energy Corporation | 7.950% | 4/15/32 | BBB+ | 13,593 | |||||||||||||||
195 | Enbridge Energy Partners LP | 5.200% | 3/15/20 | BBB | 212,578 | |||||||||||||||
92 | Energy XXI Gulf Coast Inc. | 16.000% | 6/15/14 | B+ | 104,841 | |||||||||||||||
170 | Enterprise Products Operating Group LLP | 4.600% | 8/01/12 | BBB– | 179,113 | |||||||||||||||
85 | EOG Resources Inc. | 5.625% | 6/01/19 | A– | 100,177 | |||||||||||||||
110 | Exco Resources Inc. | 7.500% | 9/15/18 | B | 109,863 | |||||||||||||||
100 | McMoran Exploration Corporation | 11.875% | 11/15/14 | B | 110,500 | |||||||||||||||
190 | NFR Energy LLC / Finance Corporation, 144A | 9.750% | 2/15/17 | B | 190,950 | |||||||||||||||
20 | Occidental Petroleum Corporation | 6.750% | 1/15/12 | A | 21,481 | |||||||||||||||
140 | Occidental Petroleum Corporation | 4.125% | 6/01/16 | A | 156,681 | |||||||||||||||
100 | Offshore Group Investment Limited, 144A | 11.500% | 8/01/15 | B3 | 105,500 | |||||||||||||||
140 | OPTI Canada Inc. | 8.250% | 12/15/14 | B– | 107,100 | |||||||||||||||
155 | RAAM Global Energy Company | 12.500% | 10/01/15 | B | 154,419 | |||||||||||||||
175 | Sabine Pass LNG LP | 7.500% | 11/30/16 | B+ | 160,563 | |||||||||||||||
90 | Sandridge Energy Inc. | 8.625% | 4/01/15 | B+ | 90,450 | |||||||||||||||
85 | Sandridge Energy Inc., 144A | 8.750% | 1/15/20 | B+ | 84,575 |
Nuveen Investments | 37 |
Portfolio of Investments
Nuveen Multi-Strategy Core Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||||||||||
$ | 510 | Shell International Finance BV | 4.300% | 9/22/19 | Aa1 | $ | 560,421 | |||||||||||||
115 | StatOilHydro ASA | 2.900% | 10/15/14 | Aa2 | 120,754 | |||||||||||||||
245 | SunCor Energy Inc. | 6.100% | 6/01/18 | BBB+ | 287,227 | |||||||||||||||
135 | Tesoro Petroleum Corporation | 6.250% | 11/01/12 | BB+ | 140,738 | |||||||||||||||
10 | Tosco Corporation | 8.125% | 2/15/30 | A1 | 13,731 | |||||||||||||||
10 | Valero Energy Corporation | 7.500% | 4/15/32 | BBB | 10,935 | |||||||||||||||
115 | W&T Offshore, Inc., 144A | 8.250% | 6/15/14 | B+ | 110,975 | |||||||||||||||
10 | XTO Energy, Inc. | 6.250% | 4/15/13 | AAA | 11,317 | |||||||||||||||
3,877 | Total Oil, Gas & Consumable Fuels | 4,078,968 | ||||||||||||||||||
Paper & Forest Products – 0.2% | ||||||||||||||||||||
190 | McClatchy Company | 11.500% | 2/15/17 | B1 | 203,063 | |||||||||||||||
8 | Westvaco Corporation | 8.200% | 1/15/30 | BBB | 8,772 | |||||||||||||||
198 | Total Paper & Forest Products | 211,835 | ||||||||||||||||||
Pharmaceuticals – 0.0% | ||||||||||||||||||||
3 | Schering-Plough Corporation | 6.500% | 12/01/33 | AA– | 3,835 | |||||||||||||||
Real Estate – 0.1% | ||||||||||||||||||||
90 | Potlatch Corporation | 7.500% | 11/01/19 | Ba1 | 92,700 | |||||||||||||||
Road & Rail – 0.2% | ||||||||||||||||||||
18 | Burlington Northern Santa Fe Corporation | 6.750% | 7/15/11 | A3 | 18,880 | |||||||||||||||
10 | CSX Corporation | 5.600% | 5/01/17 | BBB– | 11,447 | |||||||||||||||
110 | DynCorp International Inc., 144A | 10.375% | 7/01/17 | B1 | 110,000 | |||||||||||||||
17 | Norfolk Southern Corporation | 7.700% | 5/15/17 | BBB+ | 21,756 | |||||||||||||||
155 | Total Road & Rail | 162,083 | ||||||||||||||||||
Specialty Retail – 0.7% | ||||||||||||||||||||
300 | CenturyTel Inc. | 6.150% | 9/15/19 | BBB– | 307,403 | |||||||||||||||
155 | Michael’s Stores | 13.000% | 11/01/16 | CCC | 149,963 | |||||||||||||||
145 | TJX Companies, Inc. | 4.200% | 8/15/15 | A | 160,760 | |||||||||||||||
600 | Total Specialty Retail | 618,126 | ||||||||||||||||||
Tobacco – 0.2% | ||||||||||||||||||||
120 | Altria Group Inc. | 8.500% | 11/10/13 | Baa1 | 143,794 | |||||||||||||||
Trading Companies & Distributors – 0.0% | ||||||||||||||||||||
30 | Russel Metals Inc. | 6.375% | 3/01/14 | Ba1 | 29,775 | |||||||||||||||
Wireless Telecommunication Services – 0.9% | ||||||||||||||||||||
195 | Cricket Communications Inc. | 10.000% | 7/15/15 | B– | 211,575 | |||||||||||||||
202 | IntelSat Bermuda Limited | 11.500% | 2/04/17 | CCC+ | 219,790 | |||||||||||||||
50 | Nokia Corporation | 5.375% | 5/15/19 | A | 54,678 | |||||||||||||||
60 | Rogers Wireless Communications Inc. | 6.375% | 3/01/14 | BBB | 69,172 | |||||||||||||||
200 | Sprint Capital Corporation | 6.900% | 5/01/19 | BB– | 201,999 | |||||||||||||||
80 | Vodafone Group PLC | 5.350% | 2/27/12 | A– | 84,760 | |||||||||||||||
787 | Total Wireless Telecommunication Services | 841,974 | ||||||||||||||||||
$ | 22,985 | Total Corporate Bonds (cost $22,622,892) | 24,553,896 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
U.S. GOVERNMENT AND AGENCY OBLIGATIONS – 33.1% | ||||||||||||||||||||
U.S. Treasury Bonds/Notes – 33.1% | ||||||||||||||||||||
$ | 190 | Tennessee Valley Authority | 5.250% | 9/15/39 | AAA | $ | 221,396 |
38 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
U.S. Treasury Bonds/Notes (continued) | ||||||||||||||||||||
$ | 1,500 | United States of America Treasury Bonds/Notes | 4.500% | 3/31/12 | AAA | $ | 1,594,044 | |||||||||||||
1,400 | United States of America Treasury Bonds/Notes | 1.375% | 4/15/12 | AAA | 1,422,586 | |||||||||||||||
525 | United States of America Treasury Bonds/Notes | 4.625% | 7/31/12 | AAA | 565,995 | |||||||||||||||
1,150 | United States of America Treasury Bonds/Notes | 1.750% | 8/15/12 | AAA | 1,179,065 | |||||||||||||||
250 | United States of America Treasury Bonds/Notes | 1.375% | 9/15/12 | AAA | 254,639 | |||||||||||||||
1,000 | United States of America Treasury Bonds/Notes | 2.750% | 2/28/13 | AAA | 1,054,610 | |||||||||||||||
900 | United States of America Treasury Bonds/Notes | 3.375% | 6/30/13 | AAA | 969,328 | |||||||||||||||
500 | United States of America Treasury Bonds/Notes | 3.125% | 9/30/13 | AAA | 536,797 | |||||||||||||||
5,500 | United States of America Treasury Bonds/Notes | 2.750% | 10/31/13 | AAA | 5,849,767 | |||||||||||||||
1,500 | United States of America Treasury Bonds/Notes, (5) | 2.625% | 12/31/14 | AAA | 1,598,087 | |||||||||||||||
2,000 | United States of America Treasury Bonds/Notes | 4.500% | 2/15/16 | AAA | 2,320,938 | |||||||||||||||
750 | United States of America Treasury Bonds/Notes | 6.375% | 8/15/27 | AAA | 1,059,727 | |||||||||||||||
675 | United States of America Treasury Bonds/Notes | 5.250% | 11/15/28 | AAA | 852,926 | |||||||||||||||
600 | United States of America Treasury Bonds/Notes | 5.250% | 2/15/29 | AAA | 758,344 | |||||||||||||||
450 | United States of America Treasury Bonds/Notes | 5.375% | 2/15/31 | AAA | 579,445 | |||||||||||||||
300 | United States of America Treasury Bonds/Notes | 4.500% | 2/15/36 | AAA | 345,000 | |||||||||||||||
450 | United States of America Treasury Bonds/Notes | 4.750% | 2/15/37 | AAA | 538,031 | |||||||||||||||
900 | United States of America Treasury Bonds/Notes | 3.500% | 2/15/39 | AAA | 870,890 | |||||||||||||||
225 | United States of America Treasury Bonds/Notes | 4.250% | 5/15/39 | AAA | 247,394 | |||||||||||||||
200 | United States of America Treasury Bonds/Notes (5) | 4.375% | 11/15/39 | AAA | 224,406 | |||||||||||||||
425 | United States of America Treasury Bonds/Notes | 4.625% | 2/15/40 | AAA | 496,652 | |||||||||||||||
4,249 | United States of America Treasury Inflation Indexed Obligations | 1.250% | 7/15/20 | AAA | 4,463,925 | |||||||||||||||
1,500 | United States of America Treasury Securities, STRIPS (I/O) | 0.000% | 5/15/12 | AAA | 1,494,126 | |||||||||||||||
105 | United States of America Treasury Securities, STRIPS (I/O) | 0.000% | 8/15/18 | AAA | 88,077 | |||||||||||||||
400 | United States of America Treasury Securities, STRIPS (I/O) | 0.000% | 5/15/32 | AAA | 173,524 | |||||||||||||||
550 | United States of America Treasury Securities, STRIPS (P/O) | 0.000% | 2/15/39 | AAA | 181,651 | |||||||||||||||
$ | 28,194 | Total U.S. Government and Agency Obligations (cost $28,873,474) | 29,941,370 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES – 43.5% | ||||||||||||||||||||
Autos – Asset-Backed Securities – 8.4% | ||||||||||||||||||||
$ | 450 | Bank of America Auto Trust | 2.670% | 7/15/13 | AAA | $ | 456,486 | |||||||||||||
300 | Bank of America Auto Trust, Series 2009-2A, 144A | 2.130% | 9/15/13 | AAA | 303,765 | |||||||||||||||
350 | Bank of America Auto Trust, Series 2010-1A | 1.390% | 3/15/14 | AAA | 353,184 | |||||||||||||||
800 | BMW Vehicle Owners Trust, Series 2010-A | 2.100% | 10/25/16 | AAA | 824,376 | |||||||||||||||
425 | Chrysler Financial Auto Securtization Trust, Series 2010A | 1.650% | 11/08/13 | AA | 425,383 | |||||||||||||||
141 | Daimler Chrysler Auto Trust 2008B | 5.320% | 11/10/14 | AA | 148,083 | |||||||||||||||
300 | Ford Credit Auto Owner Trust 2006B-C | 5.680% | 6/15/12 | AAA | 306,495 | |||||||||||||||
140 | Ford Credit Auto Owner Trust 2008A-3A | 3.960% | 4/15/12 | AAA | 141,329 | |||||||||||||||
290 | Ford Credit Auto Owners Trust | 2.930% | 11/15/15 | AA | 300,655 | |||||||||||||||
590 | Ford Credit Floorplan Master Owner Trust Series 2010-3 | 4.200% | 2/15/17 | AAA | 641,700 | |||||||||||||||
360 | Hertz Vehicle Financing LLC Series 2009 | 4.260% | 3/25/14 | Aaa | 377,910 | |||||||||||||||
8 | Hyundai Auto Receivables Trust 2007A, Class A3A | 5.040% | 1/17/12 | AAA | 8,160 |
Nuveen Investments | 39 |
Portfolio of Investments
Nuveen Multi-Strategy Core Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Autos – Asset-Backed Securities (continued) | ||||||||||||||||||||
$ | 300 | Hyundai Auto Receivables Trust 2009A | 2.030% | 8/15/13 | AAA | $ | 304,532 | |||||||||||||
460 | Mercedes-Benz Auto Receivables Trust, Series 2010-1 | 2.140% | 8/15/13 | AAA | 474,592 | |||||||||||||||
445 | Nissan Auto Receivables Owners Trust 2008-C | 5.930% | 7/16/12 | AAA | 453,445 | |||||||||||||||
497 | Nissan Auto Receivables Owners Trust, Series 2009-1 | 5.000% | 9/15/14 | AAA | 511,905 | |||||||||||||||
420 | Toyota Auto Receivables Owner Trust, Class A3, Series 2003B | 1.860% | 5/16/16 | AAA | 427,427 | |||||||||||||||
1,126 | Volkswagen Auto Loan Enhanced Trust, 2008-2, Class A3A | 5.470% | 3/20/13 | AAA | 1,162,852 | |||||||||||||||
7,402 | Total Autos | 7,622,279 | ||||||||||||||||||
Credit Cards – Asset-Backed Securities – 5.0% | ||||||||||||||||||||
72 | Bank of America Alternative Loan Trust, Series 2005-5 2 CB1 | 6.000% | 6/25/35 | Caa1 | 57,085 | |||||||||||||||
850 | Chase Issuance Trust Series 2008-A9 | 4.260% | 5/15/13 | AAA | 870,168 | |||||||||||||||
750 | CitiBank Credit Card Issuance Trust, Series 2006-A4 | 5.450% | 5/10/13 | AAA | 772,618 | |||||||||||||||
550 | CitiBank Credit Card Issuance Trust, Series 2009-A5 | 2.250% | 12/23/14 | AAA | 566,215 | |||||||||||||||
205 | Discover Card Master Trust 2008, Class A3 | 5.100% | 10/15/13 | AAA | 210,183 | |||||||||||||||
230 | General Electric Capital Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2002-2 | 5.349% | 8/11/36 | AAA | 243,065 | |||||||||||||||
850 | General Electric Capital Credit Card Master Note Trust Series 2010-3 | 2.210% | 6/15/16 | Aaa | 871,439 | |||||||||||||||
530 | General Electric Master Credit Card Trust, Series 2009-3A | 2.540% | 9/15/14 | AAA | 539,604 | |||||||||||||||
350 | Salomon Brothers Commercial Mortgage Trust Pass-Through Certificates, Series 2002-KEY2 | 4.865% | 3/18/36 | AAA | 367,425 | |||||||||||||||
4,387 | Total Credit Cards | 4,497,802 | ||||||||||||||||||
Home Equity – Asset-Backed Secutities – 1.9% | ||||||||||||||||||||
644 | Ally Master Owner Trust 2010-3 | 2.880% | 4/15/15 | AAA | 664,879 | |||||||||||||||
350 | CNH Equipment Trust 2010-A | 1.540% | 7/15/14 | AAA | 354,347 | |||||||||||||||
648 | Government National Mortgage Assocation, Guaranteed REMIC Pass Through Securities and MX Securities Trust 2006-062 | 4.500% | 5/16/38 | AAA | 684,885 | |||||||||||||||
– | (6) | Master Asset Backed Securities Trust 2005-WMC1, Mortgage Pass Through Certificates, Class N-1 | 4.940% | 3/26/35 | CC | – | ||||||||||||||
1,642 | Total Home Equity | 1,704,111 | ||||||||||||||||||
Other – Asset-Backed Securities – 0.0% | ||||||||||||||||||||
8 | SLM Student Loan Trust 2007-7 Class A1 | 0.638% | 10/25/12 | AAA | 8,334 | |||||||||||||||
Commercial – Mortgage-Backed Securities – 1.5% | ||||||||||||||||||||
350 | Banc of America Commercial Mortgage Pass-Through Certificates, Series 2005 | 4.933% | 7/10/45 | AAA | 371,907 | |||||||||||||||
408 | Credit Suisse First Boston Mortgage Securities Corporation, Mortgage-Backed Pass-Through Certificates, Series 2003-23 | 5.750% | 9/25/33 | AAA | 417,627 | |||||||||||||||
500 | CS First Boston Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2004-C1 | 4.750% | 1/15/37 | AAA | 528,596 | |||||||||||||||
1,258 | Total Commercial | 1,318,130 | ||||||||||||||||||
Residential – Mortgage-Backed Securities – 26.7% | ||||||||||||||||||||
2,581 | Federal National Mortgage Interest Strip Series 366-25 | 5.000% | 10/01/35 | AAA | 275,625 | |||||||||||||||
382 | Federal National Mortgage Pool 735060 | 6.000% | 11/01/34 | AAA | 416,556 | |||||||||||||||
155 | Federal National Mortgage Pool 735606 | 4.089% | 5/01/35 | AAA | 159,882 | |||||||||||||||
219 | Federal National Mortgage Pool 824163 | 5.500% | 4/01/35 | AAA | 234,555 | |||||||||||||||
163 | Federal National Mortgage Pool 838948 | 2.074% | 8/01/35 | AAA | 169,168 | |||||||||||||||
155 | Federal National Mortgage Pool 905597 | 6.051% | 12/01/36 | AAA | 167,429 | |||||||||||||||
404 | Federal National Mortgage Pool 946228 | 6.199% | 9/01/37 | AAA | 435,639 | |||||||||||||||
54 | Federal Home Loan Mortgage Corporation, Mortgage Pool 1B3220 | 5.884% | 1/01/37 | AAA | 57,259 |
40 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Residential – Mortgage-Backed Securities (continued) | ||||||||||||||||||||
$ | 97 | Federal Home Loan Mortgage Corporation, Series 2376 | 5.500% | 11/15/16 | N/R | $ | 104,860 | |||||||||||||
120 | Federal Home Loan Mortgage Corporation, Mortgage Series 2963 | 5.500% | 5/15/28 | N/R | 121,515 | |||||||||||||||
2,000 | Federal Home Loan Banks, Discount Notes | 1.000% | 2/03/11 | AAA | 1,998,958 | |||||||||||||||
133 | Federal Home Loan Mortgage Pool 847681 | 6.156% | 12/01/36 | AAA | 143,708 | |||||||||||||||
4,000 | Federal National Mortgage Association (MDR) (WI/DD) | 5.500% | TBA | AAA | 4,303,440 | |||||||||||||||
8,720 | Federal National Mortgage Association (MDR) (WI/DD) | 5.000% | TBA | AAA | 9,179,160 | |||||||||||||||
6,000 | Government National Mortgage Association (MDR) (WI/DD) | 5.000% | TBA | AAA | 6,389,064 | |||||||||||||||
46 | Wells Fargo Mortgage Backed Securties, 2005-AR16 Class 3A2 | 2.921% | 10/25/35 | AAA | 41,555 | |||||||||||||||
25,229 | Total Residential | 24,198,373 | ||||||||||||||||||
$ | 39,926 | Total Asset-Backed and Mortgage-Backed Securities (cost $38,789,641) |
| 39,349,029 | ||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CAPITAL PREFERRED SECURITIES – 0.0% | ||||||||||||||||||||
Capital Markets – 0.0% | ||||||||||||||||||||
$ | 8 | First Union Institutional Capital Securities I | 8.040% | 12/01/26 | A– | $ | 8,147 | |||||||||||||
$ | 8 | Total Capital Preferred Securities (cost $8,590) | 8,147 | |||||||||||||||||
Principal Amount (000) (7) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
SOVEREIGN DEBT – 6.1% | ||||||||||||||||||||
Colombia – 3.5% | ||||||||||||||||||||
$ | 10 | Republic of Colombia | 8.250% | 12/22/14 | BBB– | $ | 12,275 | |||||||||||||
4,820,000 | COP | Republic of Colombia | 7.750% | 4/14/21 | BB+ | 3,147,374 | ||||||||||||||
Total Colombia | 3,159,649 | |||||||||||||||||||
Germany – 1.7% | ||||||||||||||||||||
1,500 | KFW Bankegruppe | 4.625% | 1/20/11 | AAA | 1,517,067 | |||||||||||||||
Peru – 0.9% | ||||||||||||||||||||
2,050 | PEN | Republic of Peru | 6.950% | 8/12/31 | Baa3 | 777,875 | ||||||||||||||
Total Sovereign Debt (cost $4,920,561) | 5,454,591 | |||||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Value | ||||||||||||||||
STRUCTURED NOTES – 0.7% | ||||||||||||||||||||
$ | 650 | FDIC Structured Sales Guaranteed Notes, Series 2010-L1A | 0.000% | 10/25/13 | $ | 620,707 | ||||||||||||||
$ | 650 | Total Structured Notes (cost $607,046) | 620,707 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
SHORT-TERM INVESTMENTS – 11.5% | ||||||||||||||||||||
U.S. Government and Agency Obligations – 8.8% | ||||||||||||||||||||
$ | 4,000 | Federal Home Loan Mortgage Corporation, Discount Notes | 1.000% | 11/01/10 | AAA | $ | 3,998,481 | |||||||||||||
4,000 | Federal National Mortgage Association | 0.000% | 11/15/10 | AAA | 3,999,250 | |||||||||||||||
8,000 | Total U.S. Government and Agency Obligations | 7,997,731 |
Nuveen Investments | 41 |
Portfolio of Investments
Nuveen Multi-Strategy Core Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Repurchase Agreements – 2.7% | ||||||||||||||||||||
$ | 2,418 | Repurchase Agreement with Fixed Income Clearing Corporation, dated 9/30/10, repurchase price $2,417,722, collateralized by $2,350,000 U.S. Treasury Notes, 2.375%, due 3/31/16, value $2,467,500 | 0.080% | 10/01/10 | �� | N/A | $ | 2,417,717 | ||||||||||||
Total Short-Term Investments (cost $10,415,448) | 10,415,448 | |||||||||||||||||||
Total Investments (cost $106,332,242) – 122.1% | 110,445,688 | |||||||||||||||||||
Other Assets Less Liabilities – (22.1)% | (19,962,862 | ) | ||||||||||||||||||
Net Assets – 100% | $ | 90,482,826 |
Investments in Derivatives
Forward Foreign Currency Exchange Contracts outstanding at September 30, 2010:
Counterparty | Currency Contracts to Deliver | Amount (Local Currency) | In Exchange For Currency | Amount (Local Currency) | Settlement Date | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||
Citigroup | Colombian Peso | 5,095,200,000 | U.S. Dollar | 2,813,473 | 12/15/10 | $ | (14,048 | ) | ||||||||||||||
Morgan Stanley | Euro | 820,000 | U.S. Dollar | 1,053,864 | 10/18/10 | (63,887 | ) | |||||||||||||||
JPMorgan Chase | Peruvian Nuevo Sol | 2,101,250 | U.S. Dollar | 738,317 | 1/12/11 | (15,435 | ) | |||||||||||||||
Morgan Stanley | Pound Sterling | 670,000 | U.S. Dollar | 1,043,126 | 10/18/10 | (9,270 | ) | |||||||||||||||
Deutsche Bank | U.S. Dollar | 908,225 | Indonesian Rupiah | 8,337,504,000 | 10/01/10 | 25,949 | ||||||||||||||||
BNP Paribas | U.S. Dollar | 1,104,904 | Euro | 820,000 | 10/18/10 | 12,846 | ||||||||||||||||
BNP Paribas | U.S. Dollar | 1,104,798 | Mexican Peso | 14,000,000 | 11/12/10 | 2,713 | ||||||||||||||||
HSBC | U.S. Dollar | 1,058,695 | New Turkish Lira | 1,572,367 | 11/15/10 | 20,109 | ||||||||||||||||
Deutsche Bank | U.S. Dollar | 580,000 | Indian Rupee | 26,250,800 | 12/06/10 | (2,202 | ) | |||||||||||||||
Morgan Stanley | U.S. Dollar | 1,162,500 | South African Rand | 8,177,548 | 12/15/10 | (2,494 | ) | |||||||||||||||
RBC | U.S. Dollar | 6,264 | Swedish Krona | 42,971 | 1/31/11 | 90 | ||||||||||||||||
$ | (45,629 | ) |
Interest Rate Swaps outstanding at September 30, 2010:
Counterparty | Notional Amount | Fund Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate* | Fixed Rate Payment Frequency | Term- ination | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||||||
Citibank | 3,600,000 | PLN | Pay | 6-Month WIBOR | 5.340 | % | Annually | 7/06/20 | $ | 43,212 | $ | 43,212 | ||||||||||||||||||||||
Credit Suisse | 280,000,000 | JPY | Pay | 6-Month LIBOR-BBA | 0.543 | Semi-Annually | 11/26/11 | 5,080 | 5,080 | |||||||||||||||||||||||||
Credit Suisse | 468,000,000 | JPY | Receive | 6-Month LIBOR-BBA | 0.793 | Semi-Annually | 11/26/14 | (86,228 | ) | (86,228 | ) | |||||||||||||||||||||||
Credit Suisse | 188,000,000 | JPY | Pay | 6-Month LIBOR-BBA | 1.406 | Semi-Annually | 11/26/19 | 105,426 | 105,426 | |||||||||||||||||||||||||
Deutsche Bank AG | 25,500,000 | MXN | Pay | 28-Day MXN-TIIE | 8.225 | 28-Day | 12/30/19 | 269,661 | 269,661 | |||||||||||||||||||||||||
Deutsche Bank AG | 5,800,000 | ILS | Pay | 3-Month TELBOR | 4.850 | Annually | 5/20/20 | 88,398 | 88,398 | |||||||||||||||||||||||||
JPMorgan | 167,200,000 | ZAR | Pay | 3-Month JIBAR | 6.300 | Quarterly | 9/20/12 | 20,182 | 20,182 | |||||||||||||||||||||||||
JPMorgan | 1,452,000,000 | CLP | Pay | 6-Month CLICP | 4.580 | Semi-Annually | 8/11/14 | (20,619 | ) | (20,003 | ) | |||||||||||||||||||||||
JPMorgan | 4,046,000,000 | KRW | Receive | 3-Month KRW-CD-KSDA | 4.250 | Quarterly | 3/11/15 | (101,551 | ) | (101,551 | ) | |||||||||||||||||||||||
JPMorgan (4) | 9,900,000 | BRL | Pay | BRL-CDI | 12.000 | 1/02/17 | 1/02/17 | 65,778 | 65,778 | |||||||||||||||||||||||||
JPMorgan | 45,000,000 | ZAR | Receive | 3-Month JIBAR | 7.560 | Quarterly | 9/20/20 | (47,979 | ) | (47,979 | ) | |||||||||||||||||||||||
Morgan Stanley | 29,500,000 | SEK | Receive | 3-Month STIBOR | 2.535 | Annually | 5/06/15 | (63,103 | ) | (63,103 | ) | |||||||||||||||||||||||
Morgan Stanley | 2,150,000 | CHF | Receive | 6-Month LIBOR-BBA | 2.358 | Annually | 4/12/20 | (139,123 | ) | (139,123 | ) | |||||||||||||||||||||||
RBC | 21,940,000 | CAD | Receive | 3-Month CAD-BA-CDOR | 1.650 | Semi-Annually | 7/23/12 | (90,828 | ) | (90,828 | ) | |||||||||||||||||||||||
RBC | 5,000,000 | CAD | Pay | 3-Month CAD-BA-CDOR | 3.460 | Semi-Annually | 7/23/20 | 273,389 | 273,389 | |||||||||||||||||||||||||
UBS AG | 74,000,000 | MXN | Pay | 28-Day MXN-TIIE | 5.270 | 28-Day | 9/06/12 | 5,209 | 5,209 | |||||||||||||||||||||||||
UBS AG | 135,000,000 | MXN | Receive | 28-Day MXN-TIIE | 5.960 | 28-Day | 9/03/15 | (50,098 | ) | (50,098 | ) | |||||||||||||||||||||||
UBS AG | 46,100,000 | CZK | Receive | 6-Month PRIBOR | 3.000 | Annually | 6/21/20 | (117,587 | ) | (117,587 | ) | |||||||||||||||||||||||
UBS AG | 61,000,000 | MXN | Pay | 28-Day MXN-TIIE | 6.600 | 28-Day | 8/27/20 | 44,267 | 44,267 | |||||||||||||||||||||||||
$ | 204,102 |
* | Annualized. |
42 | Nuveen Investments |
Investments in Derivatives (continued)
Credit Default Swaps outstanding at September 30, 2010:
Counterparty | Referenced Entity | Buy/Sell Protection (9) | Current Credit Spread (8) | Notional Amount | Fixed Rate* | Termination Date | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||
Bank of America | Boyd Gaming Corporation | Sell | 10.34 | % | $ | 200,000 | 5.000 | % | 3/20/15 | $ | (32,677 | ) | $ | 13,323 | ||||||||||||||||
Goldman Sachs | K. Hovnanian Enterprises, Inc. | Sell | 16.75 | 190,000 | 5.000 | 6/20/14 | (51,181 | ) | (20,781 | ) | ||||||||||||||||||||
Goldman Sachs | Ford Motor Company | Sell | 4.59 | 240,000 | 5.000 | 6/20/15 | 4,265 | 21,065 | ||||||||||||||||||||||
JPMorgan | DJ Investment Grade CDX | Sell | .94 | 1,500,000 | 1.000 | 12/20/14 | 4,201 | (11,336 | ) | |||||||||||||||||||||
JPMorgan | DJ High Yield CDX | Buy | 5.23 | 2,000,000 | 5.000 | 6/20/15 | 15,081 | (109,919 | ) | |||||||||||||||||||||
UBS AG | Freescale Semiconductor, Inc. | Sell | 9.76 | 140,000 | 5.000 | 6/20/15 | (21,530 | ) | 5,070 | |||||||||||||||||||||
$ | (102,578 | ) |
* | Annualized. |
Futures Contracts outstanding at September 30, 2010:
Type | Contract Position | Number of Contracts | Contract Expiration | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | |||||||||||||||
U.S. 2-Year Treasury Note | Long | 30 | 12/10 | $ | 6,584,531 | $ | 379 | |||||||||||||
U.S. 5-Year Treasury Note | Short | (225 | ) | 12/10 | (27,195,117 | ) | (7,706 | ) | ||||||||||||
U.S. 10-Year Treasury Note | Long | 134 | 12/10 | 16,890,281 | 1,957 | |||||||||||||||
U.S. 30-Year Treasury Bond | Long | 1 | 12/10 | 133,719 | 122 | |||||||||||||||
$ | (5,248 | ) |
Nuveen Investments | 43 |
Portfolio of Investments
Nuveen Multi-Strategy Core Bond Fund (continued)
September 30, 2010
For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) | All percentages shown in the Portfolio of Investments are based on net assets. |
(2) | Ratings (not covered by the report of independent registered public accounting firm): Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
(3) | The Fund’s Adviser has concluded this issue is not likely to meet its future interest payment obligations and has directed the Fund’s custodian to cease accruing additional income on the Fund’s records. |
(4) | Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
(5) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives. |
(6) | Principal Amount (000) rounds to less than $1,000. |
(7) | Principal Amount (000) denominated in U.S. Dollars, unless otherwise noted. |
(8) | The credit spread generally serves as an indication of the current status of the payment/performance risk and therefore the likelihood of default of the credit derivative. The credit spread also reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into a credit default swap contract. Higher credit spreads are indicative of a higher likelihood of performance by the seller of protection. |
(9) | The Fund entered into the credit default swaps to gain investment exposure to the referenced entity. Selling protection has a similar credit risk position to owning the referenced entity. Buying protection has a similar credit risk position to selling the referenced entity short. |
N/R | Not rated. |
N/A | Not applicable. |
TBA | To be announced. Maturity date not known prior to settlement of this transaction. |
I/O | Interest only investment. |
P/O | Principal only investment. |
MDR | Denotes investment is subject to dollar roll transactions. |
WI/DD | Purchased on a when-issued or delayed delivery basis. |
144A | Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
BRL | Brazilian Real |
CAD | Canadian Dollar |
CHF | Swiss Franc |
CLP | Chilean Peso |
COP | Colombian Peso |
CZK | Czech Koruna |
ILS | Israeli Shekel |
JPY | Japanese Yen |
KRW | South Korean Won |
MXN | Mexican Peso |
PEN | Peruvian Nuevo Sol |
PLN | Polish Zloty |
SEK | Swedish Krona |
ZAR | South African Rand |
BRL-CDI | Brazilian Average Overnight Inter-Bank Deposit Offered Rate |
CAD-BA-CDOR | Canadian Dollar-Bankers Acceptance-Canadian Deposit Offered Rate |
CLICP | Sinacofi Chile Inter-Bank Rate Average |
JIBAR | Johannesburg Inter-Bank Agreed Rate |
KRW-CD-KSDA | Korean Won-Certificates of Deposit-Korean Securities Dealers Association |
LIBOR-BBA | London Inter-Bank Offered Rate-British Bankers’ Association |
MXN-TIIE | Mexican Peso Inter-Bank Equilibrium Interest Rate |
PRIBOR | Prague Inter-Bank Offered Rate |
STIBOR | Stockholm Inter-Bank Offered Rate |
TELBOR | Tel-Aviv Inter-Bank Offered Rate |
WIBOR | Warsaw Inter-Bank Offered Rate |
See accompanying notes to financial statements.
44 | Nuveen Investments |
Portfolio of Investments
Nuveen High Yield Bond Fund
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CONVERTIBLE BONDS – 0.9% | ||||||||||||||||||||
Diversified Telecommunication Services – 0.9% | ||||||||||||||||||||
$ | 1,354 | Qwest Communications International Inc. | 7.500% | 2/15/14 | Ba2 | $ | 1,387,850 | |||||||||||||
$ | 1,354 | Total Convertible Bonds (cost $1,280,754) | 1,387,850 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CORPORATE BONDS – 94.8% | ||||||||||||||||||||
Aerospace & Defense – 3.1% | ||||||||||||||||||||
$ | 2,600 | Global Aviation Holdings, 144A | 14.000% | 8/15/13 | BB– | $ | 2,795,000 | |||||||||||||
1,670 | Kratos Defense & Security Solutions Inc. | 10.000% | 6/01/17 | B+ | 1,778,550 | |||||||||||||||
4,270 | Total Aerospace & Defense | 4,573,550 | ||||||||||||||||||
Auto Components – 4.8% | ||||||||||||||||||||
2,480 | American & Axle Manufacturing Inc. | 7.875% | 3/01/17 | B– | 2,470,700 | |||||||||||||||
1,690 | ArvinMeritor Inc. | 10.625% | 3/15/18 | Caa1 | 1,880,125 | |||||||||||||||
2,510 | Lear Corporation | 7.875% | 3/15/18 | BB+ | 2,673,150 | |||||||||||||||
6,680 | Total Auto Components | 7,023,975 | ||||||||||||||||||
Building Products – 1.6% | ||||||||||||||||||||
425 | Dayton Superior Corporation, (3) (4) | 13.000% | 6/15/11 | Caa3 | 63,750 | |||||||||||||||
2,330 | Ryland Group Inc. | 6.625% | 5/01/20 | BB– | 2,265,925 | |||||||||||||||
2,755 | Total Building Products | 2,329,675 | ||||||||||||||||||
Chemicals – 2.6% | ||||||||||||||||||||
2,495 | CF Industries Inc. | 6.875% | 5/01/18 | BB+ | 2,691,481 | |||||||||||||||
1,050 | Methanex Corporation | 8.750% | 8/15/12 | BBB– | 1,118,250 | |||||||||||||||
3,545 | Total Chemicals | 3,809,731 | ||||||||||||||||||
Commercial Services & Supplies – 6.1% | ||||||||||||||||||||
2,110 | Browning Ferris-Allied Waste | 9.250% | 5/01/21 | BBB | 2,700,102 | |||||||||||||||
2,555 | Geokinetics Holdings Inc., 144A | 9.750% | 12/15/14 | B– | 2,248,400 | |||||||||||||||
1,670 | PHI Inc., 144A | 8.625% | 10/15/18 | B+ | 1,649,125 | |||||||||||||||
2,205 | West Corporation | 11.000% | 10/15/16 | B– | 2,353,838 | |||||||||||||||
8,540 | Total Commercial Services & Supplies | 8,951,465 | ||||||||||||||||||
Communications Equipment – 0.2% | ||||||||||||||||||||
250 | MetroPCS Wireless Inc. | 7.875% | 9/01/18 | B | 258,750 | |||||||||||||||
Consumer Finance – 1.1% | ||||||||||||||||||||
1,555 | Provident Funding Associates, 144A | 10.250% | 4/15/17 | Ba3 | 1,609,425 | |||||||||||||||
Containers & Packaging – 3.4% | ||||||||||||||||||||
1,955 | Intertape Polymer US Inc. | 8.500% | 8/01/14 | Caa1 | 1,676,413 | |||||||||||||||
1,410 | Rock-Tenn Company | 5.625% | 3/15/13 | BBB– | 1,448,775 | |||||||||||||||
1,900 | Tekni-Plex Inc. | 10.875% | 8/15/12 | N/R | 1,824,000 | |||||||||||||||
5,265 | Total Containers & Packaging | 4,949,188 | ||||||||||||||||||
Diversified Telecommunication Services – 10.0% | ||||||||||||||||||||
2,510 | Cequel Communication Holdings I, 144A | 8.625% | 11/15/17 | B– | 2,660,600 | |||||||||||||||
840 | Charter Communications, CCO Holdings LLC | 7.250% | 10/30/17 | B | 855,750 | |||||||||||||||
2,330 | Cincinnati Bell Inc. | 8.750% | 3/15/18 | B– | 2,283,400 | |||||||||||||||
2,960 | Citizens Communications Company | 9.000% | 8/15/31 | BB | 3,170,900 | |||||||||||||||
1,650 | Insight Communications, 144A | 9.375% | 7/15/18 | B– | 1,761,375 |
Nuveen Investments | 45 |
Portfolio of Investments
Nuveen High Yield Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Diversified Telecommunication Services (continued) | ||||||||||||||||||||
$ | 2,515 | Paetec Holding Corporation | 8.875% | 6/30/17 | B1 | $ | 2,640,750 | |||||||||||||
50 | Qwest Communications International Inc., 144A | 7.125% | 4/01/18 | Ba2 | 52,750 | |||||||||||||||
1,250 | Windstream Corporation, 144A, (WI/DD) | 7.750% | 10/15/20 | Ba3 | 1,265,625 | |||||||||||||||
14,105 | Total Diversified Telecommunication Services | 14,691,150 | ||||||||||||||||||
Electric Utilities – 1.6% | ||||||||||||||||||||
2,330 | Edison Mission Energy | 7.625% | 5/15/27 | B– | 1,578,575 | |||||||||||||||
835 | West Corporation, 144A, (WI/DD) | 8.625% | 10/01/18 | B | 835,000 | |||||||||||||||
3,165 | Total Electric Utilities | 2,413,575 | ||||||||||||||||||
Electronic Equipment & Instruments – 1.6% | ||||||||||||||||||||
2,200 | ViaSystems Inc., 144A | 12.000% | 1/15/15 | B+ | 2,411,750 | |||||||||||||||
Energy Equipment & Services – 1.7% | ||||||||||||||||||||
2,480 | Linn Energy LLC Finance Corporation, 144A | 7.750% | 2/01/21 | B | 2,514,100 | |||||||||||||||
Hotels, Restaurants & Leisure – 2.8% | ||||||||||||||||||||
1,790 | Brunswick Corporation | 7.375% | 9/01/23 | Caa1 | 1,512,550 | |||||||||||||||
3,075 | MGM Mirage Inc. | 5.875% | 2/27/14 | CCC+ | 2,644,500 | |||||||||||||||
4,865 | Total Hotels, Restaurants & Leisure | 4,157,050 | ||||||||||||||||||
Household Durables – 2.5% | ||||||||||||||||||||
1,550 | Meritage Homes Corporation | 7.150% | 4/15/20 | B+ | 1,472,500 | |||||||||||||||
2,050 | Norcraft Companies Finance | 10.500% | 12/15/15 | B2 | 2,152,500 | |||||||||||||||
3,600 | Total Household Durables | 3,625,000 | ||||||||||||||||||
IT Services – 2.9% | ||||||||||||||||||||
3,420 | First Data Corporation | 9.875% | 9/24/15 | B– | 2,812,950 | |||||||||||||||
1,550 | Seagate HDD Cayman, 144A | 6.875% | 5/01/20 | BB+ | 1,522,875 | |||||||||||||||
4,970 | Total IT Services | 4,335,825 | ||||||||||||||||||
Machinery – 2.0% | ||||||||||||||||||||
3,016 | Greenbrier Companies, Inc. | 8.375% | 5/15/15 | CCC | 2,940,600 | |||||||||||||||
Media – 7.7% | ||||||||||||||||||||
1,050 | Allbritton Communications Company | 8.000% | 5/15/18 | B | 1,057,875 | |||||||||||||||
170 | Clear Channel Worldwide Holdings Inc. | 9.250% | 12/15/17 | B | 181,050 | |||||||||||||||
645 | Clear Channel Worldwide Holdings Inc. | 9.250% | 12/15/17 | B | 691,763 | |||||||||||||||
2,315 | Nielsen Finance LLC Co | 11.625% | 2/01/14 | B | 2,639,100 | |||||||||||||||
2,360 | Sinclair Television Group, 144A | 9.250% | 11/01/17 | Ba3 | 2,542,900 | |||||||||||||||
420 | Sinclair Television Group, (WI/DD) | 8.375% | 10/15/18 | B2 | 425,250 | |||||||||||||||
2,575 | TL Acquisitions Inc., 144A | 13.250% | 7/15/15 | CCC+ | 2,568,563 | |||||||||||||||
1,215 | WMG Acquisition Group | 9.500% | 6/15/16 | BB | 1,306,125 | |||||||||||||||
10,750 | Total Media | 11,412,626 | ||||||||||||||||||
Metals & Mining – 4.3% | ||||||||||||||||||||
1,945 | Algoma Acquisition Corporation, 144A | 9.875% | 6/15/15 | CCC+ | 1,743,207 | |||||||||||||||
1,640 | Essar Steel Algoma Inc., 144A | 9.375% | 3/15/15 | B+ | 1,656,400 | |||||||||||||||
800 | Steel Dynamics, Inc., 144A | 7.625% | 3/15/20 | BB+ | 834,000 | |||||||||||||||
1,455 | Steel Dynamics, Inc. | 7.375% | 11/01/12 | BB+ | 1,562,306 | |||||||||||||||
580 | Steel Dynamics, Inc. | 7.750% | 4/15/16 | BB+ | 606,100 | |||||||||||||||
6,420 | Total Metals & Mining | 6,402,013 |
46 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Multi-Line Retail – 2.9% | ||||||||||||||||||||
$ | 420 | Sears Holding Corporation, 144A, (WI/DD) | 6.625% | 10/15/18 | BB+ | $ | 423,280 | |||||||||||||
2,655 | Toys R Us Property Company Inc., 144A | 10.750% | 7/15/17 | B+ | 3,013,425 | |||||||||||||||
830 | Visant Corporation, 144A | 10.000% | 10/01/17 | Caa1 | 869,425 | |||||||||||||||
3,905 | Total Multi-Line Retail | 4,306,130 | ||||||||||||||||||
Multi-Utilities – 1.6% | ||||||||||||||||||||
2,335 | Bon-Ton Department Stores Inc. | 10.250% | 3/15/14 | CCC+ | 2,311,650 | |||||||||||||||
Oil, Gas & Consumable Fuels – 17.4% | ||||||||||||||||||||
2,490 | Anadarko Petroleum Corporation | 6.375% | 9/15/17 | BBB– | 2,747,755 | |||||||||||||||
2,485 | ATP Oil & Gas Corporation, 144A | 11.875% | 5/01/15 | CCC+ | 2,155,738 | |||||||||||||||
1,609 | Energy XXI Gulf Coast Inc. | 16.000% | 6/15/14 | B+ | 1,834,471 | |||||||||||||||
1,650 | Exco Resources Inc. | 7.500% | 9/15/18 | B | 1,647,938 | |||||||||||||||
1,665 | McMoran Exploration Corporation | 11.875% | 11/15/14 | B | 1,839,825 | |||||||||||||||
2,335 | NFR Energy LLC / Finance Corporation, 144A | 9.750% | 2/15/17 | B | 2,346,675 | |||||||||||||||
1,660 | Offshore Group Investment Limited, 144A | 11.500% | 8/01/15 | B3 | 1,751,300 | |||||||||||||||
2,322 | OPTI Canada Inc. | 8.250% | 12/15/14 | B– | 1,776,330 | |||||||||||||||
2,495 | RAAM Global Energy Company | 12.500% | 10/01/15 | B | 2,485,644 | |||||||||||||||
2,817 | Sabine Pass LNG LP | 7.500% | 11/30/16 | B+ | 2,584,598 | |||||||||||||||
1,715 | Sandridge Energy Inc. | 8.625% | 4/01/15 | B+ | 1,723,575 | |||||||||||||||
650 | Sandridge Energy Inc., 144A | 8.750% | 1/15/20 | B+ | 646,750 | |||||||||||||||
2,180 | W&T Offshore, Inc., 144A | 8.250% | 6/15/14 | B+ | 2,103,700 | |||||||||||||||
26,073 | Total Oil, Gas & Consumable Fuels | 25,644,299 | ||||||||||||||||||
Paper & Forest Products – 1.7% | ||||||||||||||||||||
2,335 | McClatchy Company | 11.500% | 2/15/17 | B1 | 2,495,531 | |||||||||||||||
Real Estate – 1.2% | ||||||||||||||||||||
1,685 | Potlatch Corporation | 7.500% | 11/01/19 | Ba1 | 1,735,550 | |||||||||||||||
Road & Rail – 1.3% | ||||||||||||||||||||
1,860 | DynCorp International Inc., 144A | 10.375% | 7/01/17 | B1 | 1,860,000 | |||||||||||||||
Specialty Retail – 1.3% | ||||||||||||||||||||
1,940 | Michael’s Stores | 13.000% | 11/01/16 | CCC | 1,876,950 | |||||||||||||||
Trading Companies & Distributors – 1.5% | ||||||||||||||||||||
2,230 | Russel Metals Inc. | 6.375% | 3/01/14 | Ba1 | 2,213,274 | |||||||||||||||
Wireless Telecommunication Services – 5.9% | ||||||||||||||||||||
2,325 | Cricket Communications Inc. | 10.000% | 7/15/15 | B– | 2,522,624 | |||||||||||||||
2,486 | IntelSat Bermuda Limited | 11.500% | 2/04/17 | CCC+ | 2,706,904 | |||||||||||||||
3,380 | Sprint Capital Corporation | 6.900% | 5/01/19 | BB– | 3,413,799 | |||||||||||||||
8,191 | Total Wireless Telecommunication Services | 8,643,327 | ||||||||||||||||||
$ | 138,985 | Total Corporate Bonds (cost $131,559,384) | 139,496,159 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
U.S. GOVERNMENT AND AGENCY OBLIGATIONS – 2.2% | ||||||||||||||||||||
U.S. Treasury Bonds/Notes – 2.2% | ||||||||||||||||||||
$ | 2,500 | United States of America Treasury Notes/Bonds (5) | 1.000% | 7/31/11 | AAA | $ | 2,515,527 | |||||||||||||
155 | United States of America Treasury Notes/Bonds (5) | 3.375% | 6/30/13 | AAA | 166,940 | |||||||||||||||
500 | United States of America Treasury Notes/Bonds (5) | 1.500% | 12/31/13 | AAA | 512,539 | |||||||||||||||
$ | 3,155 | Total U.S. Government and Agency Obligations (cost $3,163,722) | 3,195,006 |
Nuveen Investments | 47 |
Portfolio of Investments
Nuveen High Yield Bond Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Value | ||||||||||||||
SHORT-TERM INVESTMENTS – 3.6% | ||||||||||||||||||
$ | 5,326 | Repurchase Agreement with Fixed Income Clearing Corporation, dated 9/30/10, repurchase price $5,325,706, collateralized by $5,175,000 U.S. Treasury Notes, 2.375%, due 3/31/16, value $5,433,750 | 0.080% | 10/01/10 | $ | 5,325,694 | ||||||||||||
Total Short-Term Investments (cost $5,325,694) | 5,325,694 | |||||||||||||||||
Total Investments (cost $141,329,554) – 101.5% | 149,404,709 | |||||||||||||||||
Other Assets Less Liabilities – (1.5)% | (2,259,293 | ) | ||||||||||||||||
Net Assets – 100% | $ | 147,145,416 |
Investments in Derivatives
Credit Default Swaps outstanding at September 30, 2010:
Counterparty | Referenced Entity | Buy/Sell Protection (7) | Current Credit Spread (6) | Notional Amount | Fixed Rate* | Termination Date | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||
Bank of America | Boyd Gaming Corporation | Sell | 10.34 | % | $ | 3,200,000 | 5.000 | % | 3/20/15 | $ | (522,840 | ) | $ | 213,160 | ||||||||||||||||
Credit Suisse | Dynegy Holdings Inc. | Sell | 8.91 | 1,000,000 | 5.000 | 3/20/14 | (104,370 | ) | 35,630 | |||||||||||||||||||||
Goldman Sachs | K. Hovnanian Enterprises, Inc. | Sell | 16.75 | 2,350,000 | 5.000 | 6/20/14 | (633,025 | ) | (257,025 | ) | ||||||||||||||||||||
Goldman Sachs | Ford Motor Company | Sell | 4.59 | 4,215,000 | 5.000 | 6/20/15 | 74,910 | 369,960 | ||||||||||||||||||||||
UBS AG | Freescale Semiconductor, Inc. | Sell | 9.76 | 2,530,000 | 5.000 | 6/20/15 | (389,083 | ) | 91,617 | |||||||||||||||||||||
$ | 453,342 |
* | Annualized. |
For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) | All percentages shown in the Portfolio of Investments are based on net assets. |
(2) | Ratings (not covered by the report of independent registered public accounting firm): Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
(3) | Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
(4) | The Fund’s Adviser has concluded this issue is not likely to meet its future interest payment obligations and has directed the Fund’s custodian to cease accruing additional income on the Fund’s records. |
(5) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives. |
(6) | The credit spread generally serves as an indication of the current status of the payment/performance risk and therefore the likelihood of default of the credit derivative. The credit spread also reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into a credit default swap contract. Higher credit spreads are indicative of a higher likelihood of performance by the seller of protection. |
(7) | The Fund entered into the credit default swaps to gain investment exposure to the referenced entity. Selling protection has a similar credit risk position to owning the referenced entity. Buying protection has a similar credit risk position to selling the referenced entity short. |
N/R | Not rated. |
WI/DD | Purchased on a when-issued or delayed delivery basis. |
144A | Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
See accompanying notes to financial statements.
48 | Nuveen Investments |
Portfolio of Investments
Nuveen Symphony Credit Opportunities Fund
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CONVERTIBLE BONDS – 2.9% | ||||||||||||||||||||
Communications Equipment – 1.7% | ||||||||||||||||||||
$ | 450 | Ciena Corporation, Convertible Bond | 0.250% | 5/01/13 | B | $ | 403,875 | |||||||||||||
Multi-Line Retail – 0.8% | ||||||||||||||||||||
200 | Saks, Inc., Convertible Bonds | 2.000% | 3/15/24 | B+ | 185,750 | |||||||||||||||
Semiconductors & Equipment – 0.4% | ||||||||||||||||||||
95 | Advanced Micro Devices, Inc., Convertible Bonds, 144A | 6.000% | 5/01/15 | B+ | 93,931 | |||||||||||||||
$ | 745 | Total Convertible Bonds (cost $680,448) | 683,556 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CORPORATE BONDS – 66.6% | ||||||||||||||||||||
Aerospace & Defense – 2.6% | ||||||||||||||||||||
$ | 500 | BE Aerospace Inc. | 6.875% | 10/01/20 | BB | $ | 512,500 | |||||||||||||
100 | Esterline Technologies Corp., 144A | 7.000% | 8/01/20 | BB | 104,000 | |||||||||||||||
600 | Total Aerospace & Defense | 616,500 | ||||||||||||||||||
Auto Components – 2.2% | ||||||||||||||||||||
500 | Tenneco Inc. | 7.750% | 8/15/18 | B | 515,000 | |||||||||||||||
Capital Markets – 1.3% | ||||||||||||||||||||
300 | Energy Future Intermediate Holding Company LLC | 10.000% | 12/01/20 | B+ | 299,225 | |||||||||||||||
Chemicals – 6.1% | ||||||||||||||||||||
500 | Ferro Corporation | 7.875% | 8/15/18 | B | 521,252 | |||||||||||||||
200 | Hexion US Finance Corporation | 8.875% | 2/01/18 | B3 | 197,000 | |||||||||||||||
200 | Phibro Animal Health Corporation, 144A | 9.250% | 7/01/18 | B | 208,000 | |||||||||||||||
500 | PolyOne Corporation | 7.375% | 9/15/20 | Ba3 | 516,877 | |||||||||||||||
1,400 | Total Chemicals | 1,443,129 | ||||||||||||||||||
Commercial Services & Supplies – 1.1% | ||||||||||||||||||||
250 | International Lease Finance Corporation, 144A | 8.625% | 9/15/15 | BB+ | 268,125 | |||||||||||||||
Containers & Packaging – 0.9% | ||||||||||||||||||||
250 | Solo Cup Company | 8.500% | 2/15/14 | Caa2 | 215,625 | |||||||||||||||
Communications Equipment – 0.8% | ||||||||||||||||||||
200 | Avaya Inc. | 10.125% | 11/01/15 | CCC+ | 190,500 | |||||||||||||||
Diversified Financial Services – 4.0% | ||||||||||||||||||||
500 | Ally Financial Inc. | 7.500% | 9/15/20 | B | 535,002 | |||||||||||||||
400 | CIT Group Inc. | 7.000% | 5/01/17 | B+ | 393,500 | |||||||||||||||
900 | Total Diversified Financial Services | 928,502 | ||||||||||||||||||
Diversified Telecommunication Services – 2.0% | ||||||||||||||||||||
200 | Insight Communications, 144A | 9.375% | 7/15/18 | B– | 213,500 | |||||||||||||||
250 | Windstream Corporation, 144A | 8.125% | 9/01/18 | Ba3 | 260,000 | |||||||||||||||
450 | Total Diversified Telecommunication Services | 473,500 | ||||||||||||||||||
Electric Utilities – 1.8% | ||||||||||||||||||||
400 | Calpine Corporation, 144A | 7.875% | 7/31/20 | B+ | 413,000 | |||||||||||||||
Electrical Equipment – 0.8% | ||||||||||||||||||||
200 | Energy Future Holdings | 10.000% | 1/15/20 | B+ | 199,552 | |||||||||||||||
Electronic Equipment & Instruments – 1.1% | ||||||||||||||||||||
250 | Advanced Micro Devices, Inc., 144A | 7.750% | 8/01/20 | Ba3 | 259,375 |
Nuveen Investments | 49 |
Portfolio of Investments
Nuveen Symphony Credit Opportunities Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Food & Staples Retailing – 2.2% | ||||||||||||||||||||
$ | 500 | Rite Aid Corporation, 144A | 8.000% | 8/15/20 | B+ | $ | 510,000 | |||||||||||||
Food Products – 0.9% | ||||||||||||||||||||
200 | Michael Foods Inc., 144A | 9.750% | 7/15/18 | B– | 215,000 | |||||||||||||||
Health Care Providers & Services – 5.2% | ||||||||||||||||||||
200 | Capella Healthcare Inc., 144A | 9.250% | 7/01/17 | B | 214,500 | |||||||||||||||
250 | Select Medical Corporation | 7.625% | 2/01/15 | B– | 245,313 | |||||||||||||||
250 | Skilled Healthcare Group Inc. | 11.000% | 1/15/14 | Caa1 | 253,750 | |||||||||||||||
500 | UHS Escrow Corporation, 144A | 7.000% | 10/01/18 | B+ | 518,752 | |||||||||||||||
1,200 | Total Health Care Providers & Services | 1,232,315 | ||||||||||||||||||
Hotels, Restaurants & Leisure – 7.1% | ||||||||||||||||||||
250 | CCM Merger Inc., 144A | 8.000% | 8/01/13 | CCC+ | 230,000 | |||||||||||||||
70 | CKE Restaurant Inc., 144A | 11.375% | 7/15/18 | B | 72,100 | |||||||||||||||
200 | Harrah’s Operating Company, Inc. | 11.250% | 6/01/17 | B | 220,000 | |||||||||||||||
200 | Pinnacle Entertainment Inc., 144A | 8.750% | 5/15/20 | B | 198,000 | |||||||||||||||
500 | Scientific Games Corporation | 8.125% | 9/15/18 | BB– | 512,500 | |||||||||||||||
400 | Wynn Las Vegas LLC Corporation, 144A | 7.750% | 8/15/20 | BB+ | 424,000 | |||||||||||||||
1,620 | Total Hotels, Restaurants & Leisure | 1,656,600 | ||||||||||||||||||
Household Products – 0.9% | ||||||||||||||||||||
200 | Central Garden & Pet Company | 8.250% | 3/01/18 | B | 205,250 | |||||||||||||||
Internet Software & Services – 0.3% | ||||||||||||||||||||
95 | Open Solutions Inc., 144A | 9.750% | 2/01/15 | CCC+ | 67,450 | |||||||||||||||
IT Services – 2.0% | ||||||||||||||||||||
250 | Fidelity National Information Services Inc., 144A | 7.875% | 7/15/20 | Ba2 | 270,625 | |||||||||||||||
200 | Seagate HDD Cayman, 144A | 6.875% | 5/01/20 | BB+ | 196,500 | |||||||||||||||
450 | Total IT Services | 467,125 | ||||||||||||||||||
Machinery – 2.1% | ||||||||||||||||||||
250 | Accuride Corporation, 144A | 9.500% | 8/01/18 | B | 263,750 | |||||||||||||||
200 | Case New Holland Inc., 144A | 7.875% | 12/01/17 | BB+ | 218,250 | |||||||||||||||
450 | Total Machinery | 482,000 | ||||||||||||||||||
Media – 5.5% | ||||||||||||||||||||
500 | Clear Channel Communications, Inc. | 10.750% | 8/01/16 | CCC– | 392,500 | |||||||||||||||
400 | Entravision Communications Corporation, 144A | 8.750% | 8/01/17 | B1 | 410,000 | |||||||||||||||
500 | Nielsen Finance LLC Co., (WI/DD) | 7.750% | 10/15/18 | B | 496,335 | |||||||||||||||
1,400 | Total Media | 1,298,835 | ||||||||||||||||||
Metals & Mining – 0.6% | ||||||||||||||||||||
200 | Edgen Murray Corporation | 12.250% | 1/15/15 | B– | 145,499 | |||||||||||||||
Multi-Line Retail – 0.9% | ||||||||||||||||||||
200 | Neiman Marcus Group Inc., Term Loan | 9.000% | 10/15/15 | B– | 208,749 | |||||||||||||||
Multi-Utilities – 1.1% | ||||||||||||||||||||
250 | Bon-Ton Department Stores Inc. | 10.250% | 3/15/14 | CCC+ | 247,499 | |||||||||||||||
Oil, Gas & Consumable Fuels – 5.7% | ||||||||||||||||||||
400 | Chaparral Energy Inc. | 8.500% | 12/01/15 | B+ | 390,999 | |||||||||||||||
200 | Chaparral Energy Inc. | 8.875% | 2/01/17 | B+ | 195,499 | |||||||||||||||
250 | Western Refining Inc., 144A | 10.750% | 6/15/14 | BB– | 238,749 | |||||||||||||||
500 | Whiting Petroleum Corporation | 6.500% | 10/01/18 | BB | 513,749 | |||||||||||||||
1,350 | Total Oil, Gas & Consumable Fuels | 1,338,996 |
50 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Pharmaceuticals – 2.2% | ||||||||||||||||||||
$ | 500 | Valeant Pharmaceuticals International, 144A | 7.000% | 10/01/20 | B1 | $ | 512,499 | |||||||||||||
Semiconductors & Equipment – 2.9% | ||||||||||||||||||||
200 | Amkor Technology Inc., 144A | 7.375% | 5/01/18 | BB– | 203,499 | |||||||||||||||
500 | NXP BV | 3.276% | 10/15/13 | CCC+ | 474,374 | |||||||||||||||
700 | Total Semiconductors & Equipment | 677,873 | ||||||||||||||||||
Wireless Telecommunication Services – 2.3% | ||||||||||||||||||||
500 | Clearwire Communications Finance | 12.000% | 12/01/15 | B– | 542,501 | |||||||||||||||
$ | 15,515 | Total Corporate Bonds (cost $15,153,342) | 15,630,224 | |||||||||||||||||
Principal Amount (000) | Description (1) | Weighted Average Coupon | Maturity (3) | Ratings (2) | Value | |||||||||||||||
VARIABLE RATE SENIOR LOAN INTERESTS – 24.2% (4) | ||||||||||||||||||||
Airlines – 2.0% | ||||||||||||||||||||
$ | 249 | Delta Air Lines, Inc., Term Loan | 5.250% | 4/30/14 | B | $ | 234,724 | |||||||||||||
248 | United Air Lines Inc., Delayed Draw Term Loan | 8.625% | 2/01/14 | B+ | 234,336 | |||||||||||||||
497 | Total Airlines | 469,060 | ||||||||||||||||||
Auto Components – 1.1% | ||||||||||||||||||||
250 | United Components Inc., Term Loan | 5.250% | 9/20/40 | B | 252,265 | |||||||||||||||
Automobiles – 1.0% | ||||||||||||||||||||
232 | Ford Motor Company, Term Loan | 5.250% | 12/16/13 | Ba2 | 228,004 | |||||||||||||||
Communications Equipment – 0.9% | ||||||||||||||||||||
249 | Avaya Inc., Term Loan | 5.250% | 10/26/14 | B+ | 220,993 | |||||||||||||||
Containers & Packaging – 2.2% | ||||||||||||||||||||
167 | Graham Packaging Company LP, Term Loan, (WI/DD) | TBD | TBD | B+ | 168,177 | |||||||||||||||
50 | Reynolds Group Term Loan A, (WI/DD) | TBD | TBD | BB | 50,093 | |||||||||||||||
300 | Reynolds Group Term Loan D, (WI/DD) | TBD | TBD | BB | 301,803 | |||||||||||||||
517 | Total Containers & Packaging | 520,073 | ||||||||||||||||||
Diversified Financial Services – 1.5% | ||||||||||||||||||||
350 | Pinafore LLC, Term Loan B, (WI/DD) | TBD | TBD | BB | 353,608 | |||||||||||||||
Food Products – 3.4% | ||||||||||||||||||||
300 | NBTY Inc, Term Loan B, (WI/DD) | TBD | TBD | Ba3 | 303,482 | |||||||||||||||
500 | Pierre Foods Inc., Term Loan, (WI/DD) | TBD | TBD | B+ | 495,000 | |||||||||||||||
800 | Total Food Products | 798,482 | ||||||||||||||||||
Health Care Providers & Services – 3.8% | ||||||||||||||||||||
400 | MultiPlan, Inc., Term Loan | 5.250% | 8/17/40 | Ba3 | 400,951 | |||||||||||||||
249 | Skilled Healthcare Group Inc., Term Loan | 5.250% | 7/08/40 | B1 | 240,724 | |||||||||||||||
250 | Universal Health Services Term Loan, (WI/DD) | TBD | TBD | BB+ | 251,465 | |||||||||||||||
899 | Total Health Care Providers & Services | 893,140 | ||||||||||||||||||
IT Services – 0.9% | ||||||||||||||||||||
239 | First Data Corporation, Term Loan B-2 | 6.250% | 9/24/14 | Ba3 | 210,819 | |||||||||||||||
Media – 1.9% | ||||||||||||||||||||
449 | Interactive Data Term Loan B | 5.250% | 7/13/40 | Ba3 | 455,280 | |||||||||||||||
Multi-Line Retail – 0.8% | ||||||||||||||||||||
189 | Neiman Marcus Group Inc., Term Loan | 6.475% | 4/06/13 | Baa2 | 183,834 |
Nuveen Investments | 51 |
Portfolio of Investments
Nuveen Symphony Credit Opportunities Fund (continued)
September 30, 2010
Principal Amount (000) | Description (1) | Weighted Average Coupon | Maturity (3) | Ratings (2) | Value | |||||||||||||||
Pharmaceuticals – 1.7% | ||||||||||||||||||||
$ | 98 | Warner Chilcott Corporation, Term Loan | 5.250% | 8/23/40 | Ba3 | $ | 98,609 | |||||||||||||
302 | Warner Chilcott PLC, Term Loan A | 5.250% | 10/15/39 | BB+ | 303,686 | |||||||||||||||
400 | Total Pharmaceuticals | 402,295 | ||||||||||||||||||
Road & Rail – 1.1% | ||||||||||||||||||||
250 | Swift Transportation Company, Inc., Term Loan | 5.750% | 5/10/14 | B– | 244,764 | |||||||||||||||
Specialty Retail – 1.9% | ||||||||||||||||||||
247 | Burlington Coat Factory Warehouse Corporation, Term Loan | 7.160% | 5/28/13 | B3 | 238,053 | |||||||||||||||
200 | Michaels Stores, Inc., Term Loan | 5.250% | 11/10/39 | B | 196,473 | |||||||||||||||
447 | Total Specialty Retail | 434,526 | ||||||||||||||||||
$ | 5,768 | Total Variable Rate Senior Loan Interests (cost $5,587,663) | 5,667,143 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Value | ||||||||||||||||
SHORT-TERM INVESTMENTS – 14.6% | ||||||||||||||||||||
$ | 3,419 | Repurchase Agreement with State Street Bank, dated 9/30/10, repurchase price $3,419,222, collateralized by $3,260,000 U.S. Treasury Notes, 2.500%, due 4/30/15, value $3,490,482 | 0.080% | 10/01/10 | $ | 3,419,214 | ||||||||||||||
Total Short-Term Investments (cost $3,419,214) | 3,419,214 | |||||||||||||||||||
Total Investments (cost $24,840,667) – 108.3% | 25,400,137 | |||||||||||||||||||
Other Assets Less Liabilities – (8.3)% | (1,944,284) | |||||||||||||||||||
Net Assets – 100% | $ | 23,455,853 |
For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) | All percentages shown in the Portfolio of Investments are based on net assets. |
(2) | Ratings (not covered by the report of independent registered public accounting firm): Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
(3) | Senior Loans generally are subject to mandatory and/or optional prepayment. Because of these mandatory prepayment conditions and because there may be significant economic incentives for a Borrower to prepay, prepayments of Senior Loans may occur. As a result, the actual remaining maturity of Senior Loans held may be substantially less than the stated maturities shown. |
(4) | Senior Loans generally pay interest at rates which are periodically adjusted by reference to a base short-term, floating lending rate plus an assigned fixed rate. These floating lending rates are generally (i) the lending rate referenced by the London Inter-Bank Offered Rate (“LIBOR”), or (ii) the prime rate offered by one or more major United States banks. |
Senior Loans may be considered restricted in that the Fund ordinarily is contractually obligated to receive approval from the Agent Bank and/or Borrower prior to the disposition of a Senior Loan. |
WI/DD | Purchased on a when-issued or delayed delivery basis. |
144A | Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
TBD | Senior Loan purchased on a when-issued or delayed-delivery basis. Certain details associated with this purchase are not known prior to the settlement date of the transaction. In addition, Senior Loans typically trade without accrued interest and therefore a weighted average coupon rate is not available prior to settlement. At settlement, if still unknown, the Borrower or counterparty will provide the Fund with the final weighted average coupon rate and maturity date. |
See accompanying notes to financial statements.
52 | Nuveen Investments |
Statement of Assets and Liabilities
September 30, 2010
Short Duration | Multi-Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Assets | ||||||||||||||||
Investments, at value (cost $178,328,592, $95,916,794, $136,003,860 and $21,421,453, respectively) | $ | 183,787,280 | $ | 100,030,240 | $ | 144,079,015 | $ | 21,980,923 | ||||||||
Short-term investments (at cost, which approximates value) | 1,012,449 | 10,415,448 | 5,325,694 | 3,419,214 | ||||||||||||
Cash | — | — | — | 3,035 | ||||||||||||
Cash denominated in foreign currencies (cost $68,643, $28,594, $0 and $0, respectively) | 71,209 | 29,663 | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency exchange contracts | 142,044 | 61,707 | — | — | ||||||||||||
Unrealized appreciation on interest rate swaps | 1,536,048 | 608,110 | — | — | ||||||||||||
Unrealized appreciation on credit default swaps | 94,924 | 18,677 | 453,342 | — | ||||||||||||
Credit default swaps premiums paid | 270,716 | 140,537 | — | — | ||||||||||||
Receivables: | ||||||||||||||||
Due from broker (net of amounts deemed uncollectible of $14,342, $7,996, $0 and $0, respectively) | 51,088 | 82,768 | — | — | ||||||||||||
Interest | 1,470,506 | 789,127 | 2,826,771 | 225,433 | ||||||||||||
Investments sold | 1,600,168 | 5,348,858 | — | 645 | ||||||||||||
Paydowns | — | 5,136 | — | — | ||||||||||||
Shares sold | 591,429 | 482,076 | 759,470 | 553,246 | ||||||||||||
Variation margin on futures contracts | 16,566 | — | — | — | ||||||||||||
Other assets | 9 | — | — | — | ||||||||||||
Total assets | 190,644,436 | 118,012,347 | 153,444,292 | 26,182,496 | ||||||||||||
Liabilities | ||||||||||||||||
Cash overdraft | 49,674 | 81,979 | — | — | ||||||||||||
Unrealized depreciation on forward foreign currency exchange contracts | 223,467 | 107,336 | — | — | ||||||||||||
Unrealized depreciation on interest rate swaps | 1,011,613 | 404,008 | — | — | ||||||||||||
Unrealized depreciation on credit default swaps | 2,475 | 121,255 | — | — | ||||||||||||
Interest rate swaps premiums received | 1,975 | 616 | — | — | ||||||||||||
Credit default swaps premiums received | 568,012 | 119,800 | 2,027,750 | — | ||||||||||||
Payables: | ||||||||||||||||
Due to broker | 230,000 | — | 374,411 | — | ||||||||||||
Dividends | 220,457 | 139,545 | 384,966 | 28,203 | ||||||||||||
Investments purchased | 374,284 | 26,050,921 | 2,918,981 | 2,606,161 | ||||||||||||
Shares redeemed | 341,029 | 284,263 | 209,449 | 40,675 | ||||||||||||
Variation margin on futures contracts | — | 5,169 | — | — | ||||||||||||
Accrued expenses: | ||||||||||||||||
Management fees | 52,895 | 19,428 | 105,682 | 15,221 | ||||||||||||
12b-1 distribution and service fees | 57,188 | 25,824 | 36,855 | 2,387 | ||||||||||||
Other | 199,882 | 169,377 | 240,782 | 33,996 | ||||||||||||
Total liabilities | 3,332,951 | 27,529,521 | 6,298,876 | 2,726,643 | ||||||||||||
Net assets | $ | 187,311,485 | $ | 90,482,826 | $ | 147,145,416 | $ | 23,455,853 | ||||||||
Class A Shares | ||||||||||||||||
Net assets | $ | 76,628,800 | $ | 32,191,183 | $ | 36,443,421 | $ | 4,436,477 | ||||||||
Shares outstanding | 3,865,865 | 1,515,026 | 2,089,772 | 217,230 | ||||||||||||
Net asset value per share | $ | 19.82 | $ | 21.25 | $ | 17.44 | $ | 20.42 | ||||||||
Offering price per share (net asset value per share plus | $ | 20.23 | $ | 22.08 | $ | 18.31 | $ | 21.44 | ||||||||
Class B Shares | ||||||||||||||||
Net assets | N/A | $ | 2,383,010 | $ | 1,567,015 | N/A | ||||||||||
Shares outstanding | N/A | 111,568 | 89,953 | N/A | ||||||||||||
Net asset value and offering price per share | N/A | $ | 21.36 | $ | 17.42 | N/A | ||||||||||
Class C Shares | ||||||||||||||||
Net assets | $ | 50,186,839 | $ | 21,084,973 | $ | 35,015,964 | $ | 1,358,535 | ||||||||
Shares outstanding | 2,528,869 | 990,054 | 2,012,806 | 66,579 | ||||||||||||
Net asset value and offering price per share | $ | 19.85 | $ | 21.30 | $ | 17.40 | $ | 20.40 | ||||||||
Class R3 Shares | ||||||||||||||||
Net assets | $ | 873,514 | $ | 237,700 | $ | 144,886 | $ | 1,275,931 | ||||||||
Shares outstanding | 44,107 | 11,183 | 8,317 | 62,500 | ||||||||||||
Net asset value and offering price per share | $ | 19.80 | $ | 21.25 | $ | 17.42 | $ | 20.41 | ||||||||
Class I Shares | ||||||||||||||||
Net assets | $ | 59,622,332 | $ | 34,585,960 | $ | 73,974,130 | $ | 16,384,910 | ||||||||
Shares outstanding | 3,014,067 | 1,629,046 | 4,246,109 | 801,977 | ||||||||||||
Net asset value and offering price per share | $ | 19.78 | $ | 21.23 | $ | 17.42 | $ | 20.43 | ||||||||
Net Assets Consist of: | ||||||||||||||||
Capital paid-in | $ | 184,956,608 | $ | 85,575,444 | $ | 145,595,364 | $ | 22,803,165 | ||||||||
Undistributed (Over-distribution of) net investment income | (1,484,406 | ) | (516,562 | ) | (335,874 | ) | (28,720 | ) | ||||||||
Accumulated net realized gain (loss) | (1,924,265 | ) | 1,260,544 | (6,642,571 | ) | 121,938 | ||||||||||
Net unrealized appreciation (depreciation) | 5,763,548 | 4,163,400 | 8,528,497 | 559,470 | ||||||||||||
Net assets | $ | 187,311,485 | $ | 90,482,826 | $ | 147,145,416 | $ | 23,455,853 | ||||||||
Authorized shares | Unlimited | Unlimited | Unlimited | Unlimited | ||||||||||||
Per value per share | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.01 |
N/A – Short Duration and Symphony Credit Opportunities do not offer Class B Shares.
See accompanying notes to financial statements.
Nuveen Investments | 53 |
Statement of Operations
Year Ended September 30, 2010
Short Duration | Multi-Strategy Core Bond | High Yield | Symphony* Credit Opportunities | |||||||||||||
Investment Income | $ | 5,122,559 | $ | 3,227,689 | $ | 14,226,610 | $ | 326,881 | ||||||||
Expenses | ||||||||||||||||
Management fees | 635,852 | 335,635 | 863,921 | 32,509 | ||||||||||||
12b-1 service fees – Class A | 176,613 | 59,311 | 89,543 | 2,503 | ||||||||||||
12b-1 distribution and service fees – Class B | N/A | 24,622 | 16,199 | N/A | ||||||||||||
12b-1 distribution and service fees – Class C | 400,516 | 160,159 | 332,738 | 5,334 | ||||||||||||
12b-1 distribution and service fees – Class R3 | 3,922 | 1,033 | 689 | 2,643 | ||||||||||||
Shareholders’ servicing agent fees and expenses | 97,776 | 39,935 | 166,222 | 173 | ||||||||||||
Custodian’s fees and expenses | 103,678 | 95,928 | 43,663 | 3,143 | ||||||||||||
Trustees’ fees and expenses | 4,277 | 1,765 | 3,738 | 75 | ||||||||||||
Professional fees | 44,617 | 39,834 | 43,967 | 27,213 | ||||||||||||
Shareholders’ reports – printing and mailing expenses | 56,343 | 26,406 | 80,418 | 2,731 | ||||||||||||
Federal and state registration fees | 109,150 | 83,175 | 108,279 | 3,110 | ||||||||||||
Other expenses | 21,418 | 28,097 | 61,458 | 2,129 | ||||||||||||
Total expenses before custodian fee credit and expense reimbursement | 1,654,162 | 895,900 | 1,810,835 | 81,563 | ||||||||||||
Custodian fee credit | (78 | ) | (28 | ) | (295 | ) | (35 | ) | ||||||||
Expense reimbursement | (191,048 | ) | (212,461 | ) | (163,961 | ) | (28,250 | ) | ||||||||
Net expenses | 1,463,036 | 683,411 | 1,646,579 | 53,278 | ||||||||||||
Net investment income | 3,659,523 | 2,544,278 | 12,580,031 | 273,603 | ||||||||||||
Realized and Unrealized Gain (Loss) | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments and foreign currency | 2,086,606 | 2,255,898 | 16,797,698 | 124,820 | ||||||||||||
Forward foreign currency exchange contracts | 22,777 | (72,221 | ) | — | — | |||||||||||
Futures contracts | (2,328,438 | ) | (436,947 | ) | — | — | ||||||||||
Options written | 20,160 | 12,096 | — | — | ||||||||||||
Swaps | 198,509 | (344,998 | ) | (79,470 | ) | — | ||||||||||
Swaptions written | 10,130 | 5,559 | — | — | ||||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||||||
Investments and foreign currency | 2,868,064 | 1,949,676 | (5,683,655 | ) | 559,470 | |||||||||||
Forward foreign currency exchange contracts | (45,169 | ) | (6,777 | ) | — | — | ||||||||||
Futures contracts | (109,828 | ) | 24,994 | — | — | |||||||||||
Options written | (19,500 | ) | (11,700 | ) | — | — | ||||||||||
Swaps | 533,943 | 622,286 | 1,196,431 | — | ||||||||||||
Swaptions written | 25,200 | 12,600 | — | — | ||||||||||||
Net realized and unrealized gain (loss) | 3,262,454 | 4,010,466 | 12,231,004 | 684,290 | ||||||||||||
Net increase (decrease) in net assets from operations | $ | 6,921,977 | $ | 6,554,744 | $ | 24,811,035 | $ | 957,893 |
* For the period April 28, 2010 (commencement of operations) through September 30, 2010.
N/A – Short Duration and Symphony Credit Opportunities do not offer Class B Shares.
See accompanying notes to financial statements.
54 | Nuveen Investments |
Statement of Changes in Net Assets
Short Duration | Multi-Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||||||||||||||
Year Ended 9/30/10 | Year Ended 9/30/09 | Year Ended 9/30/10 | Year Ended 9/30/09 | Year Ended 9/30/10 | Year Ended 9/30/09 | For the Period 4/28/10 (commencement of operations) through 9/30/10 | ||||||||||||||||||||||
Operations | ||||||||||||||||||||||||||||
Net investment income | $ | 3,659,523 | $ | 1,656,399 | $ | 2,544,278 | $ | 2,137,186 | $ | 12,580,031 | $ | 12,247,648 | $ | 273,603 | ||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||||||||||||||
Investments and foreign currency | 2,086,606 | 165,510 | 2,255,898 | 2,209,681 | 16,797,698 | (9,819,964 | ) | 124,820 | ||||||||||||||||||||
Forward foreign currency exchange contracts | 22,777 | (194 | ) | (72,221 | ) | 69,336 | — | — | — | |||||||||||||||||||
Futures contracts | (2,328,438 | ) | 431,456 | (436,947 | ) | 5,743 | — | 245,299 | — | |||||||||||||||||||
Options written | 20,160 | 11,152 | 12,096 | 16,728 | — | — | — | |||||||||||||||||||||
Swaps | 198,509 | (280,031 | ) | (344,998 | ) | (846,410 | ) | (79,470 | ) | (12,564,076 | ) | — | ||||||||||||||||
Swaptions written | 10,130 | (124,234 | ) | 5,559 | (156,462 | ) | — | — | — | |||||||||||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||||||||||||||||||
Investments and foreign currency | 2,868,064 | 2,912,957 | 1,949,676 | 2,570,820 | (5,683,655 | ) | 23,210,400 | 559,470 | ||||||||||||||||||||
Forward foreign currency exchange contracts | (45,169 | ) | (117,620 | ) | (6,777 | ) | (172,312 | ) | — | — | — | |||||||||||||||||
Futures contracts | (109,828 | ) | (171,727 | ) | 24,994 | (95,104 | ) | — | (14,152 | ) | — | |||||||||||||||||
Options written | (19,500 | ) | 19,500 | (11,700 | ) | 11,700 | — | — | — | |||||||||||||||||||
Swaps | 533,943 | 206,176 | 622,286 | (218,663 | ) | 1,196,431 | 4,373,617 | — | ||||||||||||||||||||
Swaptions written | 25,200 | (29,395 | ) | 12,600 | (22,442 | ) | — | — | — | |||||||||||||||||||
Net increase (decrease) in net assets from operations | 6,921,977 | 4,679,949 | 6,554,744 | 5,509,801 | 24,811,035 | 17,678,772 | 957,893 | |||||||||||||||||||||
Distributions to Shareholders | ||||||||||||||||||||||||||||
From undistributed net investment income: | ||||||||||||||||||||||||||||
Class A | (2,625,472 | ) | (1,239,633 | ) | (1,190,698 | ) | (602,256 | ) | (2,955,101 | ) | (2,371,574 | ) | (58,974 | ) | ||||||||||||||
Class B | N/A | N/A | (105,619 | ) | (90,074 | ) | (122,514 | ) | (140,140 | ) | N/A | |||||||||||||||||
Class C | (1,197,500 | ) | (545,395 | ) | (687,333 | ) | (238,878 | ) | (2,522,196 | ) | (1,801,579 | ) | (25,924 | ) | ||||||||||||||
Class R3 | (27,140 | ) | (15,588 | ) | (9,853 | ) | (6,877 | ) | (11,145 | ) | (9,511 | ) | (27,750 | ) | ||||||||||||||
Class I | (2,178,774 | ) | (811,528 | ) | (1,415,010 | ) | (1,445,316 | ) | (6,476,954 | ) | (7,086,325 | ) | (198,035 | ) | ||||||||||||||
From accumulated net realized gains: | ||||||||||||||||||||||||||||
Class A | — | — | (16,696 | ) | (125,105 | ) | — | — | — | |||||||||||||||||||
Class B | N/A | N/A | (2,306 | ) | (21,683 | ) | — | — | N/A | |||||||||||||||||||
Class C | — | — | (12,323 | ) | (38,816 | ) | — | — | — | |||||||||||||||||||
Class R3 | — | — | (171 | ) | (1,602 | ) | — | — | — | |||||||||||||||||||
Class I | — | — | (20,397 | ) | (442,996 | ) | — | — | — | |||||||||||||||||||
Return of capital: | ||||||||||||||||||||||||||||
Class A | (167,732 | ) | — | — | — | — | (496,961 | ) | — | |||||||||||||||||||
Class B | N/A | N/A | — | — | — | (33,282 | ) | N/A | ||||||||||||||||||||
Class C | (76,504 | ) | — | — | — | — | (414,306 | ) | — | |||||||||||||||||||
Class R3 | (1,734 | ) | — | — | — | — | (2,079 | ) | — | |||||||||||||||||||
Class I | (139,195 | ) | — | — | — | — | (1,450,408 | ) | — | |||||||||||||||||||
Decrease in net assets from distributions to shareholders | (6,414,051 | ) | (2,612,144 | ) | (3,460,406 | ) | (3,013,603 | ) | (12,087,910 | ) | (13,806,165 | ) | (310,683 | ) | ||||||||||||||
Fund Share Transactions | ||||||||||||||||||||||||||||
Proceeds from sale of shares | 187,057,409 | 102,074,997 | 61,002,744 | 34,724,796 | 67,376,338 | 113,340,687 | 22,696,185 | |||||||||||||||||||||
Proceeds from shares issued to shareholders due to reinvestment of distributions | 3,227,482 | 1,205,766 | 1,789,255 | 1,021,299 | 6,859,306 | 7,527,982 | 198,317 | |||||||||||||||||||||
190,284,891 | 103,280,763 | 62,791,999 | 35,746,095 | 74,235,644 | 120,868,669 | 22,894,502 | ||||||||||||||||||||||
Cost of shares redeemed | (101,120,898 | ) | (41,230,133 | ) | (23,581,255 | ) | (50,439,988 | ) | (123,964,115 | ) | (63,599,542 | ) | (85,859 | ) | ||||||||||||||
Net increase (decrease) in net assets from Fund share transactions | 89,163,993 | 62,050,630 | 39,210,744 | (14,693,893 | ) | (49,728,471 | ) | 57,269,127 | 22,808,643 | |||||||||||||||||||
Capital contribution from Adviser | — | 27,589 | — | — | — | — | — | |||||||||||||||||||||
Net increase (decrease) in net assets | 89,671,919 | 64,146,024 | 42,305,082 | (12,197,695 | ) | (37,005,346 | ) | 61,141,734 | 23,455,853 | |||||||||||||||||||
Net assets at the beginning of period | 97,639,566 | 33,493,542 | 48,177,744 | 60,375,439 | 184,150,762 | 123,009,028 | — | |||||||||||||||||||||
Net assets at the end of period | $ | 187,311,485 | $ | 97,639,566 | $ | 90,482,826 | $ | 48,177,744 | $ | 147,145,416 | $ | 184,150,762 | $ | 23,455,853 | ||||||||||||||
Undistributed (Over-distribution of) net investment income at the end of period | $ | (1,484,406 | ) | $ | (440,834 | ) | $ | (516,562 | ) | $ | 223,526 | $ | (335,874 | ) | $ | (1,473,221 | ) | $ | (28,720 | ) |
N/A – Short Duration and Symphony Credit Opportunities do not offer Class B Shares.
See accompanying notes to financial statements.
Nuveen Investments | 55 |
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Investment Trust III (the “Trust”) is an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Trust is comprised of Nuveen Short Duration Bond Fund (“Short Duration”), Nuveen Multi-Strategy Core Bond Fund (“Multi-Strategy Core Bond”), Nuveen High Yield Bond Fund (“High Yield”) and Nuveen Symphony Credit Opportunities Fund (“Symphony Credit Opportunities”) (collectively, the “Funds”). The Trust was organized as a Massachusetts business trust in 1998. Symphony Credit Opportunities commenced operations on April 28, 2010.
Effective January 31, 2010, Nuveen Multi-Strategy Core Bond Fund changed its name from Nuveen Multi-Strategy Income Fund. There have been no changes in the Fund’s investment objectives, policies or portfolio management personnel.
Short Duration’s investment objective is to provide high current income consistent with minimal fluctuations of principal. Under normal market conditions, the Fund invests at least 80% of its net assets in short duration securities using a risk-controlled, multi-strategy approach that invests across multiple sectors of the taxable fixed-income market. Typically, the Fund’s average duration will be between approximately one and two years but it will not exceed three years.
Multi-Strategy Core Bond’s investment objective is to provide total return by investing in fixed-income securities. Under normal market conditions, the Fund invests at least 80% of its net assets in fixed-income securities using a risk-controlled, multi-strategy approach that invests across multiple sectors of the taxable fixed-income market. Typically, the Fund’s average duration will be five years or less and is not expected to be more than six years.
Short Duration and Multi-Strategy Core Bond principally invest in corporate debt securities, including bonds, notes and debentures; U.S. government securities; mortgage-related securities issued by governments, their agencies or instrumentalities, or corporations; asset-backed securities; and non-U.S. debt securities. Short Duration and Multi-Strategy Core Bond normally invests at least 80% and 75%, respectively, of their net assets in securities rated investment grade (AAA/Aaa to BBB/Baa) at the time of purchase by at least one independent rating agency and unrated securities judged to be of comparable quality by Nuveen Asset Management (the “Adviser”), a wholly-owned subsidiary of Nuveen Investments, Inc. (“Nuveen”). Short Duration and Multi-Strategy Core Bond may invest up to 35% of their net assets in debt securities issued by non-U.S. companies. Although a substantial majority of the assets of Short Duration and Multi-Strategy Core Bond are invested in U.S. dollar-denominated securities, up to 20% of the their net assets may have non-U.S. dollar currency exposure from non-U.S. dollar-denominated securities and currency derivatives, calculated on an absolute notional basis (i.e., adding together the absolute value of net long and net short exposures to individual non-U.S. dollar currencies). On a net basis (netting out long and short non-U.S. currency exposures in the aggregate), Short Duration’s and Multi-Strategy Core Bond’s non-U.S. dollar exposure will not exceed 5% of net assets. Short Duration and Multi-Strategy Core Bond also may invest up to 20% and 25%, respectively, of their net assets in securities rated below investment grade (BB/Ba or lower) at the time of purchase, which are commonly referred to as “high yield,” “high risk” or “junk” bonds. In addition, Short Duration and Multi-Strategy Core Bond may engage in repurchase, reverse repurchase and forward purchase agreements.
In an effort to enhance returns and manage risk, Short Duration and Multi-Strategy Core Bond also employ a variety of strategies, which may include the use of futures, options, swaps, credit derivatives and other derivatives to create debt or non-U.S. currency exposures designed to take advantage of the Adviser’s outlook for the global economic environment and the expected relative performance of different sectors of and securities in the fixed-income market.
High Yield’s investment objective is to maximize total return by investing in a diversified portfolio of high yield debt securities. Under normal market conditions, High Yield invests at least 80% of its net assets in U.S. and non-U.S. corporate high yield debt securities, including zero coupon, payment in-kind, corporate loans and convertible bonds. These securities generally are rated BB/Ba or below at the time of purchase by independent rating agencies or are unrated but judged to be of comparable quality by the Adviser. These below investment grade securities are commonly referred to as “high yield,” “high risk” or “junk” bonds. In addition to investing in U.S. and non-U.S. corporate high yield debt securities, the Fund may also invest in U.S. and non-U.S. corporate investment grade securities; U.S. government securities, including U.S. Treasury securities and securities issued by U.S. government agencies or instrumentalities; and cash equivalents and other short duration investments. In an effort to hedge risk, enhance returns, or as a substitute for a position in the underlying asset, the Fund also may invest in futures, options, interest rate or total return swaps, credit derivatives or other derivative instruments. In doing so, the Fund may, in certain circumstances, invest a substantial portion of its assets in such derivative instruments. Substantially all of the Fund’s assets will be invested in U.S. dollar-denominated securities. In building the Fund’s investment portfolio from these individual securities, the Adviser seeks to diversify the portfolio’s holdings across multiple factors, including individual issuers and industries, to manage the inherent credit risk associated with a high yield debt strategy.
Symphony Credit Opportunities’ investment objective is to seek current income and capital appreciation. Under normal market conditions, the Fund invests primarily in debt instruments (e.g., bonds, loans and convertible securities), a substantial portion of which may be rated below investment-grade or, if unrated, deemed by Symphony Asset Management LLC (“Symphony”), the Fund’s portfolio managers, to be of comparable quality. Although the Fund invests primarily in debt issued by U.S. companies, it may invest up to 25% of its net assets in U.S. dollar-denominated debt issued by non-U.S. companies that is traded over-the-counter or listed on an exchange. The Fund may use derivatives, such as swaps, futures and options, to gain investment exposure. The Adviser has entered into a Sub-Advisory agreement with Symphony, a subsidiary of Nuveen. Symphony bases its investment process on fundamental, bottom-up credit analysis. Analysts assess sector dynamics, company business models and asset quality. Specific recommendations are based on an analysis of the relative value of the various types of debt within a company’s capital structure.
56 | Nuveen Investments |
Inherent in Symphony’s credit analysis process is the evaluation of potential upside and downside to any credit. As such, Symphony concentrates its efforts on sectors where there is sufficient transparency to assess the downside risk and where firms have assets to support meaningful recovery in case of default. In its focus on downside protection, Symphony favors opportunities where valuations can be quantified and risks assessed.
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Investment Valuation
Prices of fixed-income securities, forward foreign currency exchange contracts and swap contracts are provided by a pricing service approved by the Funds’ Board of Trustees. These securities are generally classified as Level 2. Prices of fixed-income securities are based on the mean between the bid and ask price. When price quotes are not readily available, the pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer, or market activity provided by the Adviser. These securities are generally classified as Level 2 or Level 3. Highly rated zero coupon fixed-income securities, like U.S. Treasury Bills, issued with maturities of one year or less, are valued using the amortized cost method when 60 days or less remain until maturity. With amortized cost, any discount or premium is amortized each day, regardless of the impact of fluctuating rates on the market value of the security. These securities are generally classified as Level 1 or Level 2.
Like most fixed-income instruments, the senior and subordinated loans in which the Funds invest are not listed on an organized exchange. The secondary market for such investments may be less liquid relative to markets for other fixed-income securities. Consequently, the value of senior and subordinated loans, determined as described above, may differ significantly from the value that would have been determined had there been an active market for that loan. These securities are generally classified as Level 2.
If significant market events occur between the time of determination of the closing price of a foreign security on an exchange and the time that the Funds’ net asset value (NAV) is determined, or if under the Funds’ procedures, the closing price of a foreign security is not deemed to be reliable, and there could be a material effect on the Funds’ NAV, the security would be valued at fair value as determined in accordance with procedures established in good faith by the Fund’s Board of Trustees. These securities are generally classified as Level 2 or Level 3.
The value of exchange-traded options are based on the last sale price or, in the absence of such a price, at the mean of the bid and ask prices. Futures contracts are valued using the closing settlement price or, in the absence of such a price, at the mean of the bid and ask prices. Exchange-traded options and futures contracts are generally classified as Level 1. Options traded in the over-the counter market are valued using market implied volatilities and are generally classified as Level 2.
Temporary investments in securities that have variable rate and demand features qualifying them as short-term investments are valued at amortized cost, which approximates market value. These securities are generally classified as Level 1 or Level 2.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Funds’ Board of Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security’s fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds’ Board of Trustees or its designee.
Refer to Footnote 2 – Fair Value Measurements for further details on the leveling of securities held by the Funds as of the end of the reporting period.
Nuveen Investments | 57 |
Notes to Financial Statements (continued)
Investment Transactions
Investment transactions are recorded on a trade date basis. Trade date for senior and subordinated loans purchased in the “primary market” is considered the date on which the loan allocations are determined. Trade date for senior and subordinated loans purchased
in the “secondary market” is the date on which the transaction is entered into. Realized gains and losses from investment transactions are determined on the specific identification method. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At September 30, 2010, Short Duration, Multi-Strategy Core Bond, High Yield and Symphony Credit Opportunities had outstanding when-issued/delayed delivery purchase commitments of $374,284, $20,137,197, $2,918,981 and $2,387,585, respectively.
Investment Income
Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also reflects paydown gains and losses, if any. Fee income consists primarily of amendment fees. Amendment fees are earned as compensation for evaluating and accepting charges to an original senior loan agreement and are recognized when received.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required.
For all open tax years and all major taxing jurisdictions, management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Shareholders
During the period October 1, 2009 through March 31, 2010, dividends from net investment income were declared and paid to shareholders monthly. Effective April 1, 2010, the Funds declare dividends from their net investment income daily and continue to pay shareholders monthly. Fund shares begin to accrue dividends on the business day after the day when the monies used to purchase Fund shares are collected by the Funds’ transfer agent.
Net realized capital gains from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
Flexible Sales Charge Program
Class A Shares are generally sold with an up-front sales charge and incur a .25% annual 12b-1 service fee. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (“CDSC”) if redeemed within twelve months of purchase. Class B Shares are sold without an up-front sales charge but incur a .75% annual 12b-1 distribution fee and a .25% annual 12b-1 service fee. An investor purchasing Class B Shares is subject to a CDSC of up to 5% depending upon the length of time the shares are held by the investor (CDSC is reduced to 0% at the end of six years). Class B Shares convert to Class A Shares eight years after purchase. Class C Shares are sold without an up-front sales charge but incur a .75% annual 12b-1 distribution fee and a .25% annual 12b-1 service fee. Class C Shares are subject to a CDSC of 1% if redeemed within one year of purchase. Class R3 Shares are sold without an up-front sales charge but incur a .25% annual 12b-1 distribution and a .25% annual 12b-1 service fee. Class I Shares are not subject to any sales charge or 12b-1 distribution or service fees.
Dollar Roll Transactions
Each Fund is authorized to enter into dollar roll transactions (“dollar rolls”) in which a Fund purchases or sells mortgage-backed securities (“MBS”) for delivery in the future and simultaneously contracts to sell or repurchase substantially similar (same type, coupon, and maturity) MBS on a different specified future date. Dollar rolls are identified in the Fund’s Portfolio of Investments as “MDR”, when applicable. During the roll period, the Fund foregoes principal and interest paid on the MBS. The Fund is compensated by fee income or the difference between the current sales price and the lower forward price for the future purchase. Such compensation is amortized over the life of the dollar rolls and recognized as a component of “Investment Income” on the Statement of Operations. Dollar rolls are valued daily. Multi-Strategy Core Bond entered into dollar roll transactions during the fiscal year ended September 30, 2010.
Dollar rolls involve the risk that the market value of the MBS the Fund is obligated to repurchase under an agreement may decline below the repurchase price. These transactions also involve some risk to the Fund if the other party should default on its obligation and the Fund is delayed or prevented from completing the transaction. In the event that the buyer of securities under a dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the dollar roll may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.
58 | Nuveen Investments |
Foreign Currency Transactions
Each Fund is authorized to engage in foreign currency exchange transactions, including foreign currency forwards, futures, options and swap contracts. To the extent that the Funds invest in securities and/or contracts that are denominated in a currency other than U.S. dollars, the Funds will be subject to currency risk, which is the risk that an increase in the U.S. dollar relative to the foreign currency will reduce returns or portfolio value. Generally, when the U.S. dollar rises in value against a foreign currency, the Fund’s investments denominated in that currency will lose value because its currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value. Investments and other assets and liabilities denominated in foreign currencies are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate prevailing in the foreign currency exchange market at the time of valuation. Purchases and sales of investments and income denominated in foreign currencies are translated into U.S. dollars on the respective dates of such transactions.
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at 4:00 p.m. Eastern time. Investments, income and expenses are translated on the respective dates of such transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of the transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Funds and the amounts actually received.
The realized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments, forward foreign currency exchange contracts, options written, swaps, and swaptions written are recognized as a component of “Net realized gain (loss) from investments and foreign currency,” when applicable.
The unrealized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments are recognized as a component of “Change in unrealized appreciation (depreciation) of investments and foreign currency,” when applicable. The unrealized gains and losses resulting from changes in foreign exchange rates associated with forward foreign currency exchange contracts, options written, swaps and swaptions written are recognized as a component of “Change in net unrealized appreciation (deprecation) of forward foreign currency exchange contracts, options written, swaps and swaptions written, respectively ” when applicable.
Forward Foreign Currency Exchange Contracts
Each Fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives and is authorized to enter into forward foreign currency exchange contracts in an attempt to manage such risk under two circumstances: (i) when a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency to “lock in” the U.S. exchange rate of the transaction, with such period being a shortdated contract covering the period between transaction date and settlement date; or (ii) when the Adviser, believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar or against another foreign currency. Forward foreign currency exchange contracts are valued daily at the forward rate and are recognized as a componet of “Unrealized appreciation or depreciation on forward foreign currency exchange contracts” on the Statement of Assets and Liabilities. The change in value of the contracts during the reporting period is recognized as a component of “Change in net unrealized appreciation (depreciation) of forward foreign currency exchange contracts” on the Statement of Operations. When the contract is closed or offset with the same counterparty, the Fund recognizes the difference between the value of the contract at the time it was entered and the value at the time it was closed or offset as a componet of “Net realized gain (loss) from forward foreign currency exchange contracts” on the Statement of Operations.
Forward foreign currency exchange contracts will generally not be entered into for terms greater than three months, but may have maturities of up to six months or more. The use of forward foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of a Fund’s investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency exchange contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency exchange contract would limit the risk of loss due to a decline in the value of a particular currency; however, it also would limit any potential gain that might result should the value of the currency increase instead of decrease. These contracts may involve market risk in excess of the amount of unrealized gain or loss reflected on the Statement of Assets and Liabilities. High Yield and Symphony Credit Opportunities did not enter into forward foreign currency exchange contracts during the fiscal year ended September 30, 2010 and the period April 28, 2010 (commencement of operations) through September 30, 2010, respectively.
The average number of forward foreign currency exchange contracts outstanding during the fiscal year ended September 30, 2010, were as follows:
Short Duration | Multi- Strategy Core Bond | |||||||
Average number of forward foreign currency exchange contracts outstanding | 17 | 16 |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on forward foreign currency exchange contract activity.
Nuveen Investments | 59 |
Notes to Financial Statements (continued)
Futures Contracts
Each Fund is authorized to invest in futures contracts. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the “initial margin.” Cash held by the broker to cover initial margin requirements on open futures contracts, if any, is recognized as “Deposits with brokers for open futures contracts” on the Statement of Assets and Liabilities. Subsequent payments (“variation margin”) are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. Variation margin is recognized as a receivable or payable for “Variation margin on futures contracts” on the Statement of Assets and Liabilities, when applicable.
During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by “marking-to-market” on a daily basis to reflect the changes in market value of the contract and is recognized as “Change in net unrealized appreciation (depreciation) of futures contracts” on the Statement of Operations. When the contract is closed or expired, the Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and value of the contract when originally entered into, and is recognized as “Net realized gain (loss) from futures contracts” on the Statement of Operations.
Risks of investments in futures contracts include the possible adverse movement in the price of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts and/or that a change in the value of the contract may not correlate with a change in the value of the underlying securities or indices. High Yield and Symphony Credit Opportunities did not enter into futures contracts during the fiscal year ended September 30, 2010 and the period April 28, 2010 (commencement of operations) through September 30, 2010, respectively.
The average number of futures contracts outstanding during the fiscal year ended September 30, 2010, was as follows:
Short Duration | Multi- Strategy Core Bond | |||||||
Average number of futures contracts outstanding | 304 | 124 |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on futures contract activity.
Options Transactions
Each Fund is authorized to purchase and write (sell) call and put options on securities, futures, swaps (“swaptions”) or currencies. The purchase of options involves the risk of loss of all or a part of the cash paid for the options (the premium). The market risk associated with purchasing options is limited to the premium paid. The counterparty credit risk of purchasing options, however, needs to take into account the current value of the option, as this is the performance expected from the counterparty. Options purchased are accounted for in the accompanying financial statements in the same manner as portfolio securities. When a Fund writes an option, an amount equal to the net premium received (the premium less commission) is recognized as a component of “Call and/or Put options and/or swaptions written, at value” on the Statement of Assets and Liabilities and is subsequently adjusted to reflect the current value of the written option until the option expires or the Fund enters into a closing purchase transaction. The changes in values of the options written during the reporting period are recognized as a component of “Change in net unrealized appreciation (depreciation) of options and/or swaptions written” on the Statement of Operations. When a call or put option expires or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on executing a closing purchase transaction, including commission, is recognized as a component of “Net realized gain (loss) from options and/or swaptions written” on the Statement of Operations. The Fund, as writer of an option, has no control over whether the underlying instrument may be sold (called) or purchased (put) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option. There is also the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. High Yield and Symphony Credit Opportunities did not enter into option or swaption transactions during the fiscal year ended September 30, 2010 and the period April 28, 2010 (commencement of operations) through September 30, 2010, respectively.
The Funds did not purchase call or put options or swaptions during the fiscal year ended September 30, 2010. The average number of outstanding option and swaption contracts written during the fiscal year ended September 30, 2010, were as follows:
Short Duration | Multi- Strategy Core Bond | |||||||
Average number of outstanding option contracts written* | 6 | ** | 4 | ** |
Short Duration | Multi- Strategy Core Bond | |||||||
Average number of outstanding swaption contracts written* | 1 | ** | 1 | ** |
* | Includes both calls and puts, where applicable. |
** | The average number of outstanding contracts is calculated based on the outstanding contracts at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. The Funds were not entered into written options or swaptions at the end of the reporting period. |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on options activity.
60 | Nuveen Investments |
Swap Contracts
Each Fund is authorized to enter into swap contracts consistent with their investment objectives and policies to reduce, increase or otherwise alter its risk profile or to alter its portfolio characteristics (i.e. duration, yield curve positioning and credit quality).
Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and policies in an attempt to obtain a desired return at a lower cost than if the Fund had invested directly in the asset that yielded the desired return. In connection with these contracts, securities in the Funds’ portfolios of investments may be identified as collateral in accordance with the terms of the respective swap contract. Interest rate swap contracts involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (i.e., an exchange of floating rate payments for fixed rate payments with respect to a specified notional amount of principal). Interest rate swap contracts are valued daily. The Funds accrue daily the periodic payments expected to be paid and received on each interest rate swap contract and recognize the daily change in the market value of the Funds’ contractual rights and obligations under the contracts. The net amount recorded on these transactions for each counterparty is recognized on the Statement of Assets and Liabilities as a component of “Unrealized appreciation or depreciation on interest rate swaps” with the change during the fiscal period recognized on the Statement of Operations as a component of “Change in net unrealized appreciation (depreciation) of swaps.” Income received or paid by the Funds is recognized as a component of “Net realized gain (loss) from swaps” on the Statement of Operations, in addition to the net realized gains or losses recognized upon the termination of an interest rate swap contract and are equal to the difference between the Funds’ basis in the interest rate swap and the proceeds from (or cost of) the closing transaction. The amount of the payment obligation is based on the notional amount of the interest rate swap contract. Payments received or made at the beginning of the measurement period are recognized as a component of “Interest rate swap premiums paid and/or received” on the Statement of Assets and Liabilities. For tax purposes, periodic payments are treated as ordinary income or expense. High Yield and Symphony Credit Opportunities did not enter into interest rate swap contracts during the fiscal year ended September 30, 2010 and the period April 28, 2010 (commencement of operations) through September 30, 2010, respectively.
The average number of interest rate swap contracts outstanding during the fiscal year ended September 30, 2010, was as follows:
Short Duration | Multi- Strategy Core Bond | |||||||
Average number of interest rate swap contracts outstanding | 20 | 19 |
Each Fund is subject to credit risk in the normal course of pursuing its investment objectives. A Fund may enter into a credit default swap contract to seek to maintain a total return on a particular investment or portion of its portfolio, or to take an active long or short position with respect to the likelihood of a particular issuer’s default. Credit default swap contracts involve one party making a stream of payments to another party in exchange for the right to receive a specified return if/when there is a credit event by a third party. Generally, a credit event means bankruptcy, failure to pay, or restructuring. The specific credit events applicable for each credit default swap are stated in the terms of the particular swap agreement. As a purchaser of a credit default swap contract, the Fund pays to the counterparty a periodic interest fee based on the notional amount of the credit default swap. This interest fee is accrued daily and recognized with the daily change in the market value of the contract as a component of “Unrealized appreciation or depreciation on credit default swaps” on the Statement of Assets and Liabilities and is recorded as a realized loss upon payment. Upon occurrence of a specific credit event with respect to the underlying referenced entity, the Fund is obligated to deliver that security, or an equivalent amount of cash, to the counterparty in exchange for receipt of the notional amount from the counterparty. The difference between the value of the security delivered and the notional amount received is recorded as a realized gain. Payments received or made at the beginning of the measurement period are recognized as a component of “Credit default swap premiums paid and/or received” on the Statement of Assets and Liabilities. As a seller of a credit default swap contract, the Fund generally receives from the counterparty a periodic interest fee based on the notional amount of the credit default swap. This interest fee is accrued daily as a component of unrealized appreciation or depreciation and is recorded as a realized gain upon payment. Upon occurrence of a specific credit event with respect to the underlying referenced entity, the Fund will either receive that security, or an equivalent amount of cash, from the counterparty in exchange for payment of the notional amount to the counterparty, or pay a net settlement amount of the credit default swap contract less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The difference between the value of the security received and the notional amount paid is recorded as a realized loss. Changes in the value of a credit default swap during the fiscal period are recognized as a component of “Change in net unrealized appreciation (depreciation) of swaps”, and realized gains and losses are recognized as a component of “Net realized gain (loss) from swaps” on the Statement of Operations. The maximum potential amount of future payments the Fund could incur as a seller of protection in a credit default swap contract is limited to the notional amount of the contract. The maximum potential amount would be offset by the recovery value, if any, of the respective referenced entity. Symphony Credit Opportunities did not invest in credit default swaps during the period April 28, 2010 (commencement of operations) through September 30, 2010.
Nuveen Investments | 61 |
Notes to Financial Statements (continued)
The average notional amount of credit default swap contracts outstanding during the fiscal year ended September 30, 2010, was as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | ||||||||||
Average notional amount of credit default swap contracts outstanding | $ | 12,153,400 | $ | 7,375,040 | $ | 19,148,000 |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on swap contract activity.
Each Fund is subject to price risk in the normal course of pursuing its investment objectives. A Fund may enter into total return swap contract to manage its exposure to the market or certain sectors of the market, or to create exposure to certain debt securities to which it is otherwise not exposed. Total return swap contracts involve commitments to pay interest in exchange for a market-linked return, both based on specified notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of offsetting the interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. Payments received or made at the beginning of the measurement period are recognized as a component of “Total return swap premiums paid and/or received” on the Statement of Assets and Liabilities. As a seller of a total return swap contract, the Fund generally receives from the counterparty a periodic interest fee based on the notional amount of the total return swap. This interest fee is accrued daily as a component of unrealized appreciation or depreciation and is recorded as a realized gain upon payment. None of the Funds entered into total return swap contracts during the fiscal year ended September 30, 2010.
Market and Counterparty Credit Risk
In the normal course of business each Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose each Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of each Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange’s clearing house, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
Each Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when each Fund has an unrealized loss, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the predetermined threshold amount.
Zero Coupon Securities
Each Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Tax-exempt income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Multiclass Operations and Allocations
For the period October 1, 2009 through March 31, 2010, income and expenses of the Funds that were not directly attributable to specific class of shares were prorated among the classes based on the relative net assets of each class. Effective April 1, 2010, income and expenses of the Funds that are not directly attributable to a specific class of shares are prorated among the classes based on the relative settled shares of each class. Expenses directly attributable to a class of shares, which presently only include 12b-1 distribution and service fees, are recorded to the specific class.
Realized and unrealized gains and losses of the Funds are prorated among the classes based on the relative net assets of each class.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is each Fund’s policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on each Fund’s cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which a Fund overdraws its account at the custodian bank.
62 | Nuveen Investments |
Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that provide general indemnifications to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
In determining the fair value of each Fund’s investments, various inputs are used. These inputs are summarized in the three broad levels listed below:
Level 1 – | Quoted prices in active markets for identical securities. | |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). | |
Level 3 – | Significant unobservable inputs (including management’s assumptions in determining the fair value of investments). |
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of each Fund’s fair value measurements as of September 30, 2010:
Short Duration | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Corporate Bonds | $ | — | $ | 48,933,648 | $ | — | $ | 48,933,648 | ||||||||
U.S. Government and Agency Obligations | 79,476,339 | 3,538,738 | — | 83,015,077 | ||||||||||||
Asset-Backed Securities | — | 39,191,611 | — | 39,191,611 | ||||||||||||
Sovereign Debt | — | 10,975,810 | — | 10,975,810 | ||||||||||||
Structured Notes | — | 1,671,134 | — | 1,671,134 | ||||||||||||
Short-Term Investments | 1,012,449 | — | — | 1,012,449 | ||||||||||||
Derivatives: | ||||||||||||||||
Forward Foreign Currency Exchange Contracts* | — | (81,423 | ) | — | (81,423 | ) | ||||||||||
Interest Rate Swaps* | — | 374,939 | 149,496 | 524,435 | ||||||||||||
Credit Default Swaps* | — | 92,449 | — | 92,449 | ||||||||||||
Futures Contracts* | (228,341 | ) | — | — | (228,341 | ) | ||||||||||
Total | $ | 80,260,447 | $ | 104,696,906 | $ | 149,496 | $ | 185,106,849 | ||||||||
Multi-Strategy Core Bond | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Convertible Bonds | $ | — | $ | 102,500 | $ | — | $ | 102,500 | ||||||||
Corporate Bonds | — | 24,547,896 | 6,000 | 24,553,896 | ||||||||||||
U.S. Government and Agency Obligations | 28,003,992 | 1,937,378 | — | 29,941,370 | ||||||||||||
Asset-Backed and Mortgage-Backed Securities | — | 39,349,029 | — | 39,349,029 | ||||||||||||
Preferred Securities** | — | 8,147 | — | 8,147 | ||||||||||||
Sovereign Debt | — | 5,454,591 | — | 5,454,591 | ||||||||||||
Structured Notes | — | 620,707 | — | 620,707 | ||||||||||||
Short-Term Investments | 2,417,717 | 7,997,731 | — | 10,415,448 | ||||||||||||
Derivatives: | ||||||||||||||||
Forward Foreign Currency Exchange Contracts* | — | (45,629 | ) | — | (45,629 | ) | ||||||||||
Interest Rate Swaps* | — | 138,324 | 65,778 | 204,102 | ||||||||||||
Credit Default Swaps* | — | (102,578 | ) | — | (102,578 | ) | ||||||||||
Futures Contracts* | (5,248 | ) | — | — | (5,248 | ) | ||||||||||
Total | $ | 30,416,461 | $ | 80,008,096 | $ | 71,778 | $ | 110,496,335 |
* | Represents net unrealized appreciation (depreciation). |
** | Preferred Securities includes Convertible Preferred Securities, $25 Par (or similar) Preferred Securities and Capital Preferred Securities held by the Fund at the end of the reporting period, if any. |
Nuveen Investments | 63 |
Notes to Financial Statements (continued)
High Yield | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Convertible Bonds | $ | — | $ | 1,387,850 | $ | — | $ | 1,387,850 | ||||||||
Corporate Bonds | — | 139,432,409 | 63,750 | 139,496,159 | ||||||||||||
U.S. Government and Agency Obligations | 3,195,006 | — | — | 3,195,006 | ||||||||||||
Short-Term Investments | 5,325,694 | — | — | 5,325,694 | ||||||||||||
Derivatives: | ||||||||||||||||
Credit Default Swaps* | — | 453,342 | — | 453,342 | ||||||||||||
Total | $ | 8,520,700 | $ | 141,273,601 | $ | 63,750 | $ | 149,858,051 | ||||||||
Symphony Credit Opportunities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Convertible Bonds | $ | — | $ | 683,556 | $ | — | $ | 683,556 | ||||||||
Corporate Bonds | — | 15,630,224 | — | 15,630,224 | ||||||||||||
Variable Rate Senior Loan Interests | — | 5,667,143 | — | 5,667,143 | ||||||||||||
Short-Term Investments | 3,419,214 | — | — | 3,419,214 | ||||||||||||
Total | $ | 3,419,214 | $ | 21,980,923 | $ | — | $ | 25,400,137 |
* | Represents net unrealized appreciation (depreciation). |
The following is a reconciliation of each Fund’s Level 3 investments held at the beginning and end of the measurement period:
Short Duration | Level 3 Interest Rate Swaps* | |||
Balance at the beginning of year | $ | — | ||
Gains (losses): | ||||
Net realized gains (losses) | — | |||
Net change in unrealized appreciation (depreciation) | 149,496 | |||
Net purchases at cost (sales at proceeds) | — | |||
Net discounts (premiums) | — | |||
Net transfers in to (out of) at end of year fair value | — | |||
Balance at the end of year | $ | 149,496 |
* | Represents net unrealized appreciation (depreciation). |
Multi-Strategy Core Bond | Level 3 Corporate Bonds | Level 3 Interest Rate Swaps* | Level 3 Total | |||||||||
Balance at the beginning of year | $ | — | $ | — | $ | — | ||||||
Gains (losses): | ||||||||||||
Net realized gains (losses) | — | — | — | |||||||||
Net change in unrealized appreciation (depreciation) | — | 65,778 | 65,778 | |||||||||
Net purchases at cost (sales at proceeds) | — | — | — | |||||||||
Net discounts (premiums) | — | — | — | |||||||||
Net transfers in to (out of) at end of year fair value | 6,000 | — | 6,000 | |||||||||
Balance at the end of year | $ | 6,000 | $ | 65,778 | $ | 71,778 |
* | Represents net unrealized appreciation (depreciation). |
High-Yield | Level 3 Corporate Bonds | |||
Balance at the beginning of year | $ | — | ||
Gains (losses): | ||||
Net realized gains (losses) | — | |||
Net change in unrealized appreciation (depreciation) | — | |||
Net purchases at cost (sales at proceeds) | — | |||
Net discounts (premiums) | — | |||
Net transfers in to (out of) at end of year fair value | 63,750 | |||
Balance at the end of year | $ | 63,750 |
64 | Nuveen Investments |
“Change in net unrealized appreciation (depreciation) of investments and foreign currency” and “Change in net unrealized appreciation (depreciation) of swaps” presented on the Statement of Operations include net unrealized appreciation (depreciation) related to investments and derivatives, respectively, classified as Level 3 at year end as follows:
Short Duration | Multi-Strategy Core Bond | High Yield | ||||||||||
Level 3 net unrealized appreciation (depreciation of investments) | $ | — | $ | (7,300 | ) | $ | (77,563 | ) | ||||
Level 3 net unrealized appreciation (depreciation) of derivatives | 149,496 | 65,778 | — |
3. Derivative Instruments and Hedging Activities
The Funds record derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds’ investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. For additional information on the derivative instruments in which each Fund was invested during and at the end of the reporting period, refer to the Portfolios of Investments, Financial Statements and Footnote 1 – General Information and Significant Accounting Policies.
The following tables present the fair value of all derivative instruments held by the Funds as of September 30, 2010, the location of these instruments on the Statement of Assets and Liabilities, and the primary underlying risk exposure. Symphony Credit Opportunities did not invest in derivative instruments during the period April 28, 2010 (commencement of operations) through September 30, 2010.
Short Duration
As of September 30, 2010, Short Duration was using derivatives to reduce its sensitivity to overall interest rate movements and increase its exposure to certain currencies. On balance, the use of derivatives slightly reduced the Fund’s overall risk of loss, but made it more likely that the Fund’s performance might underperform its comparative indexes.
Location on the Statement of Assets and Liabilities | ||||||||||||||
Underlying Risk Exposure | Derivative Instrument | Asset Derivatives | Liability Derivatives | |||||||||||
Location | Value | Location | Value | |||||||||||
Foreign Currency Exchange Rate | Forward Foreign Currency Exchange Contracts | Unrealized appreciation on forward foreign currency exchange contracts | $ | 142,044 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 223,467 | |||||||
Interest Rate | Futures Contracts | Deposits with brokers for open futures contracts and Receivable for variation margin on futures contracts* | 98,476 | Deposits with brokers for open futures contracts and Payable for variation margin on futures contracts* | 326,817 | |||||||||
Interest Rate | Swaps | Unrealized appreciation on interest rate swaps** | 2,243,932 | Unrealized depreciation on interest rate swaps** | 1,719,497 | |||||||||
Credit | Swaps | Unrealized appreciation on credit default swaps** | 377,712 | Unrealized depreciation on credit default swaps** | 285,263 | |||||||||
Total | $ | 2,862,164 | $ | 2,555,044 |
* | Value represents cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments and not the deposits with brokers, if any, or the receivable or payable for variation margin on futures contracts presented on the Statement of Assets and Liabilities. |
** | Value represents cumulative appreciation (depreciation) of swap contracts as reported in the Portfolio of Investments. Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities but is not reflected in the cumulative appreciation (depreciation) presented above. |
Nuveen Investments | 65 |
Notes to Financial Statements (continued)
Multi-Strategy Core Bond
As of September 30, 2010, Multi-Strategy Core Bond was using derivatives in some cases to reduce its sensitivity to overall interest rate movements and in other cases to add exposure to certain currencies. On balance, the use of derivatives slightly increased the Fund’s risk of loss, but reduced the risk that it would underperform its comparative indexes.
Location on the Statement of Assets and Liabilities | ||||||||||||||
Underlying Risk Exposure | Derivative Instrument | Asset Derivatives | Liability Derivatives | |||||||||||
Location | Value | Location | Value | |||||||||||
Foreign Currency Exchange Rate | Forward Foreign Currency Exchange Contracts | Unrealized appreciation on forward foreign currency exchange contracts | $ | 61,707 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 107,336 | |||||||
Interest Rate | Futures Contracts | Deposits with brokers for open futures contracts and Receivable for variation margin on futures contracts* | 2,458 | Deposits with brokers for open futures contracts and Payable for variation margin on futures contracts* | 7,706 | |||||||||
Interest Rate | Swaps | Unrealized appreciation on interest rate swaps** | 920,602 | Unrealized depreciation on interest rate swaps** | 716,500 | |||||||||
Credit | Swaps | Unrealized appreciation on credit default swaps** | 39,458 | Unrealized depreciation on credit default swaps** | 142,036 | |||||||||
Total | $ | 1,024,225 | $ | 973,578 |
* | Value represents cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments and not the deposits with brokers, if any, or the receivable or payable for variation margin on futures contracts presented on the Statement of Assets and Liabilities. |
** | Value represents cumulative appreciation (depreciation) of swap contracts as reported in the Portfolio of Investments. Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities but is not reflected in the cumulative appreciation (depreciation) presented above. |
High Yield
As of September 30, 2010, the only derivative products in use by High Yield were credit default swaps. The Fund received income for entering into these transactions, but they did increase the Fund’s risk of loss and risk that it would underperform its comparative indexes.
Location on the Statement of Assets and Liabilities | ||||||||||||||
Underlying Risk Exposure | Derivative Instrument | Asset Derivatives | Liability Derivatives | |||||||||||
Location | Value | Location | Value | |||||||||||
Credit | Swaps | Unrealized appreciation on credit default swaps* | $ | 710,367 | Unrealized depreciation on credit default swaps* | $ | 257,025 |
* | Value represents cumulative appreciation (depreciation) of swap contracts as reported in the Portfolio of Investments. Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities but is not reflected in the cumulative appreciation (depreciation) presented above. |
The following tables present the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended September 30, 2010, on derivative instruments, as well as the primary risk exposure associated with each.
Net Realized Gain (Loss) from Forward Foreign Currency Exchange Contracts | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Foreign Currency Exchange Rate | $ | 22,777 | $ | (72,221 | ) | |||||||
Net Realized Gain (Loss) from Futures Contracts | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | (2,328,438 | ) | $ | (436,947 | ) | ||||||
Net Realized Gain (Loss) from Options Written | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | 20,160 | $ | 12,096 | ||||||||
Net Realized Gain (Loss) from Swaps | Short Duration | Multi-Strategy Core Bond | High Yield | |||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | (235,508 | ) | $ | (343,437 | ) | $ | — | ||||
Credit | 434,017 | (1,561 | ) | (79,470 | ) | |||||||
Total | $ | 198,509 | $ | (344,998 | ) | $ | (79,470 | ) |
66 | Nuveen Investments |
Net Realized Gain (Loss) from Swaptions Written | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | 10,130 | $ | 5,559 | ||||||||
Change in Net Unrealized Appreciation (Depreciation) of Forward Foreign Currency Exchange Contracts | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Foreign Currency Exchange Rate | $ | (45,169 | ) | $ | (6,777 | ) | ||||||
Change in Net Unrealized Appreciation (Depreciation) of Futures Contracts | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | (109,828 | ) | $ | 24,994 | |||||||
Change in Net Unrealized Appreciation (Depreciation) of Options Written | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | (19,500 | ) | $ | (11,700 | ) | ||||||
Change in Net Unrealized Appreciation (Depreciation) of Swaps | Short Duration | Multi-Strategy Core Bond | High Yield | |||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | 911,657 | $ | 659,480 | $ | — | ||||||
Credit | (377,714 | ) | (37,194 | ) | 1,196,431 | |||||||
Total | $ | 533,943 | $ | 622,286 | $ | 1,196,431 | ||||||
Change in Net Unrealized Appreciation (Depreciation) of Swaptions Written | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | 25,200 | $ | 12,600 |
4. Fund Shares
Transactions in Fund shares were as follows:
Short Duration | ||||||||||||||||
Year Ended 9/30/10 | Year Ended 9/30/09 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 4,171,651 | $ | 82,578,526 | 3,004,226 | $ | 57,897,705 | ||||||||||
Class C | 1,815,056 | 35,926,464 | 1,198,374 | 23,098,270 | ||||||||||||
Class R3 | 14,251 | 281,343 | 25,434 | 485,768 | ||||||||||||
Class I | 3,456,474 | 68,271,076 | 1,072,928 | 20,593,254 | ||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||
Class A | 94,547 | 1,865,811 | 38,238 | 734,790 | ||||||||||||
Class C | 43,306 | 855,717 | 15,497 | 299,182 | ||||||||||||
Class R3 | 158 | 3,110 | — | — | ||||||||||||
Class I | 25,536 | 502,844 | 8,935 | 171,794 | ||||||||||||
9,620,979 | 190,284,891 | 5,363,632 | 103,280,763 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (2,812,349 | ) | (55,670,099 | ) | (1,171,616 | ) | (22,470,079 | ) | ||||||||
Class C | (604,920 | ) | (11,963,925 | ) | (355,839 | ) | (6,838,308 | ) | ||||||||
Class R3 | (3,432 | ) | (67,463 | ) | — | — | ||||||||||
Class I | (1,693,670 | ) | (33,419,411 | ) | (624,387 | ) | (11,921,746 | ) | ||||||||
(5,114,371 | ) | (101,120,898 | ) | (2,151,842 | ) | (41,230,133 | ) | |||||||||
Net increase (decrease) | 4,506,608 | $ | 89,163,993 | 3,211,790 | $ | 62,050,630 |
Nuveen Investments | 67 |
Notes to Financial Statements (continued)
Multi-Strategy Core Bond | ||||||||||||||||
Year Ended 9/30/10 | Year Ended 9/30/09 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 1,435,414 | $ | 29,723,141 | 765,201 | $ | 14,552,874 | ||||||||||
Class A – automatic conversion of Class B Shares | — | — | 4,104 | 79,132 | ||||||||||||
Class B | 21,385 | 442,283 | 56,642 | 1,073,292 | ||||||||||||
Class C | 590,827 | 12,263,228 | 536,066 | 10,371,707 | ||||||||||||
Class R3 | 2,193 | 44,829 | 1,052 | 21,582 | ||||||||||||
Class I | 891,699 | 18,529,263 | 441,252 | 8,626,209 | ||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||
Class A | 37,884 | 786,067 | 20,396 | 387,179 | ||||||||||||
Class B | 3,879 | 80,506 | 3,929 | 75,611 | ||||||||||||
Class C | 20,952 | 435,334 | 5,968 | 116,061 | ||||||||||||
Class R3 | 60 | 1,245 | 4 | 74 | ||||||||||||
Class I | 23,389 | 486,103 | 23,651 | 442,374 | ||||||||||||
3,027,682 | 62,791,999 | 1,858,265 | 35,746,095 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (631,767 | ) | (13,176,273 | ) | (472,361 | ) | (9,121,286 | ) | ||||||||
Class B | (31,544 | ) | (656,452 | ) | (20,728 | ) | (400,121 | ) | ||||||||
Class B – automatic conversion to Class A Shares | — | — | (4,052 | ) | (79,132 | ) | ||||||||||
Class C | (176,186 | ) | (3,658,225 | ) | (120,259 | ) | (2,309,575 | ) | ||||||||
Class R3 | — | — | — | — | ||||||||||||
Class I | (292,027 | ) | (6,090,305 | ) | (2,048,728 | ) | (38,529,874 | ) | ||||||||
(1,131,524 | ) | (23,581,255 | ) | (2,666,128 | ) | (50,439,988 | ) | |||||||||
Net increase (decrease) | 1,896,158 | $ | 39,210,744 | (807,863 | ) | $ | (14,693,893 | ) |
High Yield | ||||||||||||||||
Year Ended 9/30/10 | Year Ended 9/30/09 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 1,155,059 | $ | 19,425,612 | 2,340,250 | $ | 33,280,190 | ||||||||||
Class A – automatic conversion of Class B Shares | 2,810 | 47,151 | 1,962 | 28,035 | ||||||||||||
Class B | 6,866 | 115,429 | 15,390 | 218,470 | ||||||||||||
Class C | 656,846 | 10,992,463 | 1,327,279 | 18,635,505 | ||||||||||||
Class R3 | 130 | 2,180 | — | — | ||||||||||||
Class I | 2,193,228 | 36,793,503 | 4,447,362 | 61,178,487 | ||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||
Class A | 106,410 | 1,787,848 | 109,532 | 1,547,761 | ||||||||||||
Class B | 4,229 | 70,993 | 5,738 | 80,038 | ||||||||||||
Class C | 73,066 | 1,225,468 | 69,574 | 980,987 | ||||||||||||
Class R3 | — | — | — | — | ||||||||||||
Class I | 224,941 | 3,774,997 | 350,471 | 4,919,196 | ||||||||||||
4,423,585 | 74,235,644 | 8,667,558 | 120,868,669 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (1,770,829 | ) | (29,510,158 | ) | (1,175,736 | ) | (16,676,662 | ) | ||||||||
Class B | (26,507 | ) | (444,151 | ) | (63,919 | ) | (912,201 | ) | ||||||||
Class B – automatic conversion to Class A Shares | (2,813 | ) | (47,151 | ) | (1,963 | ) | (28,035 | ) | ||||||||
Class C | (711,779 | ) | (11,901,334 | ) | (627,810 | ) | (8,890,931 | ) | ||||||||
Class R3 | (1 | ) | (23 | ) | — | — | ||||||||||
Class I | (4,881,073 | ) | (82,061,298 | ) | (2,659,622 | ) | (37,091,713 | ) | ||||||||
(7,393,002 | ) | (123,964,115 | ) | (4,529,050 | ) | (63,599,542 | ) | |||||||||
Net increase (decrease) | (2,969,417 | ) | $ | (49,728,471 | ) | 4,138,508 | $ | 57,269,127 |
68 | Nuveen Investments |
Symphony Credit Opportunities | ||||||||
For the Period 4/28/10 (commencement of operations) through 9/30/10 | ||||||||
Shares | Amount | |||||||
Shares sold: | ||||||||
Class A | 216,370 | $ | 4,311,772 | |||||
Class C | 66,582 | 1,331,755 | ||||||
Class R3 | 62,500 | 1,250,000 | ||||||
Class I | 797,250 | 15,802,658 | ||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||
Class A | 1,501 | 30,224 | ||||||
Class C | 11 | 237 | ||||||
Class I | 8,333 | 167,856 | ||||||
1,152,547 | 22,894,502 | |||||||
Shares redeemed: | ||||||||
Class A | (641 | ) | (12,940 | ) | ||||
Class C | (14 | ) | (283 | ) | ||||
Class I | (3,606 | ) | (72,636 | ) | ||||
(4,261 | ) | (85,859 | ) | |||||
Net increase (decrease) | 1,148,286 | $ | 22,808,643 |
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments, derivative and dollar roll transactions) for the fiscal year ended September 30, 2010, were as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Purchases: | ||||||||||||||||
Investment securities | $ | 103,530,342 | $ | 113,522,189 | $ | 195,739,097 | $ | 28,562,697 | ||||||||
U.S. Government and agency obligations | 96,343,501 | 49,564,297 | 4,014,825 | — | ||||||||||||
Sales and maturities: | ||||||||||||||||
Investment securities | 52,149,092 | 96,389,067 | 235,669,733 | 7,295,179 | ||||||||||||
U.S. Government and agency obligations | 61,798,458 | 33,122,520 | 10,909,020 | — |
Transactions in call and put options written for Short Duration and Multi-Strategy Core Bond during the fiscal year ended September 30, 2010, were as follows:
Short Duration | Multi-Strategy Core Bond | |||||||||||||||
Number of Contracts | Premiums Received | Number of Contracts | Premiums Received | |||||||||||||
Options outstanding, beginning of year | 30 | $ | 20,250 | 18 | $ | 12,150 | ||||||||||
Options written | 30 | 20,160 | 18 | 12,096 | ||||||||||||
Options terminated in closing purchase transactions | (30 | ) | (20,160 | ) | (18 | ) | (12,096 | ) | ||||||||
Options expired | (30 | ) | (20,250 | ) | (18 | ) | (12,150 | ) | ||||||||
Options outstanding, end of year | — | $ | — | — | $ | — |
Transactions in call and put swaptions written for Short Duration and Multi-Strategy Core Bond during the fiscal year ended September 30, 2010, were as follows:
Short Duration | Multi-Strategy Core Bond | |||||||||||||||
Number of Contracts | Premiums Received | Number of Contracts | Premiums Received | |||||||||||||
Swaptions outstanding, beginning of year | 1 | $ | 39,760 | 1 | $ | 19,880 | ||||||||||
Swaptions written | 10 | 178,381 | 10 | 70,602 | ||||||||||||
Swaptions terminated in closing purchase transactions | (6 | ) | (128,950 | ) | (6 | ) | (55,181 | ) | ||||||||
Swaptions expired | (5 | ) | (89,191 | ) | (5 | ) | (35,301 | ) | ||||||||
Swaptions outstanding, end of the year | — | $ | — | — | $ | — |
Nuveen Investments | 69 |
Notes to Financial Statements (continued)
6. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds.
At September 30, 2010, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives), as determined on a federal income tax basis, were as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Cost of investments | $ | 180,376,951 | $ | 107,121,394 | $ | 141,449,543 | $ | 24,841,184 | ||||||||
Gross unrealized: | ||||||||||||||||
Appreciation | $ | 5,119,940 | $ | 4,158,684 | $ | 9,259,728 | $ | 650,591 | ||||||||
Depreciation | (697,162 | ) | (834,390 | ) | (1,304,562 | ) | (91,638 | ) | ||||||||
Net unrealized appreciation (depreciation) of investments | $ | 4,422,778 | $ | 3,324,294 | $ | 7,955,166 | $ | 558,953 |
Permanent differences, primarily due to federal taxes paid, nondeductible stock issuance costs, return of capital distributions, treatment of notional principal contracts and foreign currency reclassifications resulted in reclassifications among the Funds’ components of net assets at September 30, 2010, the Funds’ tax year-end, as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Capital paid-in | $ | (385,165 | ) | $ | (9,234 | ) | $ | — | $ | (5,478 | ) | |||||
Undistributed (Over-distribution of) net investment income | 1,710,956 | 124,147 | 645,226 | 8,360 | ||||||||||||
Accumulated net realized gain (loss) | (1,325,791 | ) | (114,913 | ) | (645,226 | ) | (2,882 | ) |
The tax components of undistributed net ordinary income and net long-term capital gains at September 30, 2010, the Funds’ tax year end, were as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Undistributed net ordinary income* | $ | — | $ | 2,233,047 | $ | 173,838 | $ | 121,938 | ||||||||
Undistributed net long-term capital gains | — | — | — | — |
* | Undistributed net ordinary income (on a tax basis) has not been reduced for the dividend declared during the period September 1, 2010 through September 30, 2010 and paid on October 1, 2010. Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. |
The tax character of distributions paid during the Funds’ tax years ended September 30, 2010 and September 30, 2009, was designated for purposes of the dividends paid deduction as follows:
2010 | Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities** | ||||||||||||
Distributions from net ordinary income* | $ | 6,138,330 | $ | 3,489,912 | $ | 13,025,703 | $ | 282,480 | ||||||||
Distributions from net long-term capital gains | — | — | — | — | ||||||||||||
Return of capital | 385,165 | — | — | — |
2009 | Short Duration | Multi- Strategy Core Bond | High Yield | |||||||||
Distributions from net ordinary income* | $ | 2,405,917 | $ | 3,058,328 | $ | 10,974,688 | ||||||
Distributions from net long-term capital gains | — | 47,004 | — | |||||||||
Return of capital | — | — | 2,397,036 |
* | Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. |
** | For the period April 28, 2010 (commencement of operations) through September 30, 2010. |
70 | Nuveen Investments |
At September 30, 2010, the Funds’ tax year end, the following Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:
Short Duration | High Yield | |||||||
Expiration: | ||||||||
September 30, 2014 | $ | 54,933 | $ | — | ||||
September 30, 2015 | 141,618 | 119,975 | ||||||
September 30, 2016 | — | 139,565 | ||||||
September 30, 2017 | 48,855 | 6,367,477 | ||||||
September 30, 2018 | 348,745 | — | ||||||
Total | $ | 594,151 | $ | 6,627,017 |
During the tax year ended September 30, 2010, the following Fund utilized its capital loss carryforwards as follows:
High Yield | ||||
Capital loss carryforward utilized | $ | 99,076 |
The Funds have elected to defer net realized losses from investments incurred from November 1, 2009 through September 30, 2010, the Funds’ tax year end, (“post-October losses”) in accordance with federal income tax regulations. Post-October losses are treated as having arisen on the first day of the following fiscal year:
Short Duration | Multi- Strategy Core Bond | |||||||
Post-October capital losses | $ | 1,356,942 | $ | 275,324 |
7. Management Fees and Other Transactions with Affiliates
Each Fund’s management fee is separated into two components – a fund-level Fee, based only on the amount of assets within each individual Fund, and a complex-level fee, based on the aggregate amount of all fund assets managed by the Adviser. This pricing structure enables each Fund’s shareholders to benefit from growth in the assets within their respective Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:
Average Daily Net Assets | Short Duration Fund-Level Fee Rate | Multi-Strategy Core Bond Fund-Level Fee Rate | High Yield Fund-Level Fee Rate | Symphony Credit Opportunities Fund-Level Fee Rate | ||||||||||||
For the first $125 million | .2000 | % | .3000 | % | .4000 | % | .4500 | % | ||||||||
For the next $125 million | .1875 | .2875 | .3875 | .4375 | ||||||||||||
For the next $250 million | .1750 | .2750 | .3750 | .4250 | ||||||||||||
For the next $500 million | .1625 | .2625 | .3625 | .4125 | ||||||||||||
For the next $1 billion | .1500 | .2500 | .3500 | .4000 | ||||||||||||
For net assets over $2 billion | .1250 | .2250 | .3250 | .3750 |
The annual complex-level fee for each Fund, payable monthly, is calculated according to the following schedule:
Complex-Level Managed Asset Breakpoint Level* | Effective Rate at Breakpoint Level | |||
$55 billion | .2000 | % | ||
$56 billion | .1996 | |||
$57 billion | .1989 | |||
$60 billion | .1961 | |||
$63 billion | .1931 | |||
$66 billion | .1900 | |||
$71 billion | .1851 | |||
$76 billion | .1806 | |||
$80 billion | .1773 | |||
$91 billion | .1691 | |||
$125 billion | .1599 | |||
$200 billion | .1505 | |||
$250 billion | .1469 | |||
$300 billion | .1445 |
* | The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen funds, with such daily managed assets defined separately for each fund in its management agreement, but excluding assets attributable to investments in other Nuveen funds. Managed assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the 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 as to certain funds held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser to limit the amount of such assets for determining managed assets in certain circumstances. As of September 30, 2010, the complex-level fee rate was .1822%. |
Nuveen Investments | 71 |
Notes to Financial Statements (continued)
During the period October 1, 2009, through January 31, 2010, the Adviser agreed to reimburse all expenses for Short Duration, Multi-Strategy Core Bond and High Yield other than management fees, 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses. Effective February 1, 2010, the Adviser has agreed to waive fees and reimburse expenses (“Expense Cap”) so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed the average daily net assets of any class of Fund shares in the amounts and for the time periods stated in the following table.
Fund | Expense Cap | Expense Cap Expiration Date | ||||||
Short Duration | .600 | % | January 31, 2012 | * | ||||
Multi-Strategy Core Bond | .700 | January 31, 2012 | * | |||||
High Yield | .950 | January 31, 2012 | * | |||||
Symphony Credit Opportunities | .850 | January 31, 2013 |
* | During the fiscal year ended September 30, 2010, the Adviser extended the Fund’s Expense Cap from January 31, 2011 to January 31, 2012. |
The Adviser may also voluntarily reimburse additional expenses from time to time in any of the Funds. Voluntary reimbursements may be terminated at any time at the Adviser’s discretion.
The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Adviser has entered into a Sub-Advisory Agreement with Symphony. Symphony is compensated for their services to Symphony Credit Opportunities from the management fee paid to the Adviser.
The Trust pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Trust from the Adviser or its affiliates. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen advised funds.
During the fiscal year ended September 30, 2010, Nuveen Investments, LLC (the “Distributor”), a wholly-owned subsidiary of Nuveen, collected sales charges on purchases of Class A Shares, the majority of which were paid out as concessions to financial intermediaries as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Sales charges collected (Unaudited) | $ | 202,922 | $ | 189,257 | $ | 224,402 | $ | — | ||||||||
Paid to financial intermediaries (Unaudited) | 174,837 | 166,284 | 200,068 | — |
The Distributor also received 12b-1 service fees on Class A Shares, substantially all of which were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
During the fiscal year ended September 30, 2010, the Distributor compensated financial intermediaries directly with commission advances at the time of purchase as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony | |||||||||||||
Commission advances (Unaudited) | $ | 355,417 | $ | 117,756 | $ | 82,489 | $ | 818 |
To compensate for commissions advanced to financial intermediaries, all 12b-1 service fees collected on Class B Shares during the first year following a purchase, all 12b-1 distribution fees collected on Class B Shares, and all 12b-1 service and distribution fees collected on Class C Shares during the first year following a purchase are retained by the Distributor. During the fiscal year ended September 30, 2010, the Distributor retained such 12b-1 fees as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
12b-1 fees retained (Unaudited) | $ | 267,226 | $ | 112,395 | $ | 127,979 | $ | 5,334 |
The remaining 12b-1 fees charged to the Funds were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
72 | Nuveen Investments |
The Distributor also collected and retained CDSC on share redemptions during the fiscal year ended September 30, 2010, as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
CDSC retained (Unaudited) | $ | 44,293 | $ | 12,458 | $ | 22,625 | $ | 3 |
At September 30, 2010, Nuveen owned shares of the Funds as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Class A | — | — | — | 62,500 | ||||||||||||
Class C | — | — | — | 62,500 | ||||||||||||
Class R3 | 7,696 | 7,874 | 8,188 | 62,500 | ||||||||||||
Class I | — | — | — | 62,500 |
8. New Accounting Pronouncements
Fair Value Measurements
On January 21, 2010, the Financial Accounting Standards Board issued changes to the authoritative guidance under U.S. GAAP for fair value measurements. The objective of which is to provide guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose Level 3 activity for purchases, sales, issuances and settlements in the Level 3 roll-forward on a gross basis rather than as one net number. The effective date of the amendment is for interim and annual periods beginning after December 15, 2010. At this time, management is evaluating the implications of this guidance and the impact it will have to the footnote disclosures, if any.
Nuveen Investments | 73 |
Financial Highlights
Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||||||
SHORT DURATION | ||||||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Invest- ment Income (Loss)(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains | Return of Capital | Total | Ending Net Asset Value | Total Return(b) | ||||||||||||||||||||||||||||||
Class A (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2010 | $ | 19.74 | $ | .46 | $ | .39 | $ | .85 | $ | (.72 | ) | $ | — | $ | (0.05 | ) | $ | (.77 | ) | $ | 19.82 | 4.36 | % | |||||||||||||||||
2009 | 19.31 | .56 | .72 | 1.28 | (.85 | ) | — | — | (.85 | ) | 19.74 | 7.02 | ||||||||||||||||||||||||||||
2008 | 19.40 | .84 | (.05 | ) | .79 | (.88 | ) | — | — | (.88 | ) | 19.31 | 4.03 | |||||||||||||||||||||||||||
2007 | 19.24 | .91 | .12 | 1.03 | (.87 | ) | — | — | (.87 | ) | 19.40 | 5.49 | ||||||||||||||||||||||||||||
2006 | 19.69 | .77 | (.14 | ) | .63 | (1.08 | ) | — | — | (1.08 | ) | 19.24 | 3.29 | |||||||||||||||||||||||||||
Class C (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2010 | 19.77 | .30 | .41 | .71 | (.59 | ) | — | (0.04 | ) | (.63 | ) | 19.85 | 3.65 | |||||||||||||||||||||||||||
2009 | 19.33 | .43 | .72 | 1.15 | (.71 | ) | — | — | (.71 | ) | 19.77 | 6.27 | ||||||||||||||||||||||||||||
2008 | 19.42 | .70 | (.05 | ) | .65 | (.74 | ) | — | — | (.74 | ) | 19.33 | 3.19 | |||||||||||||||||||||||||||
2007 | 19.26 | .73 | .16 | .89 | (.73 | ) | — | — | (.73 | ) | 19.42 | 4.71 | ||||||||||||||||||||||||||||
2006 | 19.69 | .63 | (.14 | ) | .49 | (.92 | ) | — | — | (.92 | ) | 19.26 | 2.54 | |||||||||||||||||||||||||||
Class R3 (8/08) |
| |||||||||||||||||||||||||||||||||||||||
2010 | 19.72 | .48 | .33 | .81 | (.69 | ) | — | (0.04 | ) | (.73 | ) | 19.80 | 4.06 | |||||||||||||||||||||||||||
2009 | 19.31 | .53 | .68 | 1.21 | (.80 | ) | — | — | (.80 | ) | 19.72 | 6.82 | ||||||||||||||||||||||||||||
2008(f) | 19.49 | — | ** | (.04 | ) | (.04 | ) | (.14 | ) | — | — | (.14 | ) | 19.31 | (.40 | ) | ||||||||||||||||||||||||
Class I (12/04)(e) |
| |||||||||||||||||||||||||||||||||||||||
2010 | 19.71 | .50 | .39 | .89 | (.77 | ) | — | (0.05 | ) | (.82 | ) | 19.78 | 4.52 | |||||||||||||||||||||||||||
2009 | 19.30 | .61 | .70 | 1.31 | (.90 | ) | — | — | (.90 | ) | 19.71 | 7.29 | ||||||||||||||||||||||||||||
2008 | 19.38 | .88 | (.03 | ) | .85 | (.93 | ) | — | — | (.93 | ) | 19.30 | 4.29 | |||||||||||||||||||||||||||
2007 | 19.21 | .92 | .17 | 1.09 | (.92 | ) | — | — | (.92 | ) | 19.38 | 5.82 | ||||||||||||||||||||||||||||
2006 | 19.68 | .77 | (.11 | ) | .66 | (1.13 | ) | — | — | (1.13 | ) | 19.21 | 3.46 |
74 | Nuveen Investments |
Ratios/Supplemental Data | ||||||||||||||||||||||
Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(c) | |||||||||||||||||||||
Ending Net Assets (000) | Expenses | Net Invest- ment Income (Loss) | Expenses | Net Invest- ment Income (Loss) | Portfolio Turnover Rate(d) | |||||||||||||||||
$ | 76,629 | .90 | % | 2.21 | % | .78 | % | 2.33 | % | 72 | % | |||||||||||
47,607 | 1.14 | 2.44 | .65 | 2.93 | 117 | |||||||||||||||||
10,450 | 1.63 | 3.26 | .64 | 4.26 | 90 | |||||||||||||||||
4,101 | 1.93 | 3.37 | .62 | 4.67 | 138 | |||||||||||||||||
439 | 3.41 | 1.25 | .64 | 4.02 | 234 | |||||||||||||||||
50,187 | 1.65 | 1.43 | 1.53 | 1.54 | 72 | |||||||||||||||||
25,215 | 1.88 | 1.73 | 1.40 | 2.21 | 117 | |||||||||||||||||
8,068 | 2.42 | 2.54 | 1.39 | 3.57 | 90 | |||||||||||||||||
2,260 | 2.42 | 2.71 | 1.38 | 3.76 | 138 | |||||||||||||||||
1,067 | 3.52 | 1.09 | 1.36 | 3.25 | 234 | |||||||||||||||||
874 | 1.15 | 2.30 | 1.03 | 2.42 | 72 | |||||||||||||||||
653 | 1.38 | 2.29 | .90 | 2.77 | 117 | |||||||||||||||||
149 | 2.98 | * | (2.24 | )* | .87 | * | (.13 | )* | 90 | |||||||||||||
59,622 | .65 | 2.42 | .53 | 2.53 | 72 | |||||||||||||||||
24,164 | .86 | 2.70 | .40 | 3.16 | 117 | |||||||||||||||||
14,827 | 1.36 | 3.52 | .39 | 4.49 | 90 | |||||||||||||||||
9,717 | 1.34 | 3.76 | .38 | 4.72 | 138 | |||||||||||||||||
9,602 | 1.44 | 3.07 | .53 | 3.97 | 234 |
(a) | Per share Net Investment Income (Loss) is calculated using the average daily shares method. |
(b) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
(c) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
(d) | Excluding dollar roll transactions, where applicable. |
(e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(f) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
* | Annualized. |
** | Rounds to less than $.01 per share. |
See accompanying notes to financial statements.
Nuveen Investments | 75 |
Financial Highlights (continued)
Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
MULTI-STRATEGY CORE BOND | ||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains | Total | Ending Net Asset Value | Total Return(b) | |||||||||||||||||||||||||||
Class A (12/04) |
| |||||||||||||||||||||||||||||||||||
2010 | $ | 20.40 | $ | .77 | $ | 1.14 | $ | 1.91 | $ | (1.04 | ) | $ | (.02 | ) | $ | (1.06 | ) | $ | 21.25 | 9.49 | % | |||||||||||||||
2009 | 19.06 | .87 | 1.58 | 2.45 | (.91 | ) | (.20 | ) | (1.11 | ) | 20.40 | 13.76 | ||||||||||||||||||||||||
2008 | 19.28 | .95 | (.23 | ) | .72 | (.94 | ) | — | (.94 | ) | 19.06 | 3.57 | ||||||||||||||||||||||||
2007 | 19.29 | 1.00 | (.08 | ) | .92 | (.93 | ) | — | (.93 | ) | 19.28 | 4.92 | ||||||||||||||||||||||||
2006 | 19.73 | .88 | (.34 | ) | .54 | (.98 | ) | — | (.98 | ) | 19.29 | 2.86 | ||||||||||||||||||||||||
Class B (12/04) |
| |||||||||||||||||||||||||||||||||||
2010 | 20.50 | .66 | 1.11 | 1.77 | (.89 | ) | (.02 | ) | (.91 | ) | 21.36 | 8.74 | ||||||||||||||||||||||||
2009 | 19.15 | .70 | 1.63 | 2.33 | (.78 | ) | (.20 | ) | (.98 | ) | 20.50 | 12.87 | ||||||||||||||||||||||||
2008 | 19.34 | .85 | (.25 | ) | .60 | (.79 | ) | — | (.79 | ) | 19.15 | 3.04 | ||||||||||||||||||||||||
2007 | 19.30 | .88 | (.06 | ) | .82 | (.78 | ) | — | (.78 | ) | 19.34 | 4.35 | ||||||||||||||||||||||||
2006 | 19.73 | .74 | (.35 | ) | .39 | (.82 | ) | — | (.82 | ) | 19.30 | 2.06 | ||||||||||||||||||||||||
Class C (12/04) |
| |||||||||||||||||||||||||||||||||||
2010 | 20.42 | .63 | 1.16 | 1.79 | (.89 | ) | (.02 | ) | (.91 | ) | 21.30 | 8.85 | ||||||||||||||||||||||||
2009 | 19.08 | .76 | 1.55 | 2.31 | (.77 | ) | (.20 | ) | (.97 | ) | 20.42 | 12.91 | ||||||||||||||||||||||||
2008 | 19.30 | .80 | (.23 | ) | .57 | (.79 | ) | — | (.79 | ) | 19.08 | 2.84 | ||||||||||||||||||||||||
2007 | 19.29 | .84 | (.05 | ) | .79 | (.78 | ) | — | (.78 | ) | 19.30 | 4.19 | ||||||||||||||||||||||||
2006 | 19.73 | .73 | (.35 | ) | .38 | (.82 | ) | — | (.82 | ) | 19.29 | 2.01 | ||||||||||||||||||||||||
Class R3 (8/08) |
| |||||||||||||||||||||||||||||||||||
2010 | 20.39 | .80 | 1.08 | 1.88 | (.99 | ) | (.02 | ) | (1.01 | ) | 21.26 | 9.35 | ||||||||||||||||||||||||
2009 | 19.04 | .80 | 1.61 | 2.41 | (.86 | ) | (.20 | ) | (1.06 | ) | 20.39 | 13.49 | ||||||||||||||||||||||||
2008(f) | 19.05 | .05 | .09 | .14 | (.15 | ) | — | (.15 | ) | 19.04 | .64 | |||||||||||||||||||||||||
Class I (12/04)(e) |
| |||||||||||||||||||||||||||||||||||
2010 | 20.39 | .84 | 1.11 | 1.95 | (1.09 | ) | (.02 | ) | (1.11 | ) | 21.23 | 9.73 | ||||||||||||||||||||||||
2009 | 19.05 | .83 | 1.67 | 2.50 | (.96 | ) | (.20 | ) | (1.16 | ) | 20.39 | 14.05 | ||||||||||||||||||||||||
2008 | 19.28 | .86 | (.10 | ) | .76 | (.99 | ) | — | (.99 | ) | 19.05 | 3.83 | ||||||||||||||||||||||||
2007 | 19.26 | 1.01 | (.01 | ) | 1.00 | (.98 | ) | — | (.98 | ) | 19.28 | 5.29 | ||||||||||||||||||||||||
2006 | 19.72 | .86 | (.29 | ) | .57 | (1.03 | ) | — | (1.03 | ) | 19.26 | 3.03 |
76 | Nuveen Investments |
Ratios/Supplemental Data | ||||||||||||||||||||||
Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(c) | |||||||||||||||||||||
Ending Net Assets (000) | Expenses | Net Invest- ment Income | Expenses | Net Invest- ment Income | Portfolio Turnover Rate(d) | |||||||||||||||||
$ | 32,191 | 1.18 | % | 3.44 | % | .88 | % | 3.73 | % | 157 | % | |||||||||||
13,740 | 1.38 | 3.88 | .75 | 4.50 | 360 | |||||||||||||||||
6,787 | 1.72 | 3.91 | .74 | 4.90 | 289 | |||||||||||||||||
3,281 | 2.32 | 3.59 | .73 | 5.17 | 278 | |||||||||||||||||
1,282 | 4.46 | .90 | .75 | 4.62 | 241 | |||||||||||||||||
2,383 | 1.96 | 2.82 | 1.63 | 3.17 | 157 | |||||||||||||||||
2,416 | 2.12 | 3.00 | 1.50 | 3.62 | 360 | |||||||||||||||||
1,572 | 2.30 | 3.36 | 1.27 | 4.39 | 289 | |||||||||||||||||
474 | 3.14 | 2.85 | 1.42 | 4.57 | 278 | |||||||||||||||||
51 | 3.54 | 1.68 | 1.38 | 3.84 | 241 | |||||||||||||||||
21,085 | 1.94 | 2.75 | 1.63 | 3.06 | 157 | |||||||||||||||||
11,323 | 2.16 | 3.29 | 1.50 | 3.95 | 360 | |||||||||||||||||
2,531 | 2.48 | 3.14 | 1.49 | 4.14 | 289 | |||||||||||||||||
1,578 | 2.98 | 2.85 | 1.48 | 4.34 | 278 | |||||||||||||||||
266 | 3.65 | 1.69 | 1.44 | 3.90 | 241 | |||||||||||||||||
238 | 1.45 | 3.53 | 1.13 | 3.85 | 157 | |||||||||||||||||
182 | 1.61 | 3.58 | 1.00 | 4.19 | 360 | |||||||||||||||||
150 | 1.76 | * | 1.00 | * | .99 | * | 1.77 | * | 289 | |||||||||||||
34,586 | .95 | 3.75 | .63 | 4.07 | 157 | |||||||||||||||||
20,516 | 1.06 | 3.80 | .50 | 4.36 | 360 | |||||||||||||||||
49,336 | 1.40 | 3.55 | .49 | 4.47 | 289 | |||||||||||||||||
9,689 | 1.86 | 3.87 | .48 | 5.24 | 278 | |||||||||||||||||
9,623 | 1.84 | 3.24 | .63 | 4.44 | 241 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
(c) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
(d) | Excluding dollar roll transactions. |
(e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(f) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
* | Annualized. |
See accompanying notes to financial statements.
Nuveen Investments | 77 |
Financial Highlights (continued)
Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||||||
HIGH YIELD | ||||||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains | Return of Capital | Total | Ending Net Asset Value | Total Return(b) | ||||||||||||||||||||||||||||||
Class A (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2010 | $ | 16.15 | $ | 1.44 | $ | 1.25 | $ | 2.69 | $ | (1.40 | ) | $ | — | $ | — | $ | (1.40 | ) | $ | 17.44 | 17.31 | % | ||||||||||||||||||
2009 | 16.92 | 1.30 | (.62 | ) | .68 | (1.19 | ) | — | (.26 | ) | (1.45 | ) | 16.15 | 5.94 | ||||||||||||||||||||||||||
2008 | 19.55 | 1.25 | (2.41 | ) | (1.16 | ) | (1.35 | ) | — | (.12 | ) | (1.47 | ) | 16.92 | (6.41 | ) | ||||||||||||||||||||||||
2007 | 19.37 | 1.55 | .08 | 1.63 | (1.45 | ) | — | — | (1.45 | ) | 19.55 | 8.61 | ||||||||||||||||||||||||||||
2006 | 19.39 | 1.33 | .16 | 1.49 | (1.51 | ) | — | — | (1.51 | ) | 19.37 | 8.01 | ||||||||||||||||||||||||||||
Class B (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2010 | 16.13 | 1.32 | 1.24 | 2.56 | (1.27 | ) | — | — | (1.27 | ) | 17.42 | 16.48 | ||||||||||||||||||||||||||||
2009 | 16.91 | 1.22 | (.66 | ) | .56 | (1.09 | ) | — | (.25 | ) | (1.34 | ) | 16.13 | 5.11 | ||||||||||||||||||||||||||
2008 | 19.53 | 1.08 | (2.37 | ) | (1.29 | ) | (1.25 | ) | — | (.08 | ) | (1.33 | ) | 16.91 | (7.17 | ) | ||||||||||||||||||||||||
2007 | 19.36 | 1.34 | .14 | 1.48 | (1.31 | ) | — | — | (1.31 | ) | 19.53 | 7.82 | ||||||||||||||||||||||||||||
2006 | 19.39 | 1.13 | .19 | 1.32 | (1.35 | ) | — | — | (1.35 | ) | 19.36 | 7.07 | ||||||||||||||||||||||||||||
Class C (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2010 | 16.11 | 1.31 | 1.25 | 2.56 | (1.27 | ) | — | — | (1.27 | ) | 17.40 | 16.49 | ||||||||||||||||||||||||||||
2009 | 16.88 | 1.20 | (.63 | ) | .57 | (1.09 | ) | — | (.25 | ) | (1.34 | ) | 16.11 | 5.12 | ||||||||||||||||||||||||||
2008 | 19.51 | 1.10 | (2.40 | ) | (1.30 | ) | (1.22 | ) | — | (.11 | ) | (1.33 | ) | 16.88 | (7.13 | ) | ||||||||||||||||||||||||
2007 | 19.35 | 1.38 | .09 | 1.47 | (1.31 | ) | — | — | (1.31 | ) | 19.51 | 7.72 | ||||||||||||||||||||||||||||
2006 | 19.39 | 1.13 | .18 | 1.31 | (1.35 | ) | — | — | (1.35 | ) | 19.35 | 7.01 | ||||||||||||||||||||||||||||
Class R3 (8/08) |
| |||||||||||||||||||||||||||||||||||||||
2010 | 16.13 | 1.44 | 1.21 | 2.65 | (1.36 | ) | — | — | (1.36 | ) | 17.42 | 17.05 | ||||||||||||||||||||||||||||
2009 | 16.91 | 1.28 | (.64 | ) | .64 | (1.17 | ) | — | (.25 | ) | (1.42 | ) | 16.13 | 5.66 | ||||||||||||||||||||||||||
2008(e) | 18.32 | .09 | (1.26 | ) | (1.17 | ) | (.17 | ) | — | (.07 | ) | (.24 | ) | 16.91 | (6.57 | ) | ||||||||||||||||||||||||
Class I (12/04)(d) |
| |||||||||||||||||||||||||||||||||||||||
2010 | 16.13 | 1.47 | 1.26 | 2.73 | (1.44 | ) | — | — | (1.44 | ) | 17.42 | 17.62 | ||||||||||||||||||||||||||||
2009 | 16.90 | 1.34 | (.62 | ) | .72 | (1.23 | ) | — | (.26 | ) | (1.49 | ) | 16.13 | 6.20 | ||||||||||||||||||||||||||
2008 | 19.53 | 1.31 | (2.42 | ) | (1.11 | ) | (1.39 | ) | — | (.13 | ) | (1.52 | ) | 16.90 | (6.18 | ) | ||||||||||||||||||||||||
2007 | 19.35 | 1.45 | .23 | 1.68 | (1.50 | ) | — | — | (1.50 | ) | 19.53 | 8.89 | ||||||||||||||||||||||||||||
2006 | 19.40 | 1.37 | .14 | 1.51 | (1.56 | ) | — | — | (1.56 | ) | 19.35 | 8.14 |
78 | Nuveen Investments |
Ratios/Supplemental Data | ||||||||||||||||||||||
Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(c) | |||||||||||||||||||||
Ending Net Assets (000) | Expenses | Net Invest- ment Income | Expenses | Net Invest- ment Income | Portfolio Turnover Rate | |||||||||||||||||
$ | 36,443 | 1.19 | % | 8.49 | % | 1.08 | % | 8.59 | % | 139 | % | |||||||||||
41,921 | 1.23 | 8.77 | .85 | 9.15 | 124 | |||||||||||||||||
22,339 | 1.21 | 6.35 | .84 | 6.72 | 141 | |||||||||||||||||
9,100 | 1.83 | 6.85 | .83 | 7.85 | 160 | |||||||||||||||||
438 | 1.94 | 5.87 | .85 | 6.96 | 115 | |||||||||||||||||
1,567 | 1.94 | 7.76 | 1.83 | 7.86 | 139 | |||||||||||||||||
1,745 | 1.95 | 8.36 | 1.60 | 8.72 | 124 | |||||||||||||||||
2,585 | 2.00 | 5.35 | 1.59 | 5.76 | 141 | |||||||||||||||||
1,855 | 2.50 | 5.86 | 1.58 | 6.78 | 160 | |||||||||||||||||
217 | 2.69 | 4.86 | 1.57 | 5.97 | 115 | |||||||||||||||||
35,016 | 1.94 | 7.74 | 1.84 | 7.84 | 139 | |||||||||||||||||
32,131 | 1.97 | 8.08 | 1.60 | 8.45 | 124 | |||||||||||||||||
20,690 | 1.99 | 5.50 | 1.59 | 5.91 | 141 | |||||||||||||||||
8,620 | 2.54 | 6.06 | 1.58 | 7.02 | 160 | |||||||||||||||||
678 | 2.69 | 4.89 | 1.59 | 5.99 | 115 | |||||||||||||||||
145 | 1.44 | 8.46 | 1.34 | 8.56 | 139 | |||||||||||||||||
132 | 1.46 | 8.75 | 1.10 | 9.12 | 124 | |||||||||||||||||
138 | 1.70 | * | 2.44 | * | 1.07 | * | 3.07 | * | 141 | |||||||||||||
73,974 | .92 | 8.67 | .80 | 8.79 | 139 | |||||||||||||||||
108,222 | .97 | 9.09 | .60 | 9.45 | 124 | |||||||||||||||||
77,255 | .97 | 6.64 | .59 | 7.03 | 141 | |||||||||||||||||
10,534 | 1.43 | 6.51 | .58 | 7.35 | 160 | |||||||||||||||||
9,692 | 1.44 | 6.39 | .76 | 7.06 | 115 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
(c) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
(d) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(e) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
* | Annualized. |
See accompanying notes to financial statements.
Nuveen Investments | 79 |
Financial Highlights (continued)
Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
SYMPHONY CREDIT OPPORTUNITIES | ||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains | Total | Ending Net Asset Value | Total Return(b) | |||||||||||||||||||||||||||
Class A (4/10) |
| |||||||||||||||||||||||||||||||||||
2010(d) | $ | 20.00 | $ | .45 | $ | .43 | $ | .88 | $ | (.46 | ) | $ | — | $ | (.46 | ) | $ | 20.42 | 4.48 | % | ||||||||||||||||
Class C (4/10) |
| |||||||||||||||||||||||||||||||||||
2010(d) | 20.00 | .38 | .43 | .81 | (.41 | ) | — | (.41 | ) | 20.40 | 4.12 | |||||||||||||||||||||||||
Class R3 (4/10) |
| |||||||||||||||||||||||||||||||||||
2010(d) | 20.00 | .43 | .42 | .85 | (.44 | ) | — | (.44 | ) | 20.41 | 4.34 | |||||||||||||||||||||||||
Class I (4/10) |
| |||||||||||||||||||||||||||||||||||
2010(d) | 20.00 | .47 | .44 | .91 | (.48 | ) | — | (.48 | ) | 20.43 | 4.61 |
80 | Nuveen Investments |
Ratios/Supplemental Data | ||||||||||||||||||||||
Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(c) | |||||||||||||||||||||
Ending Net Assets (000) | Expenses | Net Invest- ment Income | Expenses | Net Invest- ment Income | Portfolio Turnover Rate | |||||||||||||||||
$ | 4,436 | 1.74 | %* | 4.65 | %* | 1.09 | %* | 5.31 | %* | 68 | % | |||||||||||
1,359 | 2.93 | * | 3.44 | * | 1.84 | * | 4.53 | * | 68 | |||||||||||||
1,276 | 2.45 | * | 3.92 | * | 1.34 | * | 5.04 | * | 68 | |||||||||||||
16,385 | 1.16 | * | 5.21 | * | .84 | * | 5.54 | * | 68 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
(c) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
(d) | For the period April 28, 2010 (commencement of operations) through September 30, 2010. |
* | Annualized. |
See accompanying notes to financial statements.
Nuveen Investments | 81 |
Trustees and Officers (Unaudited)
The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board of Trustees of the Funds. The number of trustees of the Funds is currently set at nine. None of the trustees who are not “interested” persons of the Funds (referred to herein as “independent trustees”) has ever been a director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses 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 Funds’ Statement of Additional Information (“SAI”) includes more information about the trustees. To request a free copy, call Nuveen Investments at (800) 257-8787 or visit the Funds’ website at www.nuveen.com.
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Independent Trustees: | ||||||||
Robert P. Bremner (2) 8/22/40 333 W. Wacker Drive Chicago, IL 60606 | Chairman of the Board and Trustee | 1996 | Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C. | 205 | ||||
Jack B. Evans 10/22/48 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1999 | President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Director and Chairman, United Fire Group, a publicly held company; President Pro Tem of the Board of Regents for the State of Iowa University System; Director, Gazette Companies; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. | 205 | ||||
William C. Hunter 3/6/48 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2004 | Dean, Tippie College of Business, University of Iowa (since 2006); Director (since 2004) of Xerox Corporation; Director (since 2005), Beta Gamma Sigma International Honor Society; 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); formerly, Director (1997-2007), Credit Research Center at George Washington University. | 205 | ||||
David J. Kundert (2) 10/28/42 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2005 | 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, Banc 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. | 205 | ||||
William J. Schneider (2) 9/24/44 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1997 | Chairman of Miller-Valentine Partners Ltd., a real estate investment company; formerly, Senior Partner and Chief Operating Officer (retired, 2004) of Miller-Valentine Group; member, University of Dayton Business School Advisory Council; member, Mid-America Health System Board; formerly, member and Chair, Dayton Philharmonic Orchestra Association; formerly, member, Business Advisory Council, Cleveland Federal Reserve Bank. | 205 | ||||
Judith M. Stockdale 12/29/47 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 1997 | Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994). | 205 | ||||
Carole E. Stone (2) 6/28/47 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2007 | Director, Chicago Board Options Exchange (since 2006); Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2010); formerly, Chair, New York Racing Association Oversight Board (2005-2007). | 205 |
82 | Nuveen Investments |
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Terence J. Toth (2) 9/29/59 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2008 | 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: Goodman Theatre Board (since 2004); Chicago Fellowship Board (since 2005), University of Illinois Leadership Council Board (since 2007) and Catalyst Schools of Chicago Board (since 2008); 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). | 205 | ||||
Interested Trustee: | ||||||||
John P. Amboian (3) 6/14/61 333 W. Wacker Drive Chicago, IL 60606 | Trustee | 2008 | Chief Executive Officer (since July 2007), Director (since 1999) and Chairman (since 2007) of Nuveen Investments, Inc.; Chief Executive Officer (since 2007) of Nuveen Asset Management, Nuveen Investments Advisors, Inc. | 205 | ||||
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (4) | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Officer | ||||
Officers of the Funds: | ||||||||
Gifford R. Zimmerman 9/9/56 333 W. Wacker Drive Chicago, IL 60606 | Chief Administrative Officer | 1988 | Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Investments, LLC; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director, Associate General Counsel and Assistant Secretary, of Nuveen Asset Management (since 2002) and of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC. (since 2002), Nuveen Investments Advisers Inc. (since 2002), Tradewinds Global Investors, LLC, and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2010) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst. | 205 | ||||
Alan A. Brown 8/1/62 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2007 | Executive Vice President, Global Client Private Group (since 2007); Executive Vice President, Mutual Funds, Nuveen Investments, LLC, (since 2005), previously, Managing Director and Chief Marketing Officer (2001-2005). | 75 | ||||
Margo L. Cook 4/11/64 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2009 | Executive Vice President (since 2008) of Nuveen Investments, Inc.; 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. | 205 | ||||
Lorna C. Ferguson 10/24/45 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 1998 | Managing Director (since 2004) of Nuveen Investments, LLC and Managing Director (since 2005) of Nuveen Asset Management. | 205 |
Nuveen Investments | 83 |
Trustees and Officers (Unaudited) (continued)
Name, Birthdate and Address | Position(s) Held with the Funds | Year First Elected or Appointed (1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee | ||||
Stephen D. Foy 5/31/54 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Controller | 1998 | Senior Vice President (since 2010), formerly, Vice President (1993-2010) and Funds Controller (since 1998) of Nuveen Investments, LLC; Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Asset Management; Certified Public Accountant. | 205 | ||||
Scott S. Grace 8/20/70 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Treasurer | 2009 | Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Investments, LLC; Managing Director and Treasurer of Nuveen Asset Management (since 2009); Nuveen Investment Solutions, Inc., Nuveen Investments Advisers, Inc., and Nuveen Investments Holdings, Inc.; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC and Winslow Capital Management, Inc.; 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 Stanley’s Global Financial Services Group (2000-2003); Chartered Accountant Designation. | 205 | ||||
Walter M. Kelly 2/24/70 333 W. Wacker Drive Chicago, IL 60606 | Chief Compliance Officer and Vice President | 2003 | Senior Vice President (since 2008), Vice President (2006-2008) formerly, Assistant Vice President and Assistant General Counsel (2003-2006) of Nuveen Investments, LLC; Senior Vice President (since 2008), formerly, Vice President (2006-2008) and Assistant Secretary (since 2003) of Nuveen Asset Management. | 205 | ||||
Tina M. Lazar 8/27/61 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2002 | Senior Vice President (since 2009), formerly, Vice President of Nuveen Investments, LLC (1999-2009); Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Asset Management. | 205 | ||||
Kevin J. McCarthy 3/26/66 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Secretary | 2007 | Managing Director (since 2008), formerly, Vice President (2007-2008), Nuveen Investments, LLC; Managing Director (since 2008), formerly, Vice President and Assistant Secretary, Nuveen Asset Management and Nuveen Investments Holdings, Inc.; Vice President (since 2007) and Assistant Secretary, Nuveen Investment Advisers Inc., NWQ Investment Management Company, LLC, Tradewinds Global Investors LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management LLC, Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007). | 205 | ||||
John S. White 5/12/67 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2007 | Senior Vice President (since 2009), formerly, Vice President (2006-2009) of Nuveen Investments, LLC, formerly, Assistant Vice President (since 2002); Lieutenant Colonel (since 2007), United States Marine Corps Reserve, formerly, Major (since 2001). | 75 |
(1) | Trustees serve an indefinite term until his/her successor is elected or appointed. The year first elected or appointed represents the year in which the trustee was first elected or appointed to any fund in the Nuveen Fund Complex. |
(2) | Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate of Nuveen Asset Management. |
(3) | Mr. Amboian is an interested trustee because of his position with Nuveen Investments, Inc. and certain of its subsidiaries, which are affiliates of the Nuveen Funds. |
(4) | Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the officer was first elected or appointed to any fund in the Nuveen Fund Complex. |
84 | Nuveen Investments |
Annual Investment Management Agreement Approval Process
(Unaudited)
The Investment Company Act of 1940, as amended (the “1940 Act”), provides, in substance, that each investment advisory agreement between a fund and its investment adviser (including sub-advisers) will continue in effect from year to year only if its continuance is approved at least annually by the fund’s board members, including by a vote of a majority of the board members who are not parties to the advisory agreement or “interested persons” of any parties (the “Independent Board Members”), cast in person at a meeting called for the purpose of considering such approval. In connection with such approvals, the fund’s board members must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the advisory agreement. Accordingly, at a meeting held on May 25-26, 2010 (the “May Meeting”), the Board of Trustees (the “Board,” and each Trustee, a “Board Member”) of the Funds (other than the Nuveen Symphony Credit Opportunities Fund (the “Credit Opportunities Fund”), which is new), including a majority of the Independent Board Members, considered and approved the continuation of the advisory agreements (each, an “Advisory Agreement”) between each such Fund and Nuveen Asset Management (the “Adviser”) for an additional one-year period. In preparation for their considerations at the May Meeting, the Board also held a separate meeting on April 21-22, 2010 (the “April Meeting”). Accordingly, the factors considered and determinations made regarding the renewals by the Independent Board Members include those made at the April Meeting. The initial advisory agreement between the Adviser and the Credit Opportunities Fund and the initial sub-advisory agreement between the Adviser and Symphony Asset Management LLC (the “Sub-Adviser”) on behalf of such Fund were approved separately at a meeting of the Board of such Fund held on February 26-28, 2010.
The discussion of the approvals for the Funds other than the Credit Opportunities Fund is set forth below in Section I, followed by the discussion in Section II of the approval for the Credit Opportunities Fund.
I.
Nuveen Short Duration Bond Fund
Nuveen Multi-Strategy Core Bond Fund
Nuveen High Yield Bond Fund
With respect to the Funds listed above (for purposes of this Section I, the “Funds”), in evaluating the applicable Advisory Agreements, the Independent Board Members reviewed a broad range of information relating to the Funds and the Adviser, including absolute and comparative performance, fee and expense information for the Funds (as described in more detail below), the profitability of Nuveen for its advisory activities (which includes its wholly owned subsidiaries), and other information regarding the organization, personnel, and services provided by the Adviser. The Independent Board Members also met quarterly as well as at other times as the need arose during the year and took into account the information provided at such meetings and the knowledge gained therefrom. Prior to approving the renewal of the Advisory Agreements, the Independent Board Members reviewed the foregoing information with their independent legal counsel and with management, reviewed materials from independent legal counsel describing applicable law and their duties in reviewing advisory contracts, and met with independent legal counsel in private sessions without management present. The Independent Board Members considered the legal advice provided by independent legal counsel and relied upon their knowledge of the Adviser, its services and the Funds resulting from their meetings and other interactions throughout the year and their own business judgment in determining the factors to be considered in evaluating the Advisory Agreements. Each Board Member may have accorded different weight to the various factors in reaching his or her conclusions with respect to a Fund’s Advisory Agreement. The Independent Board Members did not identify any single factor as all-important or controlling. The Independent Board Members’ considerations were instead based on a comprehensive consideration of all the information presented. The principal factors considered by the Board and its conclusions are described below.
A. Nature, Extent and Quality of Services
In considering renewal of the Advisory Agreements, the Independent Board Members considered the nature, extent and quality of the Adviser’s services, including advisory services and administrative services. The Independent Board Members reviewed materials outlining, among other things, the Adviser’s organization and business; the types of services that the Adviser or its affiliates provide and are expected to provide to the Funds; the performance record of the Funds (as described in further detail below); and any initiatives Nuveen had taken for the applicable fund product line, including the development of new practices and coordination among business units with respect to large shareholder transactions, streamlining the classes offered, and adding funds to various distribution platforms.
As part of their review, the Independent Board Members also evaluated the background, experience and track record of the Adviser’s investment personnel. In this regard, the Independent Board Members considered any changes in the personnel, and the impact on the level of services provided to the Funds, if any. The Independent Board Members also reviewed information regarding portfolio manager compensation arrangements to evaluate the Adviser’s ability to attract and retain high quality investment personnel, preserve stability, and reward performance but not provide an incentive for taking undue risks.
In addition to advisory services, the Independent Board Members considered the quality of administrative services provided by the Adviser and its affiliates including product management, fund administration, oversight of service providers, shareholder services, administration of Board relations, regulatory and portfolio compliance and legal support. Given the importance of compliance, the Independent Board Members also considered the Adviser’s compliance program, including the report of the chief compliance officer regarding the Funds’ compliance policies and procedures.
Nuveen Investments | 85 |
Annual Investment Management Agreement Approval Process
(Unaudited) (continued)
Based on their review, the Independent Board Members found that, overall, the nature, extent and quality of services provided (and expected to be provided) to the Funds under the Advisory Agreements were satisfactory.
B. The Investment Performance of the Funds and Adviser
The Board considered the performance results of the Funds over various time periods. The Board reviewed, among other things, each Fund’s historic investment performance as well as information comparing the Fund’s performance information with that of other funds (the “Performance Peer Group”) based on data provided by an independent provider of mutual fund data and with recognized and/or customized benchmarks. In this regard, the performance information the Board reviewed included the Funds’ total return information compared to the returns of its Performance Peer Group and recognized and/or customized benchmarks for the quarter, one-, three- and five-year periods ending December 31, 2009 and for the same periods ending March 31, 2010. Moreover, the Board reviewed the peer ranking of the taxable fixed income funds advised by the Adviser in the aggregate. This information supplemented the Fund performance information provided to the Board at each of its quarterly meetings. In reviewing peer comparison information, the Independent Board Members recognized that the Performance Peer Group of certain funds may not adequately represent the objectives and strategies of the funds, thereby limiting the usefulness of comparing a fund’s performance with that of its Performance Peer Group.
Based on their review, the Independent Board Members determined that each Fund’s investment performance over time had been satisfactory. In this regard, the Independent Board Members noted that the Nuveen Short Duration Bond Fund and the Nuveen Multi-Strategy Core Bond Fund each generally demonstrated favorable performance in comparison to peers; although they fell within the third quartile for the one-year period, they performed in the top quartile for the three-and five-year periods. In addition, the Independent Board Members noted that the performance of the Nuveen High Yield Bond Fund over time was satisfactory compared to peers, falling within the second or third quartile over various periods.
C. Fees, Expenses and Profitability
1. Fees and Expenses
The Board evaluated the management fees and expenses of each Fund reviewing, among other things, such Fund’s gross management fees, net management fees and net expense ratios in absolute terms as well as compared to the fee and expenses of a comparable universe of funds based on data provided by an independent fund data provider (the “Peer Universe”) and in certain cases, to a more focused subset of funds in the Peer Universe (the “Peer Group”) and any expense limitations.
The Independent Board Members further reviewed the methodology regarding the construction of the applicable Peer Universe and/or Peer Group. In reviewing the comparisons of fee and expense information, the Independent Board Members took into account that in certain instances various factors such as: the asset level of a fund relative to peers; the limited size and particular composition of the Peer Universe or Peer Group; the investment objectives of the peers; expense anomalies; changes in the funds comprising the Peer Universe or Peer Group from year to year; levels of reimbursement; and the timing of information used may impact the comparative data thereby limiting the ability to make a meaningful comparison with peers.
In reviewing the fee schedule for a Fund, the Independent Board Members also considered the fund-level and complex-wide breakpoint schedules (described in further detail below) and any fee waivers and reimbursements provided by Nuveen. The Independent Board Members noted that each Fund had net management fees and/or a net expense ratio below, at or near (within 5 basis points or less) the peer average of its Peer Group or Peer Universe. Notwithstanding the foregoing, the Independent Board Members recognized that each Fund received significant management fee waivers and/or expense reimbursements.
Based on their review of the fee and expense information provided, the Independent Board Members determined that each Fund’s management fees were reasonable in light of the nature, extent and quality of services provided to the Fund.
2. Comparisons with the Fees of Other Clients
The Independent Board Members further reviewed information regarding the nature of services and fee rates offered by the Adviser to other clients. Such clients include separately managed accounts (both retail and institutional accounts), foreign investment funds offered by Nuveen and funds that are not offered by Nuveen but are sub-advised by one of Nuveen’s investment management teams. In evaluating the comparisons of fees, the Independent Board Members noted that the fee rates charged to the Funds and other clients vary, among other things, because of the different services involved and the additional regulatory and compliance requirements associated with registered investment companies, such as the Funds. Accordingly, the Independent Board Members considered the differences in the product types, including, but not limited to, the services provided, the structure and operations, product distribution and costs thereof, portfolio investment policies, investor profiles, account sizes and regulatory requirements. The Independent Board Members noted, in particular, that the range of services provided to the Funds (as discussed above) is much more extensive than that provided to separately managed accounts. Given the inherent differences in the products, particularly the extensive services provided to the Funds, the Independent Board Members believe such facts justify the different levels of fees.
3. Profitability of Nuveen
In conjunction with its review of fees, the Independent Board Members also considered the profitability of Nuveen for its advisory activities (which incorporated Nuveen’s wholly-owned affiliated sub-advisers) and its financial condition. The Independent Board
86 | Nuveen Investments |
Members reviewed the revenues and expenses of Nuveen’s advisory activities for the last two years, the allocation methodology used in preparing the profitability data and an analysis of the key drivers behind the changes in revenues and expenses that impacted profitability in 2009. The Independent Board Members noted this information supplemented the profitability information requested and received during the year to help keep them apprised of developments affecting profitability (such as changes in fee waivers and expense reimbursement commitments). In this regard, the Independent Board Members noted that they had also appointed an Independent Board Member as a point person to review and keep them apprised of changes to the profitability analysis and/or methodologies during the year. The Independent Board Members also considered Nuveen’s revenues for advisory activities, expenses, and profit margin compared to that of various unaffiliated management firms with similar amounts of assets under management and relatively comparable asset composition prepared by Nuveen.
In reviewing profitability, the Independent Board Members recognized the subjective nature of determining profitability which may be affected by numerous factors including the allocation of expenses. Further, the Independent Board Members recognized the difficulties in making comparisons as the profitability of other advisers generally is not publicly available and the profitability information that is available for certain advisers or management firms may not be representative of the industry and may be affected by, among other things, the adviser’s particular business mix, capital costs, types of funds managed and expense allocations. Notwithstanding the foregoing, the Independent Board Members reviewed Nuveen’s methodology and assumptions for allocating expenses across product lines to determine profitability. In reviewing profitability, the Independent Board Members recognized Nuveen’s investment in its fund business. Based on their review, the Independent Board Members concluded that Nuveen’s level of profitability for its advisory activities was reasonable in light of the services provided.
In evaluating the reasonableness of the compensation, the Independent Board Members also considered other amounts paid to the Adviser by the Funds as well as any indirect benefits (such as soft dollar arrangements, if any) the Adviser and its affiliates receive, or are expected to receive, that are directly attributable to the management of the Funds, if any. See Section E below for additional information on indirect benefits the Adviser may receive as a result of its relationship with the Funds. Based on their review of the overall fee arrangements of the Funds, the Independent Board Members determined that the advisory fees and expenses of the respective Fund were reasonable.
D. Economies of Scale and Whether Fee Levels Reflect These Economies of Scale
With respect to economies of scale, the Independent Board Members have recognized the potential benefits resulting from the costs of a fund being spread over a larger asset base, although economies of scale are difficult to measure and predict with precision, particularly on a fund-by-fund basis. One method to help ensure the shareholders share in these benefits is to include breakpoints in the advisory fee schedule. Generally, management fees for funds in the Nuveen complex are comprised of a fund-level component and a complex-level component, subject to certain exceptions. Accordingly, the Independent Board Members reviewed and considered the applicable fund-level breakpoints in the advisory fee schedules that reduce advisory fees as asset levels increase.
In addition to fund-level advisory fee breakpoints, the Board also considered the Funds’ complex-wide fee arrangement. Pursuant to the complex-wide fee arrangement, the fees of the funds in the Nuveen complex are generally reduced as the assets in the fund complex reach certain levels. The complex-wide fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when total fund complex assets increase, even if assets of a particular fund are unchanged or have decreased. The approach reflects the notion that some of Nuveen’s costs are attributable to services provided to all its funds in the complex and therefore all funds benefit if these costs are spread over a larger asset base.
Based on their review, the Independent Board Members concluded that the breakpoint schedules and complex-wide fee arrangement were acceptable and reflect economies of scale to be shared with shareholders when assets under management increase.
E. Indirect Benefits
In evaluating fees, the Independent Board Members received and considered information regarding potential “fall out” or ancillary benefits the Adviser or its affiliates may receive as a result of its relationship with the Funds. In this regard, the Independent Board Members considered, among other things, any sales charges, distribution fees and shareholder services fees received and retained by the Funds’ principal underwriter, an affiliate of the Adviser, which includes fees received pursuant to any 12b-1 plan. The Independent Board Members, therefore, considered the 12b-1 fees retained by Nuveen during the last calendar year.
In addition to the above, the Independent Board Members considered whether the Adviser received any benefits from soft dollar arrangements whereby a portion of the commissions paid by a Fund for brokerage may be used to acquire research that may be useful to the Adviser in managing the assets of the Funds and other clients. The Independent Board Members noted that the Adviser does not currently have any soft dollar arrangements; however, to the extent certain bona fide agency transactions that occur on markets that traditionally trade on a principal basis and riskless principal transactions are considered as generating “commissions,” the Adviser intends to comply with the applicable safe harbor provisions.
Based on their review, the Independent Board Members concluded that any indirect benefits received by the Adviser as a result of its relationship with the Funds were reasonable and within acceptable parameters.
Nuveen Investments | 87 |
Annual Investment Management Agreement Approval Process
(Unaudited) (continued)
F. Other Considerations
The Independent Board Members did not identify any single factor discussed previously as all-important or controlling. The Board Members, including the Independent Board Members, unanimously concluded that the terms of the Advisory Agreements are fair and reasonable, that the Adviser’s fees are reasonable in light of the services provided to each Fund and that the Advisory Agreements be renewed.
II.
Nuveen Symphony Credit Opportunities Fund
The Board is responsible for approving advisory arrangements for the Credit Opportunities Fund (for purposes of this Section II, the “Fund”) and, at a meeting held on February 26-28, 2010 (for purposes of this Section II, the “Meeting”), was asked to approve the advisory arrangements for the Fund. At the Meeting, the Board Members, including the Independent Board Members, considered and approved the investment management agreement (the “Investment Management Agreement”) between the Fund and the Adviser and the investment sub-advisory agreement (the “Sub-Advisory Agreement”) between the Adviser and the Sub-Adviser on behalf of the Fund. For purposes of this Section II, the Sub-Adviser and the Adviser are each hereafter a “Fund Adviser” and the Investment Management Agreement and the Sub-Advisory Agreement are each hereafter an “Advisory Agreement.”
To assist the Board in its evaluation of an Advisory Agreement with a Fund Adviser at the Meeting, the Independent Board Members had received, in adequate time in advance of the Meeting or at prior meetings, materials which outlined, among other things:
• | the nature, extent and quality of services expected to be provided by the Fund Adviser; |
• | the organization of the Fund Adviser, including the responsibilities of various departments and key personnel; |
• | the expertise and background of the Fund Adviser with respect to the Fund’s investment strategy; |
• | the profitability of Nuveen Investments, Inc. (“Nuveen”) (which incorporated Nuveen’s wholly-owned affiliated sub-advisers); |
• | the proposed management fees of the Fund Adviser, including comparisons of such fees with the management fees of comparable funds; |
• | the expected expenses of the Fund, including comparisons of the Fund’s expected expense ratio with the expense ratios of comparable funds; and |
• | the soft dollar practices of the Fund Adviser, if any. |
At the Meeting, the Adviser made a presentation to and responded to questions from the Board. During the Meeting, the Independent Board Members also met privately with their legal counsel to review the Board’s duties under the 1940 Act, the general principles of state law in reviewing and approving advisory contracts, the standards used by courts in determining whether investment company boards of directors have fulfilled their duties, factors to be considered in voting on advisory contracts and an adviser’s fiduciary duty with respect to advisory agreements and compensation. It is with this background that the Independent Board Members considered the Advisory Agreements with the respective Fund Advisers for the Fund. As outlined in more detail below, the Independent Board Members considered all factors they believed relevant with respect to the Fund, including the following: (a) the nature, extent and quality of the services to be provided by the Fund Adviser; (b) investment performance, as described below; (c) the profitability of Nuveen and its affiliates; (d) the extent to which economies of scale would be realized; and (e) whether fee levels reflect these economies of scale for the benefit of Fund investors.
A. Nature, Extent and Quality of Services
The Independent Board Members considered the nature, extent and quality of the respective Fund Adviser’s services, including advisory services and administrative services. As the Adviser and the Sub-Adviser already serve as adviser and sub-adviser, respectively, to other Nuveen funds overseen by the Board Members, the Board has a good understanding of each such Fund Adviser’s organization, operations and personnel. As the Independent Board Members meet regularly throughout the year to oversee the Nuveen funds, including funds currently advised by the Fund Advisers, the Independent Board Members have relied upon their knowledge from their meetings and any other interactions throughout the year of the respective Fund Adviser and its services in evaluating the Advisory Agreements.
At the Meeting and at prior meetings, the Independent Board Members reviewed materials outlining, among other things, the respective Fund Adviser’s organization and business; the types of services that such Fund Adviser or its affiliates provide to the Nuveen funds and are expected to provide to the Fund; and the experience of the respective Fund Adviser with applicable investment strategies. Further, the Independent Board Members have evaluated the background, experience and track record of the Fund Adviser’s investment personnel.
In addition to advisory services, the Independent Board Members considered the quality of any administrative or non-advisory services to be provided. In this regard, the Adviser is expected to provide the Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by others for the Fund) and officers and other personnel as are necessary for the
88 | Nuveen Investments |
operations of the Fund. In addition to investment management services, the Adviser and its affiliates will provide the Fund with a wide range of services, including, among other things, product management, fund administration, oversight of service providers, shareholder services, administration of Board relations, regulatory and portfolio compliance and legal support. The Independent Board Members also recognized that the Adviser would oversee the Sub-Adviser.
In evaluating the services of the Sub-Adviser, the Independent Board Members noted that the Sub-Advisory Agreement was essentially an agreement for portfolio management services only and the Sub-Adviser was not expected to supply other significant administrative services to the Fund. In addition, the Board Members recognized the Sub-Adviser’s experience and established philosophy and process with strategies similar to those anticipated for the Fund.
Based on their review, the Independent Board Members found that, overall, the nature, extent and quality of services expected to be provided to the Fund under each Advisory Agreement were satisfactory.
B. Investment Performance
The Fund is new and therefore does not have its own performance history. However, the Independent Board Members are familiar with each Fund Adviser’s performance record on other Nuveen funds. The Independent Board Members were provided with certain performance information pertaining to senior loan mandates and to senior loan and multi-strategy sleeves of certain other Nuveen funds, in each case managed by the Sub-Adviser. This information included returns for such mandates and sleeves and their respective benchmarks for 2007, 2008, 2009 and the three-year and five-year (as applicable) periods ending January 31, 2010.
C. Fees, Expenses and Profitability
1. Fees and Expenses
In evaluating the management fees and expenses that the Fund was expected to bear, the Independent Board Members considered, among other things, the Fund’s proposed management fee structure and its expected expense ratios in absolute terms as well as compared with the fees and expense ratios of comparable funds. The Independent Board Members also considered the proposed sub-advisory arrangement of the Fund. In this regard, in considering fees, the Board, as noted above, recognized the Sub-Adviser’s experience, philosophy and process with strategies similar to those expected for the Fund.
The Independent Board Members also considered the fund-level breakpoint schedule and the complex-wide breakpoint schedule (described in further detail below) and any applicable fee waivers and expense reimbursements expected to be provided. Based on their review of the fee and expense information provided, the Independent Board Members determined that the Fund’s management fees were reasonable in light of the nature, extent and quality of services to be provided to the Fund.
2. Comparisons with the Fees of Other Clients
Due to their experience with other Nuveen funds, the Board Members were familiar with the fees the Adviser assesses to other clients. Such other clients include separately managed accounts (both retail and institutional accounts) and funds that are not offered by Nuveen but are sub-advised by one of Nuveen’s investment management teams. In evaluating the comparisons of fees, the Independent Board Members have noted, at the Meeting or at prior meetings, that the fee rates charged to a fund (such as the Fund) and charged to other clients vary, among other things, because of the different services involved and the additional regulatory and compliance requirements associated with registered investment companies, such as the Fund. Accordingly, the Independent Board Members have considered the differences in the product types, including, but not limited to, the services to be provided, the structure and operations, product distribution and costs thereof, portfolio investment policies, investor profiles, account sizes and regulatory requirements. The Independent Board Members have noted, in particular, that the range of services as described above to be provided to a fund (such as the Fund) is much more extensive than that provided to separately managed accounts. Given the inherent differences in the products, particularly the extensive services to be provided to the Fund, the Independent Board Members believe such facts justify the different levels of fees.
In considering the advisory fees of the Sub-Adviser, the Independent Board Members are familiar with the pricing schedule the Sub-Adviser charges for similar investment management services for other clients, including those for which the Sub-Adviser uses a strategy similar to that anticipated for the Fund.
3. Profitability of Nuveen
In conjunction with its review of fees at prior meetings, the Independent Board Members have considered the profitability of Nuveen for its advisory activities (which incorporated Nuveen’s wholly-owned affiliated sub-advisers) and its financial condition. At the Meeting or prior meetings, the Independent Board Members reviewed the revenues and expenses of Nuveen’s advisory activities, the allocation methodology used in preparing the profitability data and an analysis of the key drivers behind the changes in revenues and expenses that impacted profitability. They also reviewed the Form 8-K filed by Nuveen on January 12, 2010 and the Form 10-Q filed by Nuveen on November 12, 2009 (for the period ending September 30, 2009). The Independent Board Members have also considered, at the Meeting or at prior meetings, Nuveen’s revenues for advisory activities, expenses, and profit margin compared to that of various unaffiliated management firms with similar amounts of assets under management and relatively comparable asset composition prepared by Nuveen.
In reviewing profitability, the Independent Board Members have recognized the subjective nature of determining profitability, which may be affected by numerous factors, including the allocation of expenses. Further, the Independent Board Members have
Nuveen Investments | 89 |
Annual Investment Management Agreement Approval Process
(Unaudited) (continued)
recognized the difficulties in making comparisons as the profitability of other advisers generally is not publicly available and the profitability information that is available for certain advisers or management firms may not be representative of the industry and may be affected by, among other things, the adviser’s particular business mix, capital costs, types of funds managed and expense allocations. Notwithstanding the foregoing, the Independent Board Members reviewed Nuveen’s methodology and assumptions for allocating expenses across product lines to determine profitability. In reviewing profitability, the Independent Board Members recognized Nuveen’s investment in its fund business. Based on their review, the Independent Board Members concluded that Nuveen’s level of profitability for its advisory activities was reasonable in light of the services to be provided.
In evaluating the reasonableness of the compensation, the Independent Board Members also considered any other amounts expected to be paid to a Fund Adviser as well as any indirect benefits (such as soft dollar arrangements, if any) the respective Fund Adviser and its affiliates are expected to receive that are directly attributable to their management of the Fund, if any. See Section E below for additional information on indirect benefits a Fund Adviser may receive as a result of its relationship with the Fund. Based on their review of the overall fee arrangements of the Fund, the Independent Board Members determined that the advisory fees and expected expenses of the Fund were reasonable.
D. Economies of Scale and Whether Fee Levels Reflect These Economies of Scale
With respect to economies of scale, the Independent Board Members have recognized the potential benefits resulting from the costs of a fund being spread over a larger asset base, although economies of scale are difficult to measure and predict with precision, particularly on a fund-by-fund basis. The Independent Board Members therefore considered whether the Fund could be expected to benefit from any economies of scale. One method to help ensure that shareholders share in these benefits is to include breakpoints in the advisory fee schedule. Generally, management fees for funds in the Nuveen complex are comprised of a fund-level component and a complex-level component. Accordingly, the Independent Board Members received and reviewed the schedule of proposed advisory fees for the Fund, including fund-level breakpoints thereto.
In addition to fund-level advisory fee breakpoints, the Board also considered the Fund’s complex-wide fee arrangement. Pursuant to the complex-wide fee arrangement, the fees of the funds in the Nuveen complex, including the Fund, are generally reduced as the assets in the fund complex reach certain levels. In evaluating the complex-wide fee arrangement, the Independent Board Members have considered that the complex-wide fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when total fund complex assets increase, even if assets of a particular fund are unchanged or have decreased. The approach reflects the notion that some of Nuveen’s costs are attributable to services provided to all its funds in the complex and therefore all funds benefit if these costs are spread over a larger asset base. Based on their review, the Independent Board Members concluded that the breakpoint schedules and complex-wide fee arrangement were acceptable and reflect economies of scale to be shared with the Fund’s shareholders.
E. Indirect Benefits
In evaluating fees, the Independent Board Members also considered information regarding potential “fall out” or ancillary benefits that the Fund Adviser or its affiliates may receive as a result of its relationship with the Fund. In this regard, the Independent Board Members considered, among other things, any sales charges, distribution fees and shareholder services fees expected to be received and retained by such Fund’s principal underwriter, an affiliate of the Adviser, including fees to be received pursuant to any 12b-1 plan.
In addition to the above, the Independent Board Members considered whether the Fund Advisers will receive any benefits from soft dollar arrangements whereby a portion of the commissions paid by the Fund for brokerage may be used to acquire research that may be useful to a Fund Adviser in managing the assets of the Fund and other clients. With respect to the Adviser, the Independent Board Members noted that the Adviser does not currently have any soft dollar arrangements; however, to the extent certain bona fide agency transactions that occur on markets that traditionally trade on a principal basis and riskless principal transactions are considered as generating “commissions,” the Adviser intends to comply with the applicable safe harbor provisions. With respect to the Sub-Adviser, the Independent Board Members considered that the Sub-Adviser currently does not enter into soft dollar arrangements; however, it has adopted a soft dollar policy in the event it does so in the future.
Based on their review, the Independent Board Members concluded that any indirect benefits received by a Fund Adviser as a result of its relationship with the Fund were reasonable and within acceptable parameters.
F. Approval
The Independent Board Members did not identify any single factor discussed previously as all-important or controlling. The Board Members, including a majority of the Independent Board Members, concluded that the terms of the Investment Management Agreement and Sub-Advisory Agreement were fair and reasonable, that the respective Fund Adviser’s fees are reasonable in light of the services to be provided to the Fund and that the Investment Management Agreement and Sub-Advisory Agreement should be and were approved on behalf of the Fund.
90 | Nuveen Investments |
Notes
Nuveen Investments | 91 |
Notes
92 | Nuveen Investments |
Notes
Nuveen Investments | 93 |
Glossary of Terms Used in this Report
Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or offer price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
Average Duration: Duration is a measure of the expected period over which a bond’s principal and interest will be paid, and consequently is a measure of the sensitivity of a bond’s (or bond fund’s) value to changes when market interest rates change. Generally, the longer a bond or Fund’s duration, the more the price of the bond or Fund will change as interest rates change.
Dividend Yield (also known as Market Yield or Current Yield): An investment’s current annualized dividend divided by its current offering price.
Net Asset Value (NAV): A Fund’s NAV is the dollar value of one share in the Fund. It is calculated by subtracting the liabilities of the Fund from its total assets and then dividing the remainder by the number of shares outstanding. Fund NAVs are calculated at the end of each business day.
SEC 30-Day Yield: A standardized measure of a Fund’s yield that accounts for the future amortization of premiums or discounts of bonds held in the Fund’s portfolio.
Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. Tax-exempt income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically.
94 | Nuveen Investments |
Fund Information
Fund Manager
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
Legal Counsel
Chapman and Cutler LLP
Chicago, IL
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
Chicago, IL
Custodian
State Street Bank & Trust Company
Boston, MA
Transfer Agent and Shareholder Services
Boston Financial
Data Services, Inc.
Nuveen Investor Services
P.O. Box 8530
Boston, MA 02266-8530
(800) 257-8787
Distribution Information: The following federal income tax information is provided with respect to the Funds’ distributions paid during the taxable year ended September 30, 2010: Nuveen Short Duration Bond Fund, Nuveen Multi-Strategy Core Bond Fund and Nuveen High Yield Bond Fund hereby designate approximately 100%, 81%, and 100% (or the maximum amount eligible) of ordinary income distributions as Interest-Related Dividends as defined in Internal Revenue Code Section 871(k) for the taxable year ended September 30, 2010.
Quarterly Portfolio of Investments and Proxy Voting information: You may obtain (i) each Fund’s quarterly portfolio of investments, (ii) information regarding how the Funds voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that the Funds used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen Investments at (800) 257-8787 or on Nuveen’s website at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities and Exchange Commission (“SEC”). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street NE, Washington, D.C. 20549.
The Financial Industry Regulatory Authority (“FINRA”) provides a Public Disclosure Program which supplies certain information regarding the disciplinary history of FINRA members and their associated persons in response to either telephone inquiries at (800) 289-9999 or written inquiries at www.finra.org. FINRA also provides an investor brochure that includes information describing the Public Disclosure Program.
Nuveen Investments | 95 |
Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. We market our growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, Nuveen Investments managed more than $160 billion of assets on September 30, 2010.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/mf
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Distributed by Nuveen Inv\estments, LLC 333 West Wacker Drive Chicago, IL 60606 www.nuveen.com |
MAN-INV3-0910D
Mutual Funds
Nuveen Taxable Bond Funds
For investors seeking attractive monthly income and portfolio diversification potential.
Semi-Annual Report
March 31, 2011
Share Class / Ticker Symbol | ||||||||||
Fund Name | Class A | Class B | Class C | Class R3 | Class I | |||||
Nuveen Short Duration Bond Fund | NSDAX | — | NSCDX | NSDTX | NSDRX | |||||
Nuveen Multi-Strategy Core Bond Fund | NCBAX | NBCBX | NCBCX | NMSTX | NCBRX | |||||
Nuveen High Yield Bond Fund | NHYAX | NHBYX | NHYCX | NHYTX | NHYRX | |||||
Nuveen Symphony Credit Opportunities Fund | NCOAX | — | NCFCX | NCORX | NCOIX |
INVESTMENT ADVISER NAME CHANGE
Effective January 1, 2011, Nuveen Asset Management, the Funds’ investment adviser, changed its name to Nuveen Fund Advisors, Inc. (“Nuveen Fund Advisors”). Concurrently, Nuveen Fund Advisors formed a wholly-owned subsidiary, Nuveen Asset Management, LLC, to house its portfolio management capabilities.
NUVEEN INVESTMENTS COMPLETES STRATEGIC COMBINATION WITH FAF ADVISORS
On December 31, 2010, Nuveen Investments completed the strategic combination between Nuveen Asset Management, LLC, the largest investment affiliate of Nuveen Investments, and FAF Advisors. As part of this transaction, U.S. Bancorp — the parent of FAF Advisors — received cash consideration and a 9.5% stake in Nuveen Investments in exchange for the long term investment business of FAF Advisors, including investment-management responsibilities for the non-money market mutual funds of the First American Funds family.
The approximately $27 billion of mutual fund and institutional assets managed by FAF Advisors, along with the investment professionals managing these assets and other key personnel, have become part of Nuveen Asset Management, LLC. With these additions to Nuveen Asset Management, LLC, this affiliate now manages more than $100 billion of assets across a broad range of strategies from municipal and taxable fixed income to traditional and specialized equity investments.
This combination does not affect the investment objectives or strategies of the Funds in this report. Over time, Nuveen Investments expects that the combination will provide even more ways to meet the needs of investors who work with financial advisors and consultants by enhancing the multi-boutique model of Nuveen Investments, which also includes highly respected investment teams at HydePark, NWQ Investment Management, Santa Barbara Asset Management, Symphony Asset Management, Tradewinds Global Investors and Winslow Capital. Nuveen Investments managed approximately $206 billion of assets as of March 31, 2011.
Must be preceded by or accompanied by a prospectus. | NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
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Letter to Shareholders
Dear Shareholders,
In 2010, the global economy recorded another year of recovery from the financial and economic crises of 2008, but many of the factors that caused the downturn still weigh on the prospects for continued improvement. In the U.S., ongoing weakness in housing values has put pressure on homeowners and mortgage lenders. Similarly, the strong earnings recovery for corporations and banks is only slowly being translated into increased hiring or more active lending. Globally, deleveraging by private and public borrowers has inhibited economic growth and that process is far from complete.
Encouragingly, constructive actions are being taken by governments around the world to deal with economic issues. In the U.S., the recent passage of a stimulatory tax bill relieved some of the pressure on the Federal Reserve to promote economic expansion through quantitative easing and offers the promise of sustained economic growth. A number of European governments are undertaking programs that could significantly reduce their budget deficits. Governments across the emerging markets are implementing various steps to deal with global capital flows without undermining international trade and investment.
The success of these government actions could determine whether 2011 brings further economic recovery and financial market progress. One risk associated with the extraordinary efforts to strengthen U.S. economic growth is that the debt of the U.S. government will continue to grow to unprecedented levels. Another risk is that over time there could be inflationary pressures on asset values in the U.S. and abroad, because what happens in the U.S. impacts the rest of the world economy. Also, these various actions are being taken in a setting of heightened global economic uncertainty, primarily about the supplies of energy and other critical commodities. In this challenging environment, your Nuveen investment team continues to seek sustainable investment opportunities and to remain alert to potential risks in a recovery still facing many headwinds. On your behalf, we monitor their activities to assure they maintain their investment disciplines.
As you will note elsewhere in this report, on December 31, 2010, Nuveen Investments completed a strategic combination with FAF Advisors, Inc., the manager of the First American Funds. The combination adds highly respected and distinct investment teams to meet the needs of investors and their advisors and is designed to benefit all fund shareholders by creating a fund organization with the potential for further economies of scale and the ability to draw from even greater talent and expertise to meet those investor needs.
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
May 19, 2011
4 | Nuveen Investments |
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Any reference to credit ratings for portfolio holdings denotes the highest rating assigned by a Nationally Recognized Statistical Rating Organization (NRSRO) such as Standard & Poor’s (S&P), Moody’s or Fitch. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below investment grade. Holdings and ratings may change over time.
The Nuveen Short Duration Bond Fund, Nuveen Multi-Strategy Core Bond Fund and Nuveen High Yield Bond Fund feature portfolio management by the Taxable Fixed Income group of Nuveen Asset Management. The Nuveen Symphony Credit Opportunities Fund, which commenced operations on April 28, 2010, features portfolio management by Symphony Asset Management LLC, an affiliate of Nuveen Investments. During the reporting period, Chris Neuharth and Peter Agrimson assumed management responsibility for the Short Duration Bond Fund; Timothy Palmer, Jeffrey Ebert and Marie Newcome took over management of the Multi-Strategy Core Bond Fund; and John Fruit and Jeffrey Schmitz assumed management of the High Yield Bond Fund. Gunther Stein and Jenny Rhee manage the Symphony Credit Opportunities Fund. Recently, the managers discussed the performance of the Funds and their management strategies for six-month reporting period ended March 31, 2011.
How did the Funds perform during the six-month period ended March 31, 2011?
The tables in the Fund Performance section of this report provide total return performance information for the six-month, one-year, five-year and since inception time periods ended March 31, 2011. The tables also compare the Funds’ performance to various indexes. Over this period, the Class A Shares at net asset value (NAV) of the Short Duration Bond Fund, the High Yield Bond Fund and the Credit Opportunities Fund each outperformed their comparative market index and relevant Lipper group average. The Class A Shares at NAV of the Multi-Strategy Core Bond Fund outperformed the comparative market index, but slightly underperformed the Lipper average. A more detailed account of each Fund’s performance is provided later in this report.
What are the Funds’ investment strategies and how were they applied during the six-month period ended March 31, 2011? How did these strategies influence performance?
Nuveen Short Duration Bond Fund
The Fund is designed to provide high current income consistent with minimal fluctuations of principal. Under normal market conditions, the Fund invests at least 80% of its net assets in short duration securities using a risk-controlled, multi-strategy approach that invests across multiple sectors of the taxable fixed income market. Typically, the Fund’s average duration will be between approximately one and two years but it will not exceed three years. The Fund principally invests in corporate debt securities, including bonds, notes and debentures; U.S. government securities; mortgage-related securities issued by governments, their agencies or instrumentalities, or corporations; asset-backed securities;
Nuveen Investments | 5 |
and non-U.S. debt securities. In addition, in an effort to enhance returns and manage risk, the Fund’s portfolio managers employ a variety of strategies, which may include the use of futures, options, swaps, credit derivatives and other derivative instruments to create debt or non-U.S. currency exposures which reflect their outlook for the global economic environment and the expected relative performance of different sectors of and securities in the fixed income market. The Fund normally invests at least 80% of its net assets in securities rated investment grade (AAA/Aaa to BBB/Baa) at the time of purchase by at least one independent rating agency and unrated securities judged to be of comparable quality by the Fund’s portfolio managers. The Fund may invest up to 35% of its net assets in debt securities issued by non-U.S. companies.
To implement this investment strategy, we continued to use a bottom-up approach to identify attractively priced securities. We conducted independent credit and cash flow analysis on all portfolio assets to uncover short-term securities trading at attractive yields over government securities. We also managed duration from a longer-term strategic point of view. We emphasized the three sectors of the structured assets universe: residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and asset-backed securities (ABS).
The domestic economy strengthened significantly during the period, moving swiftly from what some feared would be a double-dip/deflation scenario in late summer 2010 to heightened inflation concerns over the final quarter of the year. Not surprisingly, rates were pressured higher on the shorter end of the Treasury curve. The Fund’s duration was positioned defensively with respect to both its unmanaged benchmark and peers; this was a primary driver of strong returns against both over the period.
At the same time, given the boost in economic activity, many market participants seemed willing to take on more risk. All fixed-income spread sectors outperformed government securities by substantial margins. The Fund held between 10% and 15% exposure in high yield corporate securities, which outperformed over the six months. The Fund was also positioned with substantial allocations to both high grade corporates and ABS, which also outpaced government debt for the reporting period.
During the period, the Fund invested in forward foreign exchange contracts in a variety of currencies. Some of these positions were designed to benefit if the foreign currency in the contract strengthened with respect to the U.S. dollar, while others were designed to benefit if the foreign currency weakened, based on analysis of whether currency values were relatively high or low compared to future expectations. At the beginning of the period, the Fund also was invested in interest rate swap contracts in a number of currencies with a variety of maturities. Some of these positions were designed to benefit if interest rates rose, and other positions were designed to benefit if rates fell in the underlying country. Other positions sought to benefit from changes in the shape of the yield curve rather than from absolute upward or downward rate movements. We also held credit default swap index positions that earned spread income in exchange for taking the credit default risk of broad investment grade and high yield credit default swap indexes. In addition, we sold futures contracts on U.S. Treasury securities to reduce the Fund’s overall interest rate risk.
6 | Nuveen Investments |
Nuveen Multi-Strategy Core Bond Fund
The Fund is designed to provide total return by investing in fixed income securities. Under normal market conditions, the Fund invests at least 80% of its net assets in fixed income securities using a multi-strategy approach that invests across multiple sectors of the taxable fixed-income market. Typically, the Fund’s average duration will be five years or less and is not expected to be more than six years. The Fund principally invests in corporate debt securities, including bonds, notes and debentures; U.S. government securities; mortgage-related securities issued by governments, their agencies or instrumentalities, or corporations; asset-backed securities; and non-U.S. debt securities. In addition, in an effort to enhance returns and manage risk, the Fund’s portfolio managers employ a variety of strategies, which may include the use of futures, options, swaps, credit derivatives and other derivative instruments, to create debt or non-U.S. currency exposures which reflect their outlook for the global economic environment and the expected relative performance of different sectors of and securities in the fixed income market. The Fund normally invests at least 75% of its net assets in securities rated investment grade (AAA/Aaa to BBB/Baa) at the time of purchase by at least one independent rating agency and unrated securities judged to be of comparable quality by the Fund’s portfolio managers. The Fund may invest up to 35% of its net assets in debt securities issued by non-U.S. companies.
In managing the Fund, we employ a sector team-based process to identify and implement investment opportunities based on rigorous analysis of fixed-income markets. Over this period, we continued to position the Fund principally in corporates, high yield and high quality securitized issues, such as commercial backed mortgage securities (CMBS) and asset-backed securities (ABS). These sectors positively contributed to the Fund’s return for the six-month period. The additional income from these securities, combined with a contraction in risk premiums in these sectors, benefited the Fund’s results. The Fund’s weighting in corporates, particularly financials, was increased during the period. Financials continued to benefit from improvements in the credit cycle and from recapitalization efforts. Foreign exposure added to results, particularly due to currency exposure in growth-oriented countries such as Brazil, Canada, and Australia. Security selection within the corporate and securitized sectors also benefited returns. The Fund’s defensive interest rate positioning was moderately beneficial.
Our macro outlook for ongoing global growth and a positive environment for non-government bonds remained in place during the reporting period. We found value by focusing on opportunities in specific credits in the corporate and high yield sectors, as identified through our credit research process. Likewise, added new-issue CMBS with superior credit metrics compared to seasoned deals at attractive spreads. The Fund’s interest rate positioning is defensive versus the market benchmark, as we believe interest rates may increase moderately.
During the current period, the Fund invested in forward foreign exchange contracts in a variety of currencies. Some of these contracts were positioned to benefit if the foreign currency strengthened with respect to the U.S. dollar, while others were positioned to benefit if the foreign currency weakened, based on analysis of whether currency values were relatively high or low compared to future expectations. We also sold call options on
Nuveen Investments | 7 |
U.S. Treasury note and bond futures to reduce the overall interest rate risk of the Fund. In addition, we invested in interest rate swap contracts in a variety of currencies, with some positions designed to benefit if rates rose and others designed to benefit if rates fell, based on analysis of whether rates were relatively high or low compared to future expectations. We also held credit default swap index positions that earned spread income in exchange for taking the credit default risk of broad investment grade and high yield credit default swap indexes, as well as a swap tied to the default risk of a single issuer, Freescale Semiconductor. In addition, we sold futures contracts on U.S. Treasury securities to reduce the Fund’s overall interest rate risk.
Nuveen High Yield Bond Fund
The Fund is designed to maximize total return by investing in a diversified portfolio of high yield debt securities. Under normal market conditions, the Fund invests at least 80% of its net assets in U.S. and non-U.S. corporate high yield debt securities, including zero coupon, payment in-kind, corporate loans and convertible bonds. These securities generally are rated BB/Ba or below at the time of purchase by independent rating agencies or are unrated but judged to be of comparable quality by the Fund’s portfolio managers. These below investment grade securities are commonly referred to as “high yield” or “junk” bonds. In addition to investing in U.S. and non-U.S. corporate high yield debt securities, the Fund may also invest in U.S. and non-U.S. corporate investment grade securities; U.S. government securities, including U.S. Treasury securities and securities issued by U.S. government agencies or instrumentalities; and cash equivalents and other short duration investments. In an effort to hedge risk, enhance returns, or as a substitute for a position in the underlying asset, the Fund also may invest in futures, options, interest rate or total return swaps, credit derivatives or other derivative instruments. In doing so, the Fund may, in certain circumstances, invest a substantial portion of its assets in such derivative instruments. Substantially all of the Fund’s assets will be invested in U.S. dollar-denominated securities.
Throughout the reporting period, we continued to seek out attractive high yield investments by striking a balance between yield and total return opportunities. We continued to employ a disciplined, analytical, bottom-up approach in selecting securities with sound fundamentals and with attractive risk/reward characteristics.
During the six-month period, the high yield market continued to perform well, especially when compared with competing fixed-income classes as defaults trended lower. The Fund continued to exhibit strong security selection. As a result, no defaults were experienced during the reporting period. Lower tier issuers (CCC- rated debt) benefited the most from this environment resulting in higher returns versus B and BB rated bonds.
In particular, the Fund benefited from its overweighting to lower tier issues. This accounted for the Fund’s outperformance versus its peers. The Fund also benefited from its overweight to economically-sensitive industries at the expense of less cyclical sectors. For example, the Fund was overweighted in the media and advertising, energy, and
metals & mining sectors, which all showed strong returns. The Fund also benefited from its exposure to the financial services sectors and specifically the insurance industry, which continued to show above-market performance. Emerging market bonds also aided
8 | Nuveen Investments |
performance as favorable credit trends in these countries helped to further narrow the spread differential between emerging and developed markets.
The high yield asset class continued to benefit from extraordinary liquidity conditions in the market and persistent monetary accommodation by the Federal Reserve. This has resulted in strong appetite for the high yield asset class, which was met by equally impressive new issuance of high yield debt.
With this backdrop, we utilized the new issue market to add new par bonds, while funding these with lower-yielding, premium bonds. With valuations getting a bit more stretched, we were careful not to compromise on credit quality as we have started to witness more aggressive uses of leverage in new financings. However, gradually improving fundamentals allowed us to focus on accepting a bit more risk in certain industries to capture incremental yield. We continued to favor industries where we see fundamental improvement, among them metals & mining, industrials, media and advertising, and oilfield services. While we believe that BB-rated bonds are still attractive, we have been more focused on the single-B sector where we anticipate slightly better risk-adjusted returns.
We also held a credit default swap position that earned spread income in exchange for taking the credit default risk of Freescale Semiconductor.
Nuveen Symphony Credit Opportunities Fund
The Fund seeks current income and capital appreciation by investing primarily in debt instruments such as bonds, loans and convertible securities, a substantial portion of which may be rated below investment-grade.
The Fund is designed to leverage Symphony Asset Management’s industry-focused research process in a fully-integrated approach to non-investment grade corporate credit. The Fund’s investment team looks actively across the debt side of a company’s balance sheet in search of total return opportunities.
The Fund utilizes a catalyst-driven approach when making investments, seeking an attractive level of income while focusing on near-term agents or events that might lead to additional total return. A catalyst might include a restructuring, a refinancing, a merger or acquisition, or a near-term maturity/liquidity event, as well as earnings announcements, or credit rating changes. We believe these types of events will continue to occur as the credit market looks to restructure and de-lever following the credit crisis.
The Fund is managed by one integrated team of industry specialists that helps make investments across the entire capital structure of companies in a wide range of sectors. We believe that aggregating and synergizing information across these interrelated markets and understanding industry dynamics is critical to managing total return credit strategies.
The Fund’s portfolio holdings are not designed to look like an index fund. While the Fund has a blended benchmark it will seek to outperform, it does not seek results by tweaking an index with a top-down optimization. The Fund has been built from the bottom up,
using Symphony’s internal fundamental research process and risk-management capabilities. This may result in a lower correlation to indexes and other funds with similar mandates.
Nuveen Investments | 9 |
During the six-month period, the theme within the overall credit market has been that of cleaning up balance sheets and tending to maturity deadlines via a readily open capital market for non-investment grade issuers. Demand for corporate credit remains robust, and we saw significant activity in the convertible primary market in March 2011.
We remain confident that company fundamentals are improving, although the improvements will be partially offset by increasing commodity prices. For the Fund, we are employing a barbell approach — long the senior secured bonds with more defensive profiles and long more levered credits with shorter maturities. We generally avoided situations that are unable to pass through commodity price increases, many of which are large names in the Dow Jones Index.
Positively contributing to performance was McJunkin Red Man, which supplies PVF (pumps, valves, fittings) to energy and industrial sectors. The company had previously traded lower after its reported results were less than anticipated. We own the senior secured bonds. We believe that if concern over missing the estimate numbers subsides and if bonds continue to trade well relative to suitable alternatives, these bonds will continue to perform. Another positive holding was Infor Global. Historically, we have been involved at different points in the capital structure. Infor, which is an enterprise software provider, has had several positive developments regarding the firm’s balance sheet. Most recently, Infor announced that it intends to acquire competitor Lawson in a $2 billion transaction with Golden Gate Capital.
One position that detracted from performance was Catalyst Paper. We own both the senior bonds and subordinated bonds. Catalyst, a specialty paper producer, reported weaker fourth quarter numbers in March 2011. This, combined with higher oil prices and Canadian exchange rate concerns, resulted in the bond’s underperformance.
Risk Considerations
Mutual fund investing involves risk; principal loss is possible. Debt or fixed income securities are subject to credit risk and interest rate risk. The value of, and income generated by debt securities will decrease or increase based on changes in market interest rates. As interest rates rise, bond prices fall. Credit risk refers to an issuer’s ability to make interest and principal payments when due. High yield or lower rated securities carry heightened credit risk and potential for default. Foreign investments involve additional risks, including currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. Asset-backed and mortgage-backed securities are subject to additional risks such as prepayment risk, liquidity risk, default risk and adverse economic developments. The potential use of derivative instruments involves a high degree of financial risk, including the risk that the loss on a derivative may be greater than the principal amount invested.
10 | Nuveen Investments |
Returns quoted represent past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Returns without sales charges would be lower if the sales charge were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Returns may reflect a contractual agreement between certain Funds and the investment adviser to waive certain fees and expenses; see Notes to Financial Statements, Footnote 7 — Management Fees and Other Transactions with Affiliates for more information. In addition, returns may reflect a voluntary expense limitation by the Funds’ investment adviser that may be modified or discontinued at any time without notice. For the most recent month-end performance visit www.nuveen.com or call (800) 257-8787.
Returns reflect differences in sales charges and expenses, which are primarily differences in distribution and service fees. Fund returns assume reinvestment of dividends and capital gains.
Comparative index and benchmark return information is provided for the Funds’ Class A Shares at net asset value (NAV) only.
Nuveen Short Duration Bond Fund
Average Annual Total Returns as of March 31, 2011* | ||||||||||||||||
Cumulative | Average Annual | |||||||||||||||
6-Month | 1-Year | 5-Year | Since Inception** | |||||||||||||
Class A Shares at NAV | 1.18% | 3.46% | 4.82% | 4.13% | ||||||||||||
Class A Shares at Offer | -1.11% | 1.15% | 4.35% | 3.75% | ||||||||||||
Citigroup 1-3 Year Treasury Index*** | -0.12% | 1.64% | 4.06% | 3.59% | ||||||||||||
Lipper Short Investment Grade Debt Funds Category Average*** | 0.53% | 3.03% | 3.64% | 3.26% | ||||||||||||
Class C Shares | 0.76% | 2.66% | 4.05% | 3.36% | ||||||||||||
Class R3 Shares | 1.06% | 3.21% | 4.57% | 3.86% | ||||||||||||
Class I Shares | 1.31% | 3.72% | 5.07% | 4.36% |
Class A Shares have a maximum 2.00% sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within twelve months of purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available to only certain retirement plans. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
* | Six-month returns are cumulative; all other returns are annualized. |
** | Since inception returns for Class A, C and I Shares are from 12/20/04; since inception return for Class R3 Shares is from 8/4/08. |
*** | Refer to the Glossary of Terms Used in this Report for definitions. |
Nuveen Investments | 11 |
Fund Performance (Unaudited) (continued)
Nuveen Multi-Strategy Core Bond Fund
Average Annual Total Returns as of March 31, 2011* | ||||||||||||||||
Cumulative | Average Annual | |||||||||||||||
6-Month | 1-Year | 5-Year | Since Inception** | |||||||||||||
Class A Shares at NAV | -0.05% | 6.33% | 6.84% | 5.63% | ||||||||||||
Class A Shares at Offer | -4.28% | 1.80% | 5.92% | 4.90% | ||||||||||||
Citigroup Broad Investment Grade Bond Index*** | -0.99% | 5.06% | 6.20% | 5.38% | ||||||||||||
Lipper Intermediate Investment Grade Debt Funds Category Average*** | -0.03% | 6.14% | 5.52% | 4.59% | ||||||||||||
Class B Shares w/o CDSC | -0.42% | 5.54% | 6.14% | 4.92% | ||||||||||||
Class B Shares w/CDSC | -5.20% | 1.57% | 5.98% | 4.92% | ||||||||||||
Class C Shares | -0.42% | 5.55% | 6.08% | 4.87% | ||||||||||||
Class R3 Shares | -0.16% | 6.08% | 6.62% | 5.38% | ||||||||||||
Class I Shares | 0.03% | 6.56% | 7.12% | 5.87% |
Class A Shares have a maximum 3.75% sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within twelve months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available to only certain retirement plans. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
* | Six-month returns are cumulative; all other returns are annualized. |
** | Since inception returns for Class A, B, C and I Shares are from 12/20/04; since inception return for Class R3 Shares is from 8/4/08. |
*** | Refer to the Glossary of Terms Used in this Report for definitions. |
12 | Nuveen Investments |
Nuveen High Yield Bond Fund
Average Annual Total Returns as of March 31, 2011* | ||||||||||||||||
Cumulative | Average Annual | |||||||||||||||
6-Month | 1-Year | 5-Year | Since Inception** | |||||||||||||
Class A Shares at NAV | 8.53% | 16.14% | 7.32% | 6.71% | ||||||||||||
Class A Shares at Offer | 3.37% | 10.60% | 6.28% | 5.88% | ||||||||||||
Citigroup High Yield BB/B Index*** | 6.47% | 13.72% | 6.46% | 6.20% | ||||||||||||
Lipper High Current Yield Funds Category Average*** | 7.28% | 13.57% | 6.86% | 6.33% | ||||||||||||
Class B Shares w/o CDSC | 8.08% | 15.18% | 6.48% | 5.88% | ||||||||||||
Class B Shares w/CDSC | 3.08% | 11.18% | 6.33% | 5.88% | ||||||||||||
Class C Shares | 8.09% | 15.25% | 6.46% | 5.86% | ||||||||||||
Class R3 Shares | 8.41% | 15.81% | 7.02% | 6.43% | ||||||||||||
Class I Shares | 8.66% | 16.37% | 7.56% | 6.96% |
Class A Shares have a maximum 4.75% sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within twelve months of purchase. Class B Shares have a CDSC that begins at 5% for redemptions during the first year and declines periodically until after six years when the charge becomes 0%. Class B Shares automatically convert to Class A Shares eight years after purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available to only certain retirement plans. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
* | Six-month returns are cumulative; all other returns are annualized. |
** | Since inception returns for Class A, B, C and I Shares are from 12/20/04; since inception return for Class R3 Shares is from 8/4/08. |
*** | Refer to the Glossary of Terms Used in this Report for definitions. |
Nuveen Investments | 13 |
Fund Performance (Unaudited) (continued)
Nuveen Symphony Credit Opportunities Fund
Average Annual Total Returns as of March 31, 2011* | ||||||||
Cumulative | Average Annual | |||||||
6-Month | Since Inception** | |||||||
Class A Shares at NAV | 7.60% | 12.42% | ||||||
Class A Shares at Offer | 2.49% | 7.08% | ||||||
Merrill Lynch - Credit Suisse Index Blend*** | 6.67% | 10.39% | ||||||
Merrill Lynch U.S. High Yield Master II Index*** | 7.31% | 11.67% | ||||||
Lipper High Current Yield Funds Category Average*** | 7.28% | 11.37% | ||||||
Class C Shares | 7.21% | 11.63% | ||||||
Class R3 Shares | 7.48% | 12.15% | ||||||
Class I Shares | 7.73% | 12.70% |
Class A Shares have a maximum 4.75% sales charge. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (CDSC), also known as a back-end sales charge, if redeemed within twelve months of purchase. Class C Shares have a 1% CDSC for redemptions within less than one year, which is not reflected in the one-year total return. Class R3 Shares have no sales charge and are available to only certain retirement plans. Class I Shares have no sales charge and may be purchased under limited circumstances or by specified classes of investors.
* | Six-month returns are cumulative; all other returns are annualized. |
** | Since inception returns for Class A, C, R3 and I Shares are from 4/28/10. |
*** | Refer to the Glossary of Terms Used in this Report for definitions. |
14 | Nuveen Investments |
Yields (Unaudited) as of March 31, 2011
Dividend Yield is the most recent dividend per share (annualized) divided by the offering price per share.
The SEC 30-Day Yield is a standardized measure of a Fund’s yield that accounts for the future amortization of premiums or discounts of bonds held in the Fund’s portfolio. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share. The 30-Day Yield is computed under the same formula but is based on the net asset value (NAV) per share. Dividend Yield may differ from the SEC 30-Day Yield because the Fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium.
The SEC 30-Day Yield on A Shares at NAV applies only to A Shares purchased at no-load pursuant to the Fund’s policy permitting waiver of the A Share load in certain specified circumstances.
Nuveen Short Duration Bond Fund
Dividend Yield | 30-Day Yield | SEC 30-Day Yield | ||||||||||
Class A Shares at NAV | 2.64% | 1.90% | — | |||||||||
Class A Shares at Offer | 2.58% | — | 1.86% | |||||||||
Class C Shares | 1.91% | 1.18% | — | |||||||||
Class R3 Shares | 2.40% | 1.68% | — | |||||||||
Class I Shares | 2.89% | 2.16% | — |
Nuveen Multi-Strategy Core Bond Fund
Dividend Yield | 30-Day Yield | SEC 30-Day Yield | ||||||||||
Class A Shares at NAV | 3.81% | 3.77% | — | |||||||||
Class A Shares at Offer | 3.65% | — | 3.63% | |||||||||
Class B Shares | 3.05% | 3.00% | — | |||||||||
Class C Shares | 3.06% | 3.01% | — | |||||||||
Class R3 Shares | 3.57% | 3.56% | — | |||||||||
Class I Shares | 4.08% | 4.01% | — |
Nuveen High Yield Bond Fund
Dividend Yield | 30-Day Yield | SEC 30-Day Yield | ||||||||||
Class A Shares at NAV | 7.68% | 6.95% | — | |||||||||
Class A Shares at Offer | 7.31% | — | 6.61% | |||||||||
Class B Shares | 6.93% | 6.12% | — | |||||||||
Class C Shares | 6.94% | 6.14% | — | |||||||||
Class R3 Shares | 7.42% | 6.77% | — | |||||||||
Class I Shares | 7.92% | 7.17% | — |
Nuveen Symphony Credit Opportunities Fund
Dividend Yield | 30-Day Yield | SEC 30-Day Yield | ||||||||||
Class A Shares at NAV | 5.55% | 5.78% | — | |||||||||
Class A Shares at Offer | 5.29% | — | 5.50% | |||||||||
Class C Shares | 4.82% | 5.01% | — | |||||||||
Class R3 Shares | 5.33% | 5.52% | — | |||||||||
Class I Shares | 5.80% | 6.03% | — |
Nuveen Investments | 15 |
Holding Summaries (Unaudited) as of March 31, 2011
This data relates to the securities held in each Fund’s portfolio of investments. It should not be construed as a measure of performance for the Fund itself.
Ratings shown are the highest of Standard & Poor’s Group, Moody’s Investor Service, Inc. or Fitch, Inc. AAA includes bonds with an implied AAA rating since they are backed by U.S. Government or agency securities. AAA, AA, A and BBB ratings are investment grade; BB, B, CCC, CC, C and D ratings are below-investment grade. Holdings designated N/R are not rated by any of these national rating agencies.
Nuveen Short Duration Bond Fund
Portfolio Credit Quality1
Nuveen Multi-Strategy Core Bond Fund
Portfolio Credit Quality1
Portfolio Allocation2
Portfolio Allocation2
Corporate Debt: Industries3 | ||||
Diversified Financial Services | 37.1% | |||
Diversified Telecommunication Services | 9.1% | |||
Oil, Gas & Consumable Fuels | 6.1% | |||
Insurance | 5.2% | |||
Wireless Telecommunication Services | 3.8% | |||
Media | 3.0% | |||
Electric Utilities | 2.4% | |||
Consumer Finance | 2.1% | |||
Pharmaceuticals | 2.0% | |||
Energy Equipment & Services | 1.9% | |||
Real Estate | 1.8% | |||
Metals & Mining | 1.8% | |||
Hotels, Restaurants & Leisure | 1.7% | |||
Multi-Line Retail | 1.6% | |||
Industrial Conglomerates | 1.6% | |||
Thrifts & Mortgage Finance | 1.5% | |||
Chemicals | 1.5% | |||
Independent Power Producers & Energy Traders | 1.3% | |||
Commercial Services & Supplies | 1.3% | |||
Airlines | 1.3% | |||
Other | 11.9% |
Corporate Debt: Industries3 | ||||
Diversified Financial Services | 22.5% | |||
Oil, Gas & Consumable Fuels | 11.2% | |||
Metals & Mining | 6.9% | |||
Media | 5.8% | |||
Diversified Telecommunication Services | 5.4% | |||
Insurance | 5.0% | |||
Energy Equipment & Services | 4.1% | |||
Chemicals | 3.4% | |||
Electric Utilities | 2.6% | |||
Specialty Retail | 2.4% | |||
Wireless Telecommunication Services | 2.2% | |||
Multi-Line Retail | 2.1% | |||
Hotels, Restaurants & Leisure | 2.0% | |||
Industrial Conglomerates | 2.0% | |||
Real Estate | 1.7% | |||
Food & Staples Retailing | 1.7% | |||
Paper & Forest Products | 1.7% | |||
Consumer Finance | 1.5% | |||
Tobacco | 1.4% | |||
Food Products | 1.3% | |||
Other | 13.1% |
1 | As a percentage of total investments (excluding short-term investments and investments in derivatives) as of March 31, 2011. Holdings are subject to change. |
2 | As a percentage of total investments (excluding investments in derivatives) as of March 31, 2011. Holdings are subject to change. |
3 | As a percentage of total corporate debt holdings as of March 31, 2011. Corporate debt holdings include corporate bonds (high-yield investment grade rated), senior loans, convertible bonds, and any other debt instruments issued by a corporation (or that references a corporation) held by the Fund at the end of the reporting period. The percentage of “Other” corporate debt represents the total of all corporate debt industries that recalculated to less than 1.3% of total corporate debt holdings. Holdings are subject to change. |
16 | Nuveen Investments |
Nuveen High Yield Bond Fund
Portfolio Credit Quality1
Nuveen Symphony Credit
Opportunities Fund
Portfolio Credit Quality2
Portfolio Allocation3
Portfolio Allocation4
Corporate Debt: Industries5 | ||||
Oil, Gas & Consumable Fuels | 14.0% | |||
Wireless Telecommunication Services | 8.9% | |||
Hotels, Restaurants & Leisure | 7.5% | |||
Diversified Telecommunication Services | 6.5% | |||
Metals & Mining | 4.7% | |||
Paper & Forest Products | 4.5% | |||
Media | 3.9% | |||
Airlines | 3.7% | |||
Food & Staples Retailing | 3.2% | |||
Commercial Services & Supplies | 3.1% | |||
Food Products | 2.8% | |||
Health Care Providers & Services | 2.8% | |||
Industrial Congolmerates | 2.7% | |||
Auto Components | 2.5% | |||
IT Services | 2.4% | |||
Containers & Packaging | 2.4% | |||
Chemicals | 2.3% | |||
Energy Equipment & Services | 2.2% | |||
Electric Utilities | 1.9% | |||
Real Estate Management & Development | 1.7% | |||
Textiles, Apparel & Luxury Goods | 1.5% | |||
Household Products | 1.4% | |||
Other | 13.4% |
Corporate Debt: Industries5 | ||||
Specialty Retail | 9.8% | |||
Media | 9.5% | |||
Diversified Telecommunication Services | 8.5% | |||
Health Care Providers & Services | 7.2% | |||
IT Services | 6.4% | |||
Communications Equipment | 4.9% | |||
Diversified Financial Services | 4.7% | |||
Oil, Gas & Consumable Fuels | 4.7% | |||
Food Products | 3.2% | |||
Food & Staples Retailing | 3.1% | |||
Paper & Forest Products | 2.9% | |||
Hotels, Restaurants & Leisure | 2.8% | |||
Commercial Services & Supplies | 2.6% | |||
Wireless Telecommunication Services | 2.6% | |||
Chemicals | 2.5% | |||
Pharmaceuticals | 2.3% | |||
Metals & Mining | 2.1% | |||
Road & Rail | 1.8% | |||
Textiles, Apparel & Luxury Goods | 1.7% | |||
Aerospace & Defense | 1.6% | |||
Machinery | 1.6% | |||
Health Care Equipment & Supplies | 1.4% | |||
Other | 12.1% |
1 | As a percentage of total investments (excluding short-term investments and investments in derivatives) as of March 31, 2011. Holdings are subject to change. |
2 | As a percentage of total investments (excluding short-term investments) as of March 31, 2011. Holdings are subject to change. |
3 | As a percentage of total investments (excluding investments in derivatives) as of March 31, 2011. Holdings are subject to change. |
4 | As a percentage of total investments as of March 31, 2011. Holdings are subject to change. |
5 | As a percentage of total corporate debt holdings as of March 31, 2011. Corporate debt holdings include corporate bonds (high-yield investment grade rated), senior loans, convertible bonds, and any other debt instruments issued by a corporation (or that references a corporation) held by the Fund at the end of the reporting period. The percentage of “Other” corporate debt represents the total of all corporate debt industries that recalculated to less than 1.4% of total corporate debt holdings. Holdings are subject to change. |
Nuveen Investments | 17 |
The expense ratios below reflect the Funds’ total operating expenses (before fee waivers or expense reimbursement if any) are those shown in the Funds’ most recent prospectus. The expense ratios included management fees and other fees and expenses.
Nuveen Short Duration Bond Fund | Nuveen Multi-Strategy Core Bond Fund | |||||||||||||||||
Share Class | Gross Expense Ratios | Net Expense Ratios | Share Class | Gross Expense Ratios | Net Expense Ratios | |||||||||||||
Class A | 0.90% | 0.83% | Class A | 1.18% | 0.94% | |||||||||||||
Class C | 1.65% | 1.58% | Class B | 1.96% | 1.69% | |||||||||||||
Class R3 | 1.15% | 1.08% | Class C | 1.94% | 1.69% | |||||||||||||
Class I | 0.65% | 0.58% | Class R3 | 1.45% | 1.19% | |||||||||||||
Class I | 0.95% | 0.69% | ||||||||||||||||
The investment adviser has agreed to waive fees and reimburse expenses through January 31, 2012 so that Total Annual Fund Operating Expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed 0.60% of the average daily net assets of any class of fund shares. This expense limitation may be terminated or modified prior to that date only with the approval of the Board of Trustees of the Fund. |
The investment adviser has agreed to waive fees and reimburse expenses through January 31, 2012 so that Total Annual Fund Operating Expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed 0.70% of the average daily net assets of any class of fund shares. This expense limitation may be terminated or modified prior to that date only with the approval of the Board of Trustees of the Fund. |
| ||||||||||||||||
Nuveen High Yield Bond Fund | Nuveen Symphony Credit Opportunities Fund | |||||||||||||||||
Share Class | Gross Expense Ratios | Share Class | Gross Expense Ratios | Net Expense Ratios | ||||||||||||||
Class A | 1.19% | Class A | 1.74% | 1.09% | ||||||||||||||
Class B | 1.94% | Class C | 2.93% | 1.84% | ||||||||||||||
Class C | 1.94% | Class R3 | 2.45% | 1.34% | ||||||||||||||
Class R3 | 1.44% | Class I | 1.16% | 0.84% | ||||||||||||||
Class I | 0.92% | |||||||||||||||||
The investment adviser has agreed to waive fees and reimburse expenses through January 31, 2013 so that Total Annual Fund Operating Expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed 0.85% (1.35% after January 31, 2013) of the average daily net assets of any class of fund shares. The expense limitation expiring January 31, 2013, may be terminated or modified prior to that date only with the approval of the Board of Trustees of the fund. The expense limitation in effect thereafter may be terminated or modified only with the approval of shareholders of the Fund. |
|
18 | Nuveen Investments |
As a shareholder of one or more of the Funds, you incur two types of costs: (1) transaction costs, including up-front and back-end sales charges (loads) or redemption fees, where applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees, where applicable; and other Fund expenses. The Examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The Examples below are based on an investment of $1,000 invested at the beginning of the period and held for the period.
The information under “Actual Performance,” together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by the cost shown for your share class, in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance,” provides information about hypothetical account values and hypothetical expenses based on the respective Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds or share classes. In addition, if these transaction costs were included, your costs would have been higher.
Nuveen Short Duration Bond Fund
Hypothetical Performance | ||||||||||||||||||||||||||||||||||
Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||||||||||
A Shares | C Shares | R3 Shares | I Shares | A Shares | C Shares | R3 Shares | I Shares | |||||||||||||||||||||||||||
Beginning Account Value (10/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||
Ending Account Value (3/31/11) | $ | 1,011.80 | $ | 1,007.60 | $ | 1,010.60 | $ | 1,013.10 | $ | 1,020.84 | $ | 1,017.15 | $ | 1,019.65 | $ | 1,022.14 | ||||||||||||||||||
Expenses Incurred During Period | $ | 4.11 | $ | 7.81 | $ | 5.31 | $ | 2.81 | $ | 4.13 | $ | 7.85 | $ | 5.34 | $ | 2.82 |
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .81%, 1.56%, 1.06% and .56% for Classes A, C, R3 and I, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
Nuveen Multi-Strategy Core Bond Fund
Hypothetical Performance | ||||||||||||||||||||||||||||||||||||||||||
Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||||||||||||||||||
A Shares | B Shares | C Shares | R3 Shares | I Shares | A Shares | B Shares | C Shares | R3 Shares | I Shares | |||||||||||||||||||||||||||||||||
Beginning Account Value (10/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||||||
Ending Account Value (3/31/11) | $ | 999.50 | $ | 995.80 | $ | 995.80 | $ | 998.40 | $ | 1,000.30 | $ | 1,020.29 | $ | 1,016.55 | $ | 1,016.55 | $ | 1,019.05 | $ | 1,021.54 | ||||||||||||||||||||||
Expenses Incurred During Period | $ | 4.64 | $ | 8.36 | $ | 8.36 | $ | 5.88 | $ | 3.39 | $ | 4.68 | $ | 8.45 | $ | 8.45 | $ | 5.94 | $ | 3.43 |
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of .93%, 1.68%, 1.68%, 1.18% and ..68% for Classes A, B, C, R3 and I, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
Nuveen High Yield Bond Fund
Hypothetical Performance | ||||||||||||||||||||||||||||||||||||||||||
Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||||||||||||||||||
A Shares | B Shares | C Shares | R3 Shares | I Shares | A Shares | B Shares | C Shares | R3 Shares | I Shares | |||||||||||||||||||||||||||||||||
Beginning Account Value (10/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||||||
Ending Account Value (3/31/11) | $ | 1,085.30 | $ | 1,080.80 | $ | 1,080.90 | $ | 1,084.10 | $ | 1,086.60 | $ | 1,019.35 | $ | 1,015.61 | $ | 1,015.61 | $ | 1,018.15 | $ | 1,020.64 | ||||||||||||||||||||||
Expenses Incurred During Period | $ | 5.82 | $ | 9.70 | $ | 9.70 | $ | 7.07 | $ | 4.47 | $ | 5.64 | $ | 9.40 | $ | 9.40 | $ | 6.84 | $ | 4.33 |
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of 1.12%, 1.87%, 1.87%, 1.37% and ..87% for Classes A, B, C, R3 and I, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
Nuveen Investments | 19 |
Expense Examples (Unaudited) (continued)
Nuveen Symphony Credit Opportunities Fund
Hypothetical Performance | ||||||||||||||||||||||||||||||||||
Actual Performance | (5% annualized return before expenses) | |||||||||||||||||||||||||||||||||
A Shares | C Shares | R3 Shares | I Shares | A Shares | C Shares | R3 Shares | I Shares | |||||||||||||||||||||||||||
Beginning Account Value (10/01/10) | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||||||||
Ending Account Value (3/31/11) | $ | 1,076.00 | $ | 1,072.10 | $ | 1,074.80 | $ | 1,077.30 | $ | 1,019.55 | $ | 1,015.91 | $ | 1,018.30 | $ | 1,020.79 | ||||||||||||||||||
Expenses Incurred During Period | $ | 5.59 | $ | 9.35 | $ | 6.88 | $ | 4.30 | $ | 5.44 | $ | 9.10 | $ | 6.69 | $ | 4.18 |
For each class of the Fund, expenses are equal to the Fund’s annualized net expense ratio of 1.08%, 1.83%, 1.33% and .83% for Classes A, C, R3 and I, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
20 | Nuveen Investments |
Portfolio of Investments (Unaudited)
Nuveen Short Duration Bond Fund
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CORPORATE BONDS – 35.4% | ||||||||||||||||||||
Aerospace & Defense – 0.2% | ||||||||||||||||||||
$ | 325 | Northrop Grumman Corporation | 3.700% | 8/01/14 | BBB | $ | 340,113 | |||||||||||||
Airlines – 0.4% | ||||||||||||||||||||
560 | Delta Airlines, (WI/DD) | 5.300% | 4/15/19 | A– | 564,200 | |||||||||||||||
235 | Global Aviation Holdings | 14.000% | 8/15/13 | BB– | 275,537 | |||||||||||||||
795 | Total Airlines | 839,737 | ||||||||||||||||||
Auto Components – 0.4% | ||||||||||||||||||||
340 | American & Axle Manufacturing Inc. | 7.875% | 3/01/17 | B– | 345,100 | |||||||||||||||
450 | Johnson Controls Inc. | 1.750% | 3/01/14 | BBB+ | 448,102 | |||||||||||||||
790 | Total Auto Components | 793,202 | ||||||||||||||||||
Beverages – 0.4% | ||||||||||||||||||||
500 | Dr. Pepper Snapple Group Inc. | 2.900% | 1/15/16 | BBB | 495,795 | |||||||||||||||
240 | Miller Brewing Company, 144A | 5.500% | 8/15/13 | BBB+ | 260,836 | |||||||||||||||
740 | Total Beverages | 756,631 | ||||||||||||||||||
Building Products – 0.2% | ||||||||||||||||||||
460 | Ryland Group Inc. | 6.625% | 5/01/20 | BB– | 448,500 | |||||||||||||||
Chemicals – 0.5% | ||||||||||||||||||||
340 | CF Industries Inc. | 6.875% | 5/01/18 | BB+ | 381,650 | |||||||||||||||
205 | Methanex Corporation | 8.750% | 8/15/12 | BBB– | 220,888 | |||||||||||||||
375 | Potash Corporation of Saskatchewan | 3.750% | 9/30/15 | A– | 390,064 | |||||||||||||||
920 | Total Chemicals | 992,602 | ||||||||||||||||||
Commercial Services & Supplies – 0.4% | ||||||||||||||||||||
210 | Avis Budget Car Rental | 8.250% | 1/15/19 | B | 219,975 | |||||||||||||||
310 | GATX Corporation | 4.750% | 10/01/12 | Baa1 | 324,061 | |||||||||||||||
300 | Hertz Corporation, 144A | 6.750% | 4/15/19 | B2 | 297,375 | |||||||||||||||
820 | Total Commercial Services & Supplies | 841,411 | ||||||||||||||||||
Consumer Finance – 0.8% | ||||||||||||||||||||
530 | American Express Credit Corporation | 7.300% | 8/20/13 | A2 | 592,627 | |||||||||||||||
750 | Capital One Bank | 6.500% | 6/13/13 | Baa1 | 815,894 | |||||||||||||||
1,280 | Total Consumer Finance | 1,408,521 | ||||||||||||||||||
Diversified Financial Services – 13.1% | ||||||||||||||||||||
1,500 | Bank of America Corporation | 1.724% | 1/30/14 | A | 1,524,522 | |||||||||||||||
500 | Barclays Bank PLC | 2.375% | 1/13/14 | AA– | 502,831 | |||||||||||||||
350 | BB&T Corporation | 5.700% | 4/30/14 | A | 386,455 | |||||||||||||||
850 | BB&T Corporation | 3.200% | 3/15/16 | A | 844,182 | |||||||||||||||
250 | BBVA Bancomer SA Texas, 144A | 4.500% | 3/10/16 | A1 | 250,529 | |||||||||||||||
225 | Capital One Financial Corporation | 7.375% | 5/23/14 | Baa1 | 258,253 | |||||||||||||||
400 | CIT Group Inc. | 7.000% | 5/01/14 | B+ | 407,500 | |||||||||||||||
400 | Citigroup Inc. | 5.850% | 7/02/13 | A | 431,179 | |||||||||||||||
325 | Citigroup Inc. | 6.500% | 8/19/13 | A | 355,340 | |||||||||||||||
1,515 | Citigroup Inc. | 6.375% | 8/12/14 | A | 1,674,739 | |||||||||||||||
225 | Credit Suisse New York | 5.500% | 5/01/14 | Aa1 | 246,624 | |||||||||||||||
920 | Deutsche Bank London | 4.875% | 5/20/13 | Aa3 | 978,167 | |||||||||||||||
260 | Fifth Third Bancorp. | 6.250% | 5/01/13 | Baa1 | 282,026 | |||||||||||||||
650 | Fifth Third Bancorp. | 3.625% | 1/25/16 | Baa1 | 649,427 | |||||||||||||||
700 | General Electric Capital Corporation | 5.250% | 10/19/12 | AA+ | 742,348 | |||||||||||||||
1,500 | General Electric Capital Corporation | 2.100% | 1/07/14 | AA+ | 1,500,891 |
Nuveen Investments | 21 |
Portfolio of Investments (Unaudited)
Nuveen Short Duration Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||||
$ | 585 | Goldman Sachs Group, Inc. | 5.500% | 11/15/14 | A1 | $ | 636,379 | |||||||||||||
740 | Goldman Sachs Group, Inc. | 1.310% | 2/07/14 | A1 | 745,380 | |||||||||||||||
1,500 | Goldman Sachs Group, Inc. | 3.700% | 8/01/15 | A1 | 1,511,069 | |||||||||||||||
300 | Household Finance Corporation | 6.375% | 11/27/12 | A | 322,847 | |||||||||||||||
850 | JP Morgan Chase & Company | 5.750% | 1/02/13 | A1 | 908,711 | |||||||||||||||
750 | JP Morgan Chase & Company | 1.103% | 1/24/14 | Aa3 | 754,146 | |||||||||||||||
670 | JP Morgan Chase & Company | 5.125% | 9/15/14 | A1 | 719,124 | |||||||||||||||
335 | KeyCorp. | 6.500% | 5/14/13 | BBB+ | 365,130 | |||||||||||||||
750 | Lloyds TSB Bank | 4.875% | 1/21/16 | Aa3 | 773,343 | |||||||||||||||
150 | Morgan Stanley | 5.250% | 11/02/12 | A | 158,784 | |||||||||||||||
575 | Morgan Stanley | 6.000% | 5/13/14 | A | 625,514 | |||||||||||||||
835 | Morgan Stanley | 1.903% | 1/24/14 | A | 851,548 | |||||||||||||||
250 | National Rural Utilities Cooperative Finance Corporation | 7.250% | 3/01/12 | A | 264,869 | |||||||||||||||
500 | Norea Bank AB, 144A | 2.125% | 1/14/14 | Aa2 | 498,841 | |||||||||||||||
200 | PNC Funding Corporation | 5.400% | 6/10/14 | A | 218,874 | |||||||||||||||
750 | Societe Generale, 144A | 2.500% | 1/15/14 | Aa2 | 744,189 | |||||||||||||||
2,000 | UBS AG Stamford | 1.304% | 1/28/14 | Aa3 | 2,018,296 | |||||||||||||||
675 | Wells Fargo & Company | 5.250% | 10/23/12 | AA– | 715,516 | |||||||||||||||
275 | Wells Fargo & Company | 4.950% | 10/16/13 | A+ | 293,719 | |||||||||||||||
675 | Wells Fargo & Company | 3.676% | 6/15/16 | AA– | 678,989 | |||||||||||||||
23,935 | Total Diversified Financial Services | 24,840,281 | ||||||||||||||||||
Diversified Telecommunication Services – 3.2% | ||||||||||||||||||||
525 | AT&T, Inc. | 6.700% | 11/15/13 | A2 | 590,962 | |||||||||||||||
325 | Cequel Communication Holdings I, 144A | 8.625% | 11/15/17 | B– | 338,812 | |||||||||||||||
455 | Cincinnati Bell Inc. | 8.750% | 3/15/18 | B3 | 429,406 | |||||||||||||||
575 | Citizens Communications Company | 9.000% | 8/15/31 | BB | 587,938 | |||||||||||||||
500 | Insight Communications, 144A | 9.375% | 7/15/18 | B– | 555,000 | |||||||||||||||
480 | Paetec Holding Corporation | 8.875% | 6/30/17 | Ba3 | 517,200 | |||||||||||||||
790 | Qwest Communications International Inc. | 7.125% | 4/01/18 | Baa3 | 852,213 | |||||||||||||||
310 | Telecom Italia Capital | 5.250% | 10/01/15 | BBB | 320,869 | |||||||||||||||
200 | Telefonica Emisiones SAU | 4.949% | 1/15/15 | A– | 211,024 | |||||||||||||||
400 | Verizon Global Funding Company | 4.900% | 9/15/15 | A– | 436,074 | |||||||||||||||
750 | Verizon Wireless Capital LLC | 5.550% | 2/01/14 | A2 | 823,530 | |||||||||||||||
400 | Windstream Corporation | 8.125% | 8/01/13 | Ba3 | 439,000 | |||||||||||||||
5,710 | Total Diversified Telecommunication Services | 6,102,028 | ||||||||||||||||||
Electric Utilities – 0.8% | ||||||||||||||||||||
325 | American Electric Power | 5.250% | 6/01/15 | BBB | 352,285 | |||||||||||||||
500 | Commonwealth Edison Company, First Mortgage | 1.625% | 1/15/14 | A– | 496,816 | |||||||||||||||
200 | Exelon Generation Company LLC | 5.350% | 1/15/14 | A3 | 214,856 | |||||||||||||||
400 | Niagara Mohawk Power Company, 144A | 3.553% | 10/01/14 | A– | 411,139 | |||||||||||||||
110 | West Corporation, 144A | 8.625% | 10/01/18 | B | 115,775 | |||||||||||||||
1,535 | Total Electric Utilities | 1,590,871 | ||||||||||||||||||
Electronic Equipment & Instruments – 0.4% | ||||||||||||||||||||
365 | Agilent Technologies Inc. | 5.500% | 9/14/15 | BBB– | 396,972 | |||||||||||||||
315 | ViaSystems Inc., 144A | 12.000% | 1/15/15 | B+ | 355,950 | |||||||||||||||
680 | Total Electronic Equipment & Instruments | 752,922 |
22 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Energy Equipment & Services – 0.7% | ||||||||||||||||||||
$ | 530 | Ensco PLC | 3.250% | 3/15/16 | BBB+ | $ | 528,051 | |||||||||||||
275 | Kinder Morgan Energy Partners, L.P. | 5.850% | 9/15/12 | BBB | 292,509 | |||||||||||||||
220 | PHI Inc. | 8.625% | 10/15/18 | B+ | 230,175 | |||||||||||||||
225 | Rockies Express Pipeline Company, 144A | 6.250% | 7/15/13 | BBB– | 240,322 | |||||||||||||||
1,250 | Total Energy Equipment & Services | 1,291,057 | ||||||||||||||||||
Food & Staples Retailing – 0.3% | ||||||||||||||||||||
325 | Kroger Co. | 3.900% | 10/01/15 | BBB | 337,337 | |||||||||||||||
250 | Supervalu Inc. | 7.500% | 11/15/14 | B | 251,250 | |||||||||||||||
575 | Total Food & Staples Retailing | 588,587 | ||||||||||||||||||
Health Care Providers & Services – 0.3% | ||||||||||||||||||||
630 | Saint Jude Medical Inc. | 2.200% | 9/15/13 | A | 640,323 | |||||||||||||||
Hotels, Restaurants & Leisure – 0.6% | ||||||||||||||||||||
335 | Boyd Gaming Corporation, 144A | 9.125% | 12/01/18 | B | 345,887 | |||||||||||||||
345 | Brunswick Corporation | 7.375% | 9/01/23 | Caa1 | 319,125 | �� | ||||||||||||||
310 | Marina District Finance Company Limited, 144A | 9.875% | 8/15/18 | BB | 324,338 | |||||||||||||||
175 | Tricon Global Restaurants Incorporated | 8.875% | 4/15/11 | BBB– | 175,392 | |||||||||||||||
1,165 | Total Hotels, Restaurants & Leisure | 1,164,742 | ||||||||||||||||||
Household Durables – 0.2% | ||||||||||||||||||||
305 | Meritage Homes Corporation | 7.150% | 4/15/20 | B+ | 304,619 | |||||||||||||||
Independent Power Producers & Energy Traders – 0.5% | ||||||||||||||||||||
350 | NRG Energy Inc. | 7.375% | 1/15/17 | BB– | 364,875 | |||||||||||||||
500 | RRI Energy Inc. | 7.625% | 6/15/14 | B | 517,500 | |||||||||||||||
850 | Total Independent Power Producers & Energy Traders | 882,375 | ||||||||||||||||||
Industrial Conglomerates – 0.6% | ||||||||||||||||||||
225 | Anheuser Busch InBev | 5.375% | 11/15/14 | BBB+ | 247,944 | |||||||||||||||
220 | Offshore Group Investment Limited | 11.500% | 8/01/15 | B– | 244,200 | |||||||||||||||
365 | Timken Company | 6.000% | 9/15/14 | BBB– | 402,611 | |||||||||||||||
155 | Tyco International Group | 6.000% | 11/15/13 | A– | 171,592 | |||||||||||||||
965 | Total Industrial Conglomerates | 1,066,347 | ||||||||||||||||||
Insurance – 1.9% | ||||||||||||||||||||
400 | Allstate Life Global Funding | 5.375% | 4/30/13 | A+ | 431,547 | |||||||||||||||
1,370 | Berkshire Hathaway Inc. | 5.000% | 8/15/13 | AA+ | 1,482,437 | |||||||||||||||
400 | Genworth Life Institution Funding, 144A | 5.875% | 5/03/13 | A | 423,202 | |||||||||||||||
275 | Met Life Global Funding I, 144A | 5.125% | 4/10/13 | AA– | 293,468 | |||||||||||||||
475 | Prudential Financial Inc. | 5.100% | 9/20/14 | A | 510,521 | |||||||||||||||
350 | Willis Group Holdings PLC | 4.125% | 3/15/16 | BBB– | 348,199 | |||||||||||||||
3,270 | Total Insurance | 3,489,374 | ||||||||||||||||||
IT Services – 0.1% | ||||||||||||||||||||
204 | First Data Corporation, 144A | 12.625% | 1/15/21 | B– | 221,340 | |||||||||||||||
Machinery – 0.3% | ||||||||||||||||||||
585 | Caterpillar Financial Services Corporation | 6.200% | 9/30/13 | A | 652,276 | |||||||||||||||
Media – 1.1% | ||||||||||||||||||||
205 | Allbritton Communications Company | 8.000% | 5/15/18 | B | 216,275 | |||||||||||||||
350 | Comcast Corporation | 5.850% | 11/15/15 | BBB+ | 389,758 |
Nuveen Investments | 23 |
Portfolio of Investments (Unaudited)
Nuveen Short Duration Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Media (continued) | ||||||||||||||||||||
$ | 110 | Nielsen Finance LLC Co., 144A | 7.750% | 10/15/18 | B+ | $ | 117,975 | |||||||||||||
420 | Sinclair Television Group, 144A | 9.250% | 11/01/17 | BB– | 468,300 | |||||||||||||||
250 | Sirius XM Radio Inc., 144A | 8.750% | 4/01/15 | BB– | 281,250 | |||||||||||||||
150 | Time Warner Cable Inc. | 5.400% | 7/02/12 | BBB | 157,729 | |||||||||||||||
105 | Time Warner Cable Inc. | 6.200% | 7/01/13 | BBB | 115,443 | |||||||||||||||
250 | WMG Acquisition Corporation | 7.375% | 4/15/14 | B1 | 250,625 | |||||||||||||||
1,840 | Total Media | 1,997,355 | ||||||||||||||||||
Metals & Mining – 0.6% | ||||||||||||||||||||
150 | ArcelorMittal | 5.375% | 6/01/13 | BBB– | 159,527 | |||||||||||||||
200 | BHP Billiton Finance Limited | 5.500% | 4/01/14 | A+ | 221,799 | |||||||||||||||
375 | Patriot Coal Corporation | 8.250% | 4/30/18 | B+ | 399,375 | |||||||||||||||
140 | Steel Dynamics, Inc. | 7.625% | 3/15/20 | BB+ | 150,150 | |||||||||||||||
250 | Vedanta Resources PLC, 144A | 9.500% | 7/18/18 | BB | 273,750 | |||||||||||||||
1,115 | Total Metals & Mining | 1,204,601 | ||||||||||||||||||
Multi-Line Retail – 0.6% | ||||||||||||||||||||
585 | CVS Caremark Corporation | 3.250% | 5/18/15 | BBB+ | 594,251 | |||||||||||||||
200 | Home Depot, Inc. | 5.400% | 3/01/16 | BBB+ | 221,162 | |||||||||||||||
250 | Target Corporation | 5.875% | 3/01/12 | A+ | 262,308 | |||||||||||||||
1,035 | Total Multi-Line Retail | 1,077,721 | ||||||||||||||||||
Oil, Gas & Consumable Fuels – 2.2% | ||||||||||||||||||||
125 | Anadarko Petroleum Corporation | 7.625% | 3/15/14 | BBB– | 142,697 | |||||||||||||||
100 | Apache Corporation | 6.250% | 4/15/12 | A– | 105,286 | |||||||||||||||
600 | Apache Corporation | 6.000% | 9/15/13 | A– | 663,727 | |||||||||||||||
290 | Black Elk Energy Offshore Operations LLC, 144A | 13.750% | 12/01/15 | B– | 295,800 | |||||||||||||||
550 | BP Capital Markets PLC | 0.910% | 3/11/14 | A | 552,396 | |||||||||||||||
405 | Cenovus Energy Inc. | 4.500% | 9/15/14 | BBB+ | 434,882 | |||||||||||||||
100 | Energy XXI Gulf Coast Inc., 144A | 9.250% | 12/15/17 | B | 107,000 | |||||||||||||||
600 | Marathon Petroleum Corporation, 144A | 3.500% | 3/01/16 | BBB+ | 601,574 | |||||||||||||||
300 | StatOilHydro ASA | 2.900% | 10/15/14 | Aa2 | 309,556 | |||||||||||||||
365 | Tesoro Petroleum Corporation | 6.250% | 11/01/12 | BB+ | 385,075 | |||||||||||||||
300 | Total Capital Canada Limited | 1.625% | 1/28/14 | Aa1 | 305,853 | |||||||||||||||
150 | Valero Energy Corporation | 6.875% | 4/15/12 | BBB | 158,566 | |||||||||||||||
3,885 | Total Oil, Gas & Consumable Fuels | 4,062,412 | ||||||||||||||||||
Paper & Forest Products – 0.4% | ||||||||||||||||||||
455 | McClatchy Company | 11.500% | 2/15/17 | B+ | 511,875 | |||||||||||||||
300 | Stora Enso Oyj, 144A | 6.404% | 4/15/16 | BB | 315,000 | |||||||||||||||
755 | Total Paper & Forest Products | 826,875 | ||||||||||||||||||
Pharmaceuticals – 0.7% | ||||||||||||||||||||
460 | Teva Pharmaceutical Finance III | 1.700% | 3/21/14 | A– | 456,823 | |||||||||||||||
350 | Valeant Pharmaceuticals International, 144A | 6.875% | 12/01/18 | BB– | 343,000 | |||||||||||||||
510 | Wyeth | 5.500% | 2/01/14 | AA | 562,412 | |||||||||||||||
1,320 | Total Pharmaceuticals | 1,362,235 |
24 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Real Estate – 0.7% | ||||||||||||||||||||
$ | 750 | HCP Inc. | 2.700% | 2/01/14 | BBB | $ | 752,246 | |||||||||||||
475 | Health Care REIT Inc. | 3.625% | 3/15/16 | Baa2 | 470,520 | |||||||||||||||
1,225 | Total Real Estate | 1,222,766 | ||||||||||||||||||
Road & Rail – 0.2% | ||||||||||||||||||||
255 | DynCorp International Inc., 144A | 10.375% | 7/01/17 | B1 | 276,037 | |||||||||||||||
Specialty Retail – 0.4% | ||||||||||||||||||||
300 | Armored AutoGroup Inc., 144A | 9.250% | 11/01/18 | CCC+ | 305,250 | |||||||||||||||
50 | Ferrellgas LP, 144A | 6.500% | 5/01/21 | Ba3 | 48,500 | |||||||||||||||
435 | TJX Companies, Inc. | 4.200% | 8/15/15 | A | 462,746 | |||||||||||||||
785 | Total Specialty Retail | 816,496 | ||||||||||||||||||
Textiles, Apparel & Luxury Goods – 0.1% | ||||||||||||||||||||
105 | Hanesbrands Inc. | 6.375% | 12/15/20 | BB– | 102,375 | |||||||||||||||
Thrifts & Mortgage Finance – 0.5% | ||||||||||||||||||||
1,000 | Nordea Eiendomskreditt, 144A, (WI/DD) | 1.875% | 4/07/14 | AAA | 997,010 | |||||||||||||||
Tobacco – 0.2% | ||||||||||||||||||||
400 | Reynolds American Inc. | 7.250% | 6/01/13 | BBB | 447,427 | |||||||||||||||
Wireless Telecommunication Services – 1.4% | ||||||||||||||||||||
250 | AT&T/Cingular Wireless Services | 8.125% | 5/01/12 | A2 | 269,073 | |||||||||||||||
275 | Digicel Group, Limited, 144A | 10.500% | 4/15/18 | Caa1 | 314,875 | |||||||||||||||
488 | IntelSat Bermuda Limited | 11.500% | 2/04/17 | CCC+ | 535,127 | |||||||||||||||
165 | MetroPCS Wireless Inc. | 6.625% | 11/15/20 | B | 164,794 | |||||||||||||||
370 | Sprint Capital Corporation | 6.900% | 5/01/19 | BB– | 382,025 | |||||||||||||||
250 | UPC Germany GmbH, 144A | 8.125% | 12/01/17 | BB– | 263,125 | |||||||||||||||
150 | Vodafone Group PLC | 5.000% | 12/16/13 | A– | 162,764 | |||||||||||||||
165 | Windstream Corporation, 144A | 7.750% | 10/15/20 | Ba3 | 169,537 | |||||||||||||||
290 | XM Satellite Radio Inc., 144A | 7.625% | 11/01/18 | BB– | 305,951 | |||||||||||||||
2,403 | Total Wireless Telecommunication Services | 2,567,271 | ||||||||||||||||||
$ | 63,912 | Total Corporate Bonds (cost $65,275,990) | 66,968,440 |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
U.S. GOVERNMENT AND AGENCY OBLIGATIONS – 13.3% | ||||||||||||||||||||
U.S. Treasury Bonds/Notes – 13.3% | ||||||||||||||||||||
$ | 500 | United States of America Treasury Bonds/Notes | 4.880% | 7/31/11 | AAA | $ | 507,891 | �� | ||||||||||||
700 | United States of America Treasury Bonds/Notes | 4.500% | 11/30/11 | AAA | 719,879 | |||||||||||||||
3,300 | United States of America Treasury Bonds/Notes, (3) | 1.130% | 1/15/12 | AAA | 3,322,173 | |||||||||||||||
1,400 | United States of America Treasury Bonds/Notes | 4.750% | 1/31/12 | AAA | 1,452,172 | |||||||||||||||
400 | United States of America Treasury Bonds/Notes | 4.880% | 2/15/12 | AAA | 416,016 | |||||||||||||||
1,300 | United States of America Treasury Bonds/Notes | 4.500% | 3/31/12 | AAA | 1,353,726 | |||||||||||||||
200 | United States of America Treasury Bonds/Notes, (3) | 4.880% | 6/30/12 | AAA | 211,062 | |||||||||||||||
1,250 | United States of America Treasury Bonds/Notes | 4.130% | 8/31/12 | AAA | 1,313,525 | |||||||||||||||
3,500 | United States of America Treasury Bonds/Notes | 1.380% | 9/15/12 | AAA | 3,542,795 | |||||||||||||||
6,500 | United States of America Treasury Bonds/Notes | 1.130% | 12/15/12 | AAA | 6,551,292 | |||||||||||||||
1,800 | United States of America Treasury Bonds/Notes | 1.375% | 5/15/13 | AAA | 1,819,692 | |||||||||||||||
380 | United States of America Treasury Bonds/Notes | 1.880% | 2/28/14 | AAA | 387,036 | |||||||||||||||
55 | United States of America Treasury Securities, STRIPS (I/O) | 0.000% | 5/15/14 | AAA | 52,659 | |||||||||||||||
3,500 | United States of America Treasury Securities, STRIPS (P/O) | 0.000% | 2/15/12 | AAA | 3,490,647 | |||||||||||||||
$ | 24,785 | Total U.S. Government and Agency Obligations (cost $24,938,762) | 25,140,565 |
Nuveen Investments | 25 |
Portfolio of Investments (Unaudited)
Nuveen Short Duration Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES – 47.4% | ||||||||||||||||||||
Autos – Asset-Backed Securities – 11.6% | ||||||||||||||||||||
$ | 1,548 | Ally Master Owner Trust 2010-3, 144A | 2.880% | 4/15/15 | AAA | $ | 1,583,815 | |||||||||||||
1,050 | AmeriCredit Automobile Receivables Trust, Series 2010-4 | 1.990% | 10/08/15 | Aa1 | 1,045,328 | |||||||||||||||
449 | Bank of America Auto Trust, Series 2009-1A, 144A | 2.670% | 7/15/13 | AAA | 452,568 | |||||||||||||||
534 | Bank of America Auto Trust, Series 2009-2A, 144A | 2.130% | 9/15/13 | AAA | 538,430 | |||||||||||||||
950 | Bank of America Auto Trust, Series 2010-1A, 144A | 1.390% | 3/15/14 | AAA | 955,323 | |||||||||||||||
1,935 | BMW Vehicle Owners Trust, Series 2010-A | 2.100% | 10/25/16 | AAA | 1,967,201 | |||||||||||||||
78 | Capital Auto Receivable Asset Trust, 2008-2, A3A | 4.680% | 10/15/12 | AAA | 78,957 | |||||||||||||||
1,000 | CarMax Auto Owner Trust 2009-2 | 1.740% | 4/15/14 | AAA | 1,009,177 | |||||||||||||||
575 | CarMax Auto Owner Trust 2010-3 | 2.000% | 5/16/16 | AA | 561,177 | |||||||||||||||
872 | Chrysler Financial Auto Securtization Trust, Series 2010A | 1.650% | 11/08/13 | AA | 873,021 | |||||||||||||||
9 | Daimler Chrysler Auto Trust 2008-A A3 | 3.700% | 6/08/12 | AAA | 9,468 | |||||||||||||||
158 | Daimler Chrysler Auto Trust 2008B | 5.320% | 11/10/14 | Aaa | 162,552 | |||||||||||||||
42 | Ford Credit Auto Owner Trust 2008A-3A | 3.960% | 4/15/12 | AAA | 42,205 | |||||||||||||||
1,000 | Ford Credit Auto Owner Trust 2009E | 2.420% | 11/15/14 | AAA | 1,022,907 | |||||||||||||||
710 | Ford Credit Auto Owners Trust 2010 | 2.930% | 11/15/15 | AA | 719,306 | |||||||||||||||
1,480 | Ford Credit Floorplan Master Owner Trust Series 2010-3, 144A | 4.200% | 2/15/17 | AAA | 1,565,313 | |||||||||||||||
863 | Hertz Vehicle Financing LLC Series 2009, 144A | 4.260% | 3/25/14 | Aaa | 904,177 | |||||||||||||||
700 | Hyundai Auto Receivables Trust 2009A | 2.030% | 8/15/13 | AAA | 706,031 | |||||||||||||||
1,115 | Mercedes-Benz Auto Receivables Trust, Series 2010-1 | 2.140% | 8/15/16 | AAA | 1,133,984 | |||||||||||||||
47 | Nissan Auto Receivables Owner Trust 2008-B A3 | 4.460% | 4/16/12 | AAA | 46,828 | |||||||||||||||
110 | Nissan Auto Receivables Owners Trust 2008-C | 5.930% | 7/16/12 | AAA | 110,643 | |||||||||||||||
1,473 | Nissan Auto Receivables Owners Trust, Series 2009-1 | 5.000% | 9/15/14 | AAA | 1,506,890 | |||||||||||||||
1,650 | SMART Trust, Asset Backed Securities, Series 2011-1USA, 144A, (4) | 1.100% | 10/14/14 | Aaa | 1,646,728 | |||||||||||||||
1,028 | Toyota Auto Receivables Owner Trust, Class A3, Series 2003B | 1.860% | 5/16/16 | AAA | 1,041,767 | |||||||||||||||
85 | USAA Auto Owner Trust 2007-2 | 5.070% | 6/15/13 | AAA | 85,616 | |||||||||||||||
1,000 | USAA Auto Owners Trust 2010-1 | 2.140% | 9/15/15 | AAA | 1,017,650 | |||||||||||||||
445 | Volkswagen Auto Loan Enhanced Trust, 2008-2, Class A3A | 5.470% | 3/20/13 | AAA | 451,938 | |||||||||||||||
620 | World Omni Auto Receivables Trust, Series 2010A | 1.340% | 12/16/13 | AAA | 623,140 | |||||||||||||||
21,526 | Total Autos | 21,862,140 | ||||||||||||||||||
Credit Cards – Asset-Backed Securities – 7.3% | ||||||||||||||||||||
805 | Bank of America Credit Card Trust, Series 2008-A5 | 1.460% | 12/16/13 | AAA | 807,444 | |||||||||||||||
1,500 | Capital One Mult-Asset Execution Trust, Card Series 2005-A7 | 4.700% | 6/15/15 | AAA | 1,578,825 | |||||||||||||||
2,500 | Chase Issuance Trust, Series 2008-A4 | 4.650% | 3/15/15 | AAA | 2,670,045 | |||||||||||||||
650 | CitiBank Credit Card Issuance Trust, Series 2006-A4 | 5.450% | 5/10/13 | AAA | 653,454 | |||||||||||||||
2,300 | CitiBank Credit Card Issuance Trust, Series 2009-A5 | 2.250% | 12/23/14 | AAA | 2,348,753 | |||||||||||||||
234 | Discover Card Master Trust I 2008-3 | 5.100% | 10/15/13 | AAA | 234,420 | |||||||||||||||
2,500 | Discover Card Master Trust 2009-A2 | 1.560% | 2/17/15 | Aaa | 2,536,164 | |||||||||||||||
1,840 | General Electric Capital Credit Card Master Note Trust Series 2010-3 | 2.210% | 6/15/16 | Aaa | 1,869,360 | |||||||||||||||
1,080 | General Electric Master Credit Card Trust, Series 2009-3A | 2.540% | 9/15/14 | AAA | 1,089,360 | |||||||||||||||
13,409 | Total Credit Cards | 13,787,825 |
26 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Other – Asset-Backed Securities – 4.0% | ||||||||||||||||||||
$ | 870 | CNH Agriculture Equipment Trust, Series 2009C | 1.850% | 12/16/13 | AAA | $ | 874,776 | |||||||||||||
667 | CNH Equipment Trust 2010-A | 1.540% | 7/15/14 | AAA | 671,531 | |||||||||||||||
870 | Fieldstone Mortgage Investment Trust, Mortgage Backed Notes, | 1.340% | 3/25/35 | A+ | 830,929 | |||||||||||||||
1,675 | GMAC Mortgage Services Advance Funding, Series 2011-1A, 144A, (4) | 3.720% | 2/15/23 | Aaa | 1,683,760 | |||||||||||||||
2,698 | U.S. Small Business Administration Guaranteed Participating Securities, Participation Certificates, Series 2005-10B | 4.941% | 9/10/15 | AAA | 2,894,926 | |||||||||||||||
596 | U.S. Small Business Administration Guaranteed Participating Securities, Participation Certificates, Series 2007-10A | 5.459% | 2/10/17 | AAA | 641,843 | |||||||||||||||
7,376 | Total Other | 7,597,765 | ||||||||||||||||||
Commercial – Mortgage-Backed Securities – 9.4% | ||||||||||||||||||||
850 | Bank of America Commercial Mortgage Pass-Through Certificates, Series 2005 | 4.930% | 7/10/45 | AA– | 899,223 | |||||||||||||||
520 | Banc of America Commercial Mortgage Pass-Through Certificates Series 2007-2, (4) | 1.000% | 4/10/49 | BBB+ | 510,678 | |||||||||||||||
2,250 | Citigroup Commercial Mortgage Securities Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-CD4 | 5.205% | 12/11/49 | AAA | 2,299,933 | |||||||||||||||
930 | CS First Boston Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2004-C1 | 4.750% | 1/15/37 | AAA | 977,562 | |||||||||||||||
700 | Developers Diversified Realty Corporation, Commercial Mortgage | 5.730% | 10/14/14 | AA | 748,981 | |||||||||||||||
1,987 | Extended Stay America Trust 2010-EHSA, 144A | 2.950% | 11/05/27 | AAA | 1,954,556 | |||||||||||||||
557 | General Electric Capital Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2002-2 | 5.349% | 8/11/36 | AAA | 578,509 | |||||||||||||||
1,325 | Goldman Sachs Mortgage Securities Corporation II, Commercial Mortgage Pass Through Certificates, Series 2001-ALF, 144A | 2.720% | 2/10/21 | N/R | 1,329,214 | |||||||||||||||
1,500 | Goldman Sachs Mortgage Securities Corporation II, Commercial Mortgage Pass-Through Certificates, Series 2007-GG10 | 5.808% | 8/10/45 | A1 | 1,592,603 | |||||||||||||||
1,455 | Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-IQ12 | 5.332% | 12/15/43 | AAA | 1,535,222 | |||||||||||||||
1,964 | Morgan Stanley Capital Trust I, Commercial Mortgage Pass-Through Certificates, Series 2011-C1 | 2.602% | 9/15/47 | AAA | 1,989,149 | |||||||||||||||
833 | Salomon Brothers Commercial Mortgage Trust Pass-Through Certificates, Series 2002-KEY2 | 4.870% | 3/18/36 | AAA | 859,805 | |||||||||||||||
546 | Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage | 1.000% | 6/15/20 | Aaa | 505,327 | |||||||||||||||
2,000 | WF-RBS Commercial Mortage Trust, Commercial Mortgage Pass-Through Certificates, Series 2011-C2 | 2.500% | 2/15/44 | Aaa | 2,020,367 | |||||||||||||||
17,417 | Total Commercial | 17,801,129 | ||||||||||||||||||
Residential – Mortgage-Backed Securities – 15.1% | ||||||||||||||||||||
527 | Citicorp Residential Mortgage Trust, REMIC Pass-Through Certificates, | 5.980% | 6/25/37 | AAA | 529,163 | |||||||||||||||
1,304 | Citigroup Mortgage Loan Trust Inc., Mortgage Pass Through Certificates, Series 2010-10, 144A | 4.780% | 12/25/32 | BBB | 1,309,164 | |||||||||||||||
1,026 | Credit Suisse First Boston Mortgage Securities Corporation, Mortgage-Backed Pass-Through Certificates, Series 2003-23 | 5.750% | 9/25/33 | AAA | 1,057,396 | |||||||||||||||
1,750 | FDIC Structured Sales Guaranteed Notes, Series 2010-L1A, 144A | 0.000% | 10/25/13 | N/A | 1,656,935 | |||||||||||||||
2,069 | FDIC Structured Sale Guaranteed Notes, Series 2010-S1, 144A | 3.250% | 4/25/38 | AAA | 2,091,204 | |||||||||||||||
4,852 | Federal Home Loan Mortgage Corporation Multi-Class Certificates | 0.660% | 12/15/20 | AAA | 4,757,490 |
Nuveen Investments | 27 |
Portfolio of Investments (Unaudited)
Nuveen Short Duration Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Residential – Mortgage-Backed Securities (continued) | ||||||||||||||||||||
$ | 2,000 | Federal Home Loan Mortgage Corporation Mulitfamily Structured Pass Through Certificates, Series K701 | 2.780% | 6/25/17 | AAA | $ | 2,025,275 | |||||||||||||
3,704 | Federal National Mortgage Interest Strip Series 366-25 | 5.000% | 10/01/35 | AAA | 428,711 | |||||||||||||||
150 | Federal National Mortgage Pool 838948 | 2.010% | 8/01/35 | AAA | 156,647 | |||||||||||||||
3,351 | Federal National Mortgage REMIC Pass-Through Certificates | 2.750% | 6/25/20 | AAA | 3,405,366 | |||||||||||||||
3,836 | Federal National Mortgage REMIC Pass-Through Certificates | 0.660% | 4/25/32 | AAA | 3,833,237 | |||||||||||||||
798 | GMAC Mortgage Corporation, Mortgage Pass-Through Certificates, | 4.250% | 7/25/40 | A2 | 806,628 | |||||||||||||||
1,459 | Government National Mortgage Association, Guaranteed REMIC Pass Through Securities and MX Securities Trust 2006-062 | 4.500% | 5/16/38 | AAA | 1,546,220 | |||||||||||||||
1,645 | National Credit Union Administration, Guaranteed Notes Series 2011-R1 | 0.709% | 1/08/20 | N/R | 1,647,354 | |||||||||||||||
1,042 | National Credit Union Administration Guaranteed Structured Collateral Notes | 2.900% | 10/29/20 | AAA | 1,014,450 | |||||||||||||||
600 | Nationstar Mortgage Advance Receivables Trust, Series 2009-ADV1, 144A | 1.000% | 12/25/22 | BBB | 610,875 | |||||||||||||||
1,000 | Park Place Securities Inc., Asset Backed Pass Through Certificates | 0.780% | 1/25/36 | AA | 945,419 | |||||||||||||||
638 | RBSSP Resecuritization Trust 2009-10, 144A | 0.360% | 3/26/37 | N/R | 595,199 | |||||||||||||||
43 | Wells Fargo Mortgage Backed Securities, 2005-AR16 Class 3A2, (4) | 2.830% | 10/25/35 | AAA | 41,230 | |||||||||||||||
31,794 | Total Residential | 28,457,963 | ||||||||||||||||||
$ | 91,522 | Total Asset-Backed and Mortgage-Backed Securities (cost $89,245,019) | 89,506,822 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CAPITAL PREFERRED SECURITIES – 0.2% | ||||||||||||||||||||
Commercial Banks – 0.2% | ||||||||||||||||||||
$ | 375 | National City Preferred Capital Trust I | 12.000% | 12/29/49 | BBB | $ | 425,332 | |||||||||||||
$ | 375 | Total Capital Preferred Securities (cost $424,219) | 425,332 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
SOVEREIGN DEBT – 0.7% | ||||||||||||||||||||
Canada – 0.7% | ||||||||||||||||||||
$ | 1,350 | Province of Ontario, Canada Bond | 1.375% | 1/27/14 | Aa1 | $ | 1,346,436 | |||||||||||||
$ | 1,350 | Total Sovereign Debt (cost $1,346,385) | 1,346,436 |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
SHORT-TERM INVESTMENTS – 3.4% | ||||||||||||||||||||
U.S. Government and Agency Obligations – 2.4% | ||||||||||||||||||||
$ | 4,500 | Federal Home Loan Bank Bonds | 3.625% | 7/01/11 | AAA | $ | 4,540,554 | |||||||||||||
Repurchase Agreements – 1.0% | ||||||||||||||||||||
1,838 | Repurchase Agreement with Fixed Income Clearing Corporation, dated 3/31/11, repurchase price $1,837,794, collateralized by $1,905,000 U.S. Treasury Notes, 0.500%, due 11/15/13, value $1,878,806 | 0.010% | 4/01/11 | N/A | 1,837,793 | |||||||||||||||
$ | 6,338 | Total Short-Term Investments (cost $6,415,206) | 6,378,347 | |||||||||||||||||
Total Investments (cost $187,645,581) – 100.4% | 189,765,942 | |||||||||||||||||||
Other Assets Less Liabilities – (0.4)% (5) | (784,829) | |||||||||||||||||||
Net Assets – 100% | $ | 188,981,113 |
28 | Nuveen Investments |
Investments in Derivatives
Forward Foreign Currency Exchange Contracts outstanding at March 31, 2011:
Counterparty | Currency Contracts to Deliver | Amount (Local Currency) | In Exchange For Currency | Amount (Local Currency) | Settlement Date | Unrealized Appreciation Depreciation) (U.S. Dollars) | ||||||||||||||||||
Morgan Stanley | Brazilian Real | 4,100,000 | U.S. Dollar | 2,466,907 | 4/04/11 | $ | (44,347 | ) | ||||||||||||||||
HSBC | Euro | 1,700,000 | U.S. Dollar | 2,299,335 | 4/18/11 | (109,277 | ) | |||||||||||||||||
Bank of America | Japanese Yen | 224,000,000 | U.S. Dollar | 2,761,307 | 5/31/11 | 67,457 | ||||||||||||||||||
HSBC | Mexican Peso | 29,762,640 | U.S. Dollar | 2,482,289 | 4/04/11 | (19,941 | ) | |||||||||||||||||
JPMorgan Chase | Peruvian Nuevo Sol | 4,920,000 | U.S. Dollar | 1,748,712 | 4/29/11 | (1,867 | ) | |||||||||||||||||
Morgan Stanley | Polish Zloty | 7,800,000 | U.S. Dollar | 2,728,418 | 5/18/11 | (8,195 | ) | |||||||||||||||||
Bank of America | Swiss Franc | 2,600,000 | U.S. Dollar | 2,809,474 | 5/10/11 | (21,870 | ) | |||||||||||||||||
Morgan Stanley | U.S. Dollar | 1,843,020 | Australian Dollar | 1,800,000 | 5/31/11 | 5,744 | ||||||||||||||||||
Morgan Stanley | U.S. Dollar | 2,443,797 | Brazilian Real | 4,111,200 | 4/04/11 | 74,318 | ||||||||||||||||||
Morgan Stanley | U.S. Dollar | 2,453,327 | Brazilian Real | 4,100,000 | 5/03/11 | 44,102 | ||||||||||||||||||
Morgan Stanley | U.S. Dollar | 2,776,207 | Canadian Dollar | 2,700,000 | 5/31/11 | 5,095 | ||||||||||||||||||
HSBC | U.S. Dollar | 2,467,328 | Mexican Peso | 29,762,640 | 4/04/11 | 34,901 | ||||||||||||||||||
HSBC | U.S. Dollar | 2,468,904 | Mexican Peso | 29,762,640 | 6/03/11 | 19,631 | ||||||||||||||||||
JPMorgan Chase | U.S. Dollar | 1,772,015 | Peruvian Nuevo Sol | 4,920,000 | 4/29/11 | (21,437 | ) | |||||||||||||||||
Morgan Stanley | U.S. Dollar | 2,655,771 | Polish Zloty | 7,800,000 | 5/18/11 | 80,841 | ||||||||||||||||||
Morgan Stanley | U.S. Dollar | 2,490,815 | Turkish Lira | 4,000,000 | 4/07/11 | 97,189 | ||||||||||||||||||
$202,344 |
Credit Default Swaps outstanding at March 31, 2011:
Counterparty | Referenced Entity | Buy/Sell Protection (6) | Current Credit Spread (7) | Notional Amount (U.S. Dollars) | Fixed Rate* | Termination Date | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||
JPMorgan | DJ Investment Grade CDX | Sell | .96 | % | $ | 12,250,000 | 1.000 | % | 6/20/16 | $ | 27,429 | $ | (3,744 | ) | ||||||||||||||||
JPMorgan | DJ High Yield CDX | Sell | 4.52 | 7,400,000 | 5.000 | 6/20/16 | 161,343 | 8,718 | ||||||||||||||||||||||
UBS AG | Freescale Semiconductor, Inc. | Sell | 6.71 | 330,000 | 5.000 | 6/20/15 | (4,968 | ) | 57,732 | |||||||||||||||||||||
$ | 62,706 |
* | Annualized. |
Nuveen Investments | 29 |
Portfolio of Investments (Unaudited)
Nuveen Short Duration Bond Fund (continued)
March 31, 2011
Futures Contracts outstanding at March 31, 2011:
Type | Contract Position | Number of Contracts | Contract Expiration | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | |||||||||||||||
U.S. 2-Year Treasury Note | Short | (36 | ) | 6/11 | $ | (7,852,500 | ) | $ | (4,599 | ) | ||||||||||
U.S. 5-Year Treasury Note | Short | (108 | ) | 6/11 | (12,613,219 | ) | (16,566 | ) | ||||||||||||
U.S. 10-Year Treasury Note | Short | (92 | ) | 6/11 | (10,950,875 | ) | (21,490 | ) | ||||||||||||
U.S. 30-Year Treasury Bond | Short | (12 | ) | 6/11 | (1,442,250 | ) | (11,002 | ) | ||||||||||||
$ | (53,657 | ) |
For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry subclassifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) | All percentages shown in the Portfolio of Investments are based on net assets. |
(2) | Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
(3) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives. |
(4) | For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
(5) | Other Assets Less Liabilities includes Value and/or Net Unrealized Appreciation (Depreciation) of derivative instruments as noted within Investments in Derivatives. |
(6) | The Fund entered into the credit default swaps to gain investment exposure to the referenced entity. Selling protection has a similar credit risk position to owning the referenced entity. Buying protection has a similar credit risk position to selling the referenced entity short. |
(7) | The credit spread generally serves as an indication of the current status of the payment/performance risk and therefore the likelihood of default of the credit derivative. The credit spread also reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into a credit default swap contract. Higher credit spreads are indicative of a higher likelihood of performance by the seller of protection. |
N/A | Not applicable. |
N/R | Not rated. |
I/O | Interest only investment. |
P/O | Principal only investment. |
WI/DD | Purchased on a when-issued or delayed delivery basis. |
144A | Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
See accompanying notes to financial statements.
30 | Nuveen Investments |
Portfolio of Investments (Unaudited)
Nuveen Multi-Strategy Core Bond Fund
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CORPORATE BONDS – 49.1% | ||||||||||||||||||||
Aerospace & Defense – 0.6% | ||||||||||||||||||||
$ | 50 | BE Aerospace Inc. | 8.500% | 7/01/18 | BB | $ | 55,374 | |||||||||||||
12 | Boeing Capital Corporation | 5.800% | 1/15/13 | A | 12,995 | |||||||||||||||
35 | General Dynamics Corporation | 4.250% | 5/15/13 | A | 37,249 | |||||||||||||||
240 | Huntington Ingalls Industries Inc., 144A | 7.125% | 3/15/21 | Ba3 | 250,200 | |||||||||||||||
20 | Lockheed Martin Corporation | 7.650% | 5/01/16 | A– | 24,257 | |||||||||||||||
85 | Raytheon Company | 4.400% | 2/15/20 | A– | 86,167 | |||||||||||||||
8 | United Technologies Corporation | 7.500% | 9/15/29 | A | 10,358 | |||||||||||||||
450 | Total Aerospace & Defense | 476,600 | ||||||||||||||||||
Airlines – 0.4% | ||||||||||||||||||||
125 | Air Canada, 144A | 12.000% | 2/01/16 | B– | 130,312 | |||||||||||||||
140 | Global Aviation Holdings | 14.000% | 8/15/13 | BB– | 164,150 | |||||||||||||||
265 | Total Airlines | 294,462 | ||||||||||||||||||
Auto Components – 0.4% | ||||||||||||||||||||
155 | American & Axle Manufacturing Inc. | 7.875% | 3/01/17 | B– | 157,324 | |||||||||||||||
200 | Dana Holding Corporation | 6.500% | 2/15/19 | BB– | 199,000 | |||||||||||||||
355 | Total Auto Components | 356,324 | ||||||||||||||||||
Beverages – 0.5% | ||||||||||||||||||||
240 | Anheuser Busch InBev | 8.200% | 1/15/39 | BBB+ | 326,513 | |||||||||||||||
5 | Diageo Capital, PLC | 5.750% | 10/23/17 | A– | 5,605 | |||||||||||||||
55 | Miller Brewing Company, 144A | 5.500% | 8/15/13 | BBB+ | 59,775 | |||||||||||||||
10 | Pepsi Bottling Group PLC | 5.500% | 4/01/16 | Aa3 | 11,268 | |||||||||||||||
310 | Total Beverages | 403,161 | ||||||||||||||||||
Biotechnology – 0.2% | ||||||||||||||||||||
180 | STHI Holding Corporation, 144A | 8.000% | 3/15/18 | B | 186,300 | |||||||||||||||
Building Products – 0.2% | ||||||||||||||||||||
40 | Dayton Superior Corporation, (3), (4), (7) | 13.000% | 6/15/11 | Caa3 | 6,000 | |||||||||||||||
4 | Masco Corporation | 5.875% | 7/15/12 | BBB | 4,188 | |||||||||||||||
185 | Ryland Group Inc. | 6.625% | 5/01/20 | BB– | 180,374 | |||||||||||||||
229 | Total Building Products | 190,562 | ||||||||||||||||||
Chemicals – 1.7% | ||||||||||||||||||||
190 | Airgas, Inc. | 4.500% | 9/15/14 | BBB | 198,485 | |||||||||||||||
145 | CF Industries Inc. | 6.875% | 5/01/18 | BB+ | 162,763 | |||||||||||||||
335 | Dow Chemical Company | 4.250% | 11/15/20 | BBB– | 319,936 | |||||||||||||||
75 | E.I. Du Pont de Nemours and Company | 3.250% | 1/15/15 | A | 77,776 | |||||||||||||||
80 | Methanex Corporation | 8.750% | 8/15/12 | BBB– | 86,200 | |||||||||||||||
195 | Potash Corporation of Saskatchewan | 3.750% | 9/30/15 | A– | 202,833 | |||||||||||||||
75 | Praxair, Inc. | 4.500% | 8/15/19 | A | 78,120 | |||||||||||||||
225 | Rhodia SA, 144A | 6.875% | 9/15/20 | BB | 229,218 | |||||||||||||||
1,320 | Total Chemicals | 1,355,331 | ||||||||||||||||||
Commercial Services & Supplies – 0.6% | ||||||||||||||||||||
100 | Avis Budget Car Rental | 8.250% | 1/15/19 | B | 104,750 | |||||||||||||||
110 | GATX Corporation | 4.750% | 10/01/12 | Baa1 | 114,989 | |||||||||||||||
250 | Hertz Corporation, 144A | 6.750% | 4/15/19 | B2 | 247,813 | |||||||||||||||
460 | Total Commercial Services & Supplies | 467,552 |
Nuveen Investments | 31 |
Portfolio of Investments (Unaudited)
Nuveen Multi-Strategy Core Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Communications Equipment – 0.0% | ||||||||||||||||||||
$ | 10 | Cisco Systems, Inc. | 5.500% | 2/22/16 | A+ | $ | 11,228 | |||||||||||||
3 | Motorola, Inc. | 7.500% | 5/15/25 | BBB | 3,398 | |||||||||||||||
13 | Total Communications Equipment | 14,626 | ||||||||||||||||||
Computers & Peripherals – 0.0% | ||||||||||||||||||||
35 | International Business Machines Corporation (IBM) | 4.750% | 11/29/12 | Aa3 | 37,195 | |||||||||||||||
Consumer Finance – 0.8% | ||||||||||||||||||||
185 | American Express Credit Corporation | 7.300% | 8/20/13 | A2 | 206,860 | |||||||||||||||
320 | Capital One Bank | 8.800% | 7/15/19 | Baa1 | 402,356 | |||||||||||||||
505 | Total Consumer Finance | 609,216 | ||||||||||||||||||
Containers & Packaging – 0.1% | ||||||||||||||||||||
95 | Intertape Polymer US Inc. | 8.500% | 8/01/14 | Caa1 | 85,025 | |||||||||||||||
Diversified Financial Services – 11.0% | ||||||||||||||||||||
1,240 | Bank of America Corporation | 5.875% | 1/05/21 | A | 1,294,781 | |||||||||||||||
105 | Bank of New York Mellon | 4.300% | 5/15/14 | Aa2 | 112,594 | |||||||||||||||
150 | Barlcays Bank PLC | 5.000% | 9/22/16 | AA– | 159,027 | |||||||||||||||
115 | BB&T Corporation | 5.700% | 4/30/14 | A | 126,978 | |||||||||||||||
150 | BBVA Bancomer SA Texas, 144A | 4.500% | 3/10/16 | A1 | 150,318 | |||||||||||||||
185 | Capital One Financial Corporation | 7.375% | 5/23/14 | Baa1 | 212,342 | |||||||||||||||
6 | Charter One Bank FSB | 6.375% | 5/15/12 | A3 | 6,224 | |||||||||||||||
225 | Citigroup Inc. | 6.125% | 11/21/17 | A | 245,173 | |||||||||||||||
500 | Citigroup Inc. | 5.375% | 8/09/20 | A | 514,727 | |||||||||||||||
65 | Citigroup Inc. | 6.000% | 10/31/33 | A– | 62,068 | |||||||||||||||
300 | Citigroup Inc. | 6.875% | 3/05/38 | A | 329,683 | |||||||||||||||
140 | Credit Suisse New York | 5.500% | 5/01/14 | Aa1 | 153,455 | |||||||||||||||
110 | Fifth Third Bancorp. | 6.250% | 5/01/13 | Baa1 | 119,319 | |||||||||||||||
65 | General Electric Capital Corporation | 5.625% | 9/15/17 | AA+ | 70,533 | |||||||||||||||
200 | General Electric Capital Corporation | 5.300% | 2/11/21 | AA | 203,134 | |||||||||||||||
225 | General Electric Capital Corporation | 6.875% | 1/10/39 | AA+ | 251,098 | |||||||||||||||
505 | Goldman Sachs Group, Inc. | 5.500% | 11/15/14 | A1 | 549,352 | |||||||||||||||
610 | Goldman Sachs Group, Inc. | 6.000% | 6/15/20 | A1 | 644,846 | |||||||||||||||
310 | HSBC Holdings PLC | 6.800% | 6/01/38 | A1 | 324,604 | |||||||||||||||
170 | Jefferies Group Inc. | 8.500% | 7/15/19 | BBB | 200,549 | |||||||||||||||
80 | JP Morgan Chase & Company | 5.375% | 10/01/12 | Aa3 | 84,959 | |||||||||||||||
210 | JP Morgan Chase & Company | 6.000% | 1/15/18 | Aa3 | 230,262 | |||||||||||||||
500 | JP Morgan Chase & Company | 4.250% | 10/15/20 | Aa3 | 477,856 | |||||||||||||||
140 | KeyCorp. | 6.500% | 5/14/13 | BBB+ | 152,592 | |||||||||||||||
220 | KeyCorp. | 5.100% | 3/24/21 | BBB+ | 218,642 | |||||||||||||||
375 | Merrill Lynch & Company | 6.050% | 5/16/16 | A– | 396,333 | |||||||||||||||
185 | Morgan Stanley | 6.000% | 5/13/14 | A | 201,252 | |||||||||||||||
150 | Morgan Stanley | 5.625% | 9/23/19 | A | 153,200 | |||||||||||||||
120 | Morgan Stanley | 5.950% | 12/28/17 | A | 128,897 | |||||||||||||||
515 | Morgan Stanley | 5.750% | 1/25/21 | A | 519,787 | |||||||||||||||
25 | National City Bank | 6.200% | 12/15/11 | A | 25,942 | |||||||||||||||
90 | National Rural Utilities Cooperative Finance Corporation | 7.250% | 3/01/12 | A | 95,353 |
32 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||||
$ | 60 | PNC Funding Corporation | 6.700% | 6/10/19 | A | $ | 69,793 | |||||||||||||
235 | State Street Corporation | 4.956% | 3/15/18 | A3 | 242,158 | |||||||||||||||
6 | SunTrust Banks Inc. | 6.375% | 4/01/11 | Baa1 | 6,000 | |||||||||||||||
74 | Wachovia Corporation | 5.250% | 8/01/14 | A+ | 79,141 | |||||||||||||||
170 | Wells Fargo & Company | 5.250% | 10/23/12 | AA– | 180,204 | |||||||||||||||
8,531 | Total Diversified Financial Services | 8,993,176 | ||||||||||||||||||
Diversified Telecommunication Services – 2.7% | ||||||||||||||||||||
240 | AT&T, Inc. | 6.800% | 5/15/36 | A2 | 256,659 | |||||||||||||||
140 | Cequel Communication Holdings I, 144A | 8.625% | 11/15/17 | B– | 145,950 | |||||||||||||||
190 | Cincinnati Bell Inc. | 8.750% | 3/15/18 | B3 | 179,313 | |||||||||||||||
240 | Citizens Communications Company | 9.000% | 8/15/31 | BB | 245,400 | |||||||||||||||
145 | Cox Communications, Inc | 5.500% | 10/01/15 | Baa2 | 159,032 | |||||||||||||||
90 | France Telecom | 5.375% | 7/08/19 | A– | 98,930 | |||||||||||||||
100 | Insight Communications, 144A | 9.375% | 7/15/18 | B– | 111,000 | |||||||||||||||
180 | Paetec Holding Corporation | 8.875% | 6/30/17 | Ba3 | 193,950 | |||||||||||||||
130 | Qwest Communications International Inc. | 7.125% | 4/01/18 | Baa3 | 140,238 | |||||||||||||||
215 | Telecom Italia Capital | 5.250% | 10/01/15 | BBB | 222,538 | |||||||||||||||
130 | Telefonica Emisiones SAU | 4.949% | 1/15/15 | A– | 137,166 | |||||||||||||||
260 | Verizon Communications | 6.250% | 4/01/37 | A– | 266,146 | |||||||||||||||
2,060 | Total Diversified Telecommunication Services | 2,156,322 | ||||||||||||||||||
Electric Utilities – 1.3% | ||||||||||||||||||||
35 | American Electric Power | 5.250% | 6/01/15 | BBB | 37,938 | |||||||||||||||
175 | Calpine Corporation, 144A | 7.875% | 7/31/20 | B+ | 185,938 | |||||||||||||||
20 | Carolina Power and Light Company | 5.125% | 9/15/13 | A1 | 21,706 | |||||||||||||||
14 | Duke Capital LLC | 5.668% | 8/15/14 | BBB | 15,340 | |||||||||||||||
105 | Duke Energy Corporation | 6.250% | 1/15/12 | A– | 109,673 | |||||||||||||||
75 | Exelon Corporation | 4.900% | 6/15/15 | Baa1 | 78,817 | |||||||||||||||
2 | FirstEnergy Corporation | 6.450% | 11/15/11 | Baa3 | 2,060 | |||||||||||||||
5 | FirstEnergy Corporation | 7.375% | 11/15/31 | Baa3 | 5,416 | |||||||||||||||
230 | FirstEnergy Solutions Corporation | 6.050% | 8/15/21 | Baa2 | 238,327 | |||||||||||||||
250 | Niagara Mohawk Power Company, 144A | 3.553% | 10/01/14 | A– | 256,962 | |||||||||||||||
10 | Progress Energy, Inc. | 7.000% | 10/30/31 | BBB | 11,538 | |||||||||||||||
5 | PSE&G Power LLC | 8.625% | 4/15/31 | Baa1 | 6,267 | |||||||||||||||
50 | West Corporation, 144A | 8.625% | 10/01/18 | B | 52,625 | |||||||||||||||
976 | Total Electric Utilities | 1,022,607 | ||||||||||||||||||
Electrical Equipment – 0.0% | ||||||||||||||||||||
25 | Emerson Electric Company | 5.250% | 10/15/18 | A | 27,530 | |||||||||||||||
Electronic Equipment & Instruments – 0.4% | ||||||||||||||||||||
190 | Agilent Technologies Inc. | 5.500% | 9/14/15 | BBB– | 206,643 | |||||||||||||||
120 | ViaSystems Inc., 144A | 12.000% | 1/15/15 | B+ | 135,600 | |||||||||||||||
310 | Total Electronic Equipment & Instruments | 342,243 |
Nuveen Investments | 33 |
Portfolio of Investments (Unaudited)
Nuveen Multi-Strategy Core Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Energy Equipment & Services – 2.0% | ||||||||||||||||||||
$ | 325 | Ensco PLC | 4.700% | 3/15/21 | BBB+ | $ | 322,597 | |||||||||||||
250 | Kinder Morgan Energy Partners, L.P. | 6.500% | 9/01/39 | BBB | 256,220 | |||||||||||||||
85 | Nabors Industries Inc. | 9.250% | 1/15/19 | BBB | 107,147 | |||||||||||||||
100 | PHI Inc. | 8.625% | 10/15/18 | B+ | 104,625 | |||||||||||||||
200 | Plains All American Pipeline L.P. | 5.750% | 1/15/20 | BBB– | 214,055 | |||||||||||||||
205 | Rockies Express Pipeline Company, 144A | 5.625% | 4/15/20 | BBB– | 203,780 | |||||||||||||||
190 | Transocean Sedco Inc. | 6.000% | 3/15/18 | BBB | 205,138 | |||||||||||||||
220 | Weatherford International Limited | 7.000% | 3/15/38 | BBB | 233,019 | |||||||||||||||
1,575 | Total Energy Equipment & Services | 1,646,581 | ||||||||||||||||||
Food & Staples Retailing – 0.8% | ||||||||||||||||||||
165 | Kroger Co. | 3.900% | 10/01/15 | BBB | 171,263 | |||||||||||||||
2 | Kroger Co. | 7.500% | 4/01/31 | BBB | 2,389 | |||||||||||||||
135 | Safeway Inc. | 6.250% | 3/15/14 | BBB | 149,266 | |||||||||||||||
150 | Supervalu Inc. | 7.500% | 11/15/14 | B | 150,750 | |||||||||||||||
135 | Wal-Mart Stores, Inc. | 3.200% | 5/15/14 | AA | 141,416 | |||||||||||||||
50 | Wal-Mart Stores, Inc. | 5.800% | 2/15/18 | AA | 56,941 | |||||||||||||||
637 | Total Food & Staples Retailing | 672,025 | ||||||||||||||||||
Food Products – 0.7% | ||||||||||||||||||||
400 | Bunge Limited Finance Corporation | 4.100% | 3/15/16 | Baa2 | 400,996 | |||||||||||||||
27 | Kellogg Company | 7.450% | 4/01/31 | A3 | 33,640 | |||||||||||||||
85 | Kraft Foods Inc. | 6.125% | 2/01/18 | Baa2 | 95,018 | |||||||||||||||
512 | Total Food Products | 529,654 | ||||||||||||||||||
Gas Utilities – 0.0% | ||||||||||||||||||||
2 | Consolidated Natural Gas Company | 5.000% | 12/01/14 | A– | 2,187 | |||||||||||||||
Health Care Providers & Services – 0.3% | ||||||||||||||||||||
180 | UnitedHealth Group Incorporated | 6.875% | 2/15/38 | A– | 201,910 | |||||||||||||||
Hotels, Restaurants & Leisure – 1.0% | ||||||||||||||||||||
160 | Boyd Gaming Corporation, 144A | 9.125% | 12/01/18 | B | 165,200 | |||||||||||||||
145 | Brunswick Corporation | 7.375% | 9/01/23 | Caa1 | 134,125 | |||||||||||||||
150 | Isle of Capri Casinos, Inc., 144A | 7.750% | 3/15/19 | B– | 149,250 | |||||||||||||||
155 | Marina District Finance Company Limited, 144A | 9.875% | 8/15/18 | BB | 162,169 | |||||||||||||||
85 | McDonald’s Corporation | 5.800% | 10/15/17 | A | 97,312 | |||||||||||||||
100 | Tricon Global Restaurants Incorporated | 8.875% | 4/15/11 | BBB– | 100,224 | |||||||||||||||
795 | Total Hotels, Restaurants & Leisure | 808,280 | ||||||||||||||||||
Household Durables – 0.3% | ||||||||||||||||||||
155 | MDC Holdings Inc. | 5.625% | 2/01/20 | BBB– | 153,133 | |||||||||||||||
120 | Meritage Homes Corporation | 7.150% | 4/15/20 | B+ | 119,850 | |||||||||||||||
275 | Total Household Durables | 272,983 | ||||||||||||||||||
Household Products – 0.2% | ||||||||||||||||||||
150 | Clorox Company | 3.550% | 11/01/15 | BBB+ | 153,563 | |||||||||||||||
20 | Procter and Gamble Company | 4.850% | 12/15/15 | AA– | 22,215 | |||||||||||||||
170 | Total Household Products | 175,778 | ||||||||||||||||||
Independent Power Producers & Energy Traders – 0.2% | ||||||||||||||||||||
175 | NRG Energy Inc. | 7.375% | 1/15/17 | BB– | 182,438 |
34 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Industrial Conglomerates – 1.0% | ||||||||||||||||||||
$ | 100 | Offshore Group Investment Limited | 11.500% | 8/01/15 | B– | $ | 111,000 | |||||||||||||
300 | Textron Inc. | 7.250% | 10/01/19 | BBB– | 345,892 | |||||||||||||||
190 | Timken Company | 6.000% | 9/15/14 | BBB– | 209,579 | |||||||||||||||
125 | Tyco International Group | 6.000% | 11/15/13 | A– | 138,381 | |||||||||||||||
715 | Total Industrial Conglomerates | 804,852 | ||||||||||||||||||
Insurance – 2.4% | ||||||||||||||||||||
290 | AFLAC Insurance | 6.450% | 8/15/40 | A2 | 291,063 | |||||||||||||||
100 | Berkshire Hathaway Inc. | 5.400% | 5/15/18 | AA+ | 110,101 | |||||||||||||||
315 | Genworth Financial Inc. | 6.515% | 5/22/18 | BBB | 311,629 | |||||||||||||||
585 | Hartford Financial Services Group Inc. | 6.000% | 1/15/19 | BBB | 614,916 | |||||||||||||||
200 | ING Bank NV, 144A | 4.000% | 3/15/16 | Aa3 | 199,721 | |||||||||||||||
75 | MetLife Inc. | 7.717% | 2/15/19 | A– | 91,168 | |||||||||||||||
170 | Prudential Financial Inc. | 7.375% | 6/15/19 | A | 199,600 | |||||||||||||||
160 | Prudential Financial Inc. | 5.900% | 3/17/36 | A | 160,827 | |||||||||||||||
1,895 | Total Insurance | 1,979,025 | ||||||||||||||||||
IT Services – 0.3% | ||||||||||||||||||||
94 | First Data Corporation, 144A | 12.625% | 1/15/21 | B– | 101,990 | |||||||||||||||
150 | First Data Corporation, 144A | 8.750% | 1/15/22 | B– | 149,250 | |||||||||||||||
244 | Total IT Services | 251,240 | ||||||||||||||||||
Machinery – 0.0% | ||||||||||||||||||||
5 | Caterpillar Inc. | 6.050% | 8/15/36 | A | 5,617 | |||||||||||||||
15 | Deere & Company | 6.950% | 4/25/14 | A | 17,311 | |||||||||||||||
20 | Total Machinery | 22,928 | ||||||||||||||||||
Media – 2.8% | ||||||||||||||||||||
80 | Allbritton Communications Company | 8.000% | 5/15/18 | B | 84,400 | |||||||||||||||
55 | Comcast Corporation | 6.450% | 3/15/37 | BBB+ | 56,344 | |||||||||||||||
160 | Comcast Corporation | 6.400% | 5/15/38 | BBB+ | 162,934 | |||||||||||||||
205 | DIRECTV Holdings LLC | 5.200% | 3/15/20 | BBB | 211,141 | |||||||||||||||
325 | News America Holdings Inc., 144A | 6.150% | 2/15/41 | BBB+ | 322,284 | |||||||||||||||
40 | News America Holdings Inc. | 6.150% | 3/01/37 | BBB+ | 39,635 | |||||||||||||||
50 | Nielsen Finance LLC Co., 144A | 7.750% | 10/15/18 | B+ | 53,625 | |||||||||||||||
195 | Sinclair Television Group, 144A | 9.250% | 11/01/17 | BB– | 217,425 | |||||||||||||||
170 | Thomson Reuters Corporation | 4.700% | 10/15/19 | A– | 177,849 | |||||||||||||||
405 | Time Warner Cable Inc. | 6.550% | 5/01/37 | BBB | 412,215 | |||||||||||||||
210 | Time Warner Inc. | 4.875% | 3/15/20 | BBB | 214,128 | |||||||||||||||
300 | Viacom Inc. | 6.875% | 4/30/36 | BBB+ | 328,498 | |||||||||||||||
25 | Walt Disney Company | 6.000% | 7/17/17 | A | 28,427 | |||||||||||||||
2 | Walt Disney Company | 7.000% | 3/01/32 | A | 2,435 | |||||||||||||||
2,222 | Total Media | 2,311,340 | ||||||||||||||||||
Metals & Mining – 3.4% | ||||||||||||||||||||
175 | AK Steel Corporation | 7.625% | 5/15/20 | BB | 178,500 | |||||||||||||||
45 | Algoma Acquisition Corporation, 144A | 9.875% | 6/15/15 | CCC+ | 41,400 | |||||||||||||||
275 | Anglogold Holdings PLC | 6.500% | 4/15/40 | BBB– | 275,421 | |||||||||||||||
385 | ArcelorMittal | 7.000% | 10/15/39 | BBB– | 386,030 |
Nuveen Investments | 35 |
Portfolio of Investments (Unaudited)
Nuveen Multi-Strategy Core Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Metals & Mining (continued) | ||||||||||||||||||||
$ | 80 | BHP Billiton Finance Limited | 5.500% | 4/01/14 | A+ | $ | 88,719 | |||||||||||||
390 | Newmont Mining Corporation | 6.250% | 10/01/39 | BBB+ | 413,466 | |||||||||||||||
250 | Patriot Coal Corporation | 8.250% | 4/30/18 | B+ | 266,250 | |||||||||||||||
250 | Southern Copper Corporation | 7.500% | 7/27/35 | Baa2 | 270,070 | |||||||||||||||
25 | Steel Dynamics, Inc. | 7.750% | 4/15/16 | BB+ | 26,625 | |||||||||||||||
50 | Steel Dynamics, Inc. | 7.625% | 3/15/20 | BB+ | 53,625 | |||||||||||||||
200 | Teck Resources Limited | 6.125% | 10/01/35 | BBB | 205,317 | |||||||||||||||
60 | United States Steel Corporation | 6.050% | 6/01/17 | BB | 61,875 | |||||||||||||||
300 | Vale Overseas Limited | 6.875% | 11/10/39 | BBB+ | 320,669 | |||||||||||||||
150 | Vedanta Resources PLC, 144A | 9.500% | 7/18/18 | BB | 164,250 | |||||||||||||||
2,635 | Total Metals & Mining | 2,752,217 | ||||||||||||||||||
Multi-Line Retail – 1.0% | ||||||||||||||||||||
200 | Albertson’s, Inc. | 8.700% | 5/01/30 | B | 171,500 | |||||||||||||||
120 | Costco Wholesale Corporation | 5.300% | 3/15/12 | A+ | 125,356 | |||||||||||||||
260 | CVS Caremark Corporation | 3.250% | 5/18/15 | BBB+ | 264,111 | |||||||||||||||
8 | Federated Department Stores, Inc. | 6.900% | 4/01/29 | BB+ | 8,100 | |||||||||||||||
75 | Home Depot, Inc. | 5.400% | 3/01/16 | BBB+ | 82,936 | |||||||||||||||
170 | Target Corporation | 5.375% | 5/01/17 | A+ | 189,312 | |||||||||||||||
833 | Total Multi-Line Retail | 841,315 | ||||||||||||||||||
Multi-Utilities – 0.1% | ||||||||||||||||||||
45 | Dominion Resources Inc. | 6.250% | 6/30/12 | A– | 47,747 | |||||||||||||||
16 | Pacific Gas and Electric Company | 6.050% | 3/01/34 | A3 | 16,673 | |||||||||||||||
9 | Virginia Electric and Power Company | 4.750% | 3/01/13 | A– | 9,582 | |||||||||||||||
70 | Total Multi-Utilities | 74,002 | ||||||||||||||||||
Oil, Gas & Consumable Fuels – 5.5% | ||||||||||||||||||||
240 | Amerada Hess Corporation | 7.125% | 3/15/33 | BBB | 275,908 | |||||||||||||||
95 | Anadarko Petroleum Corporation | 6.375% | 9/15/17 | BBB– | 104,566 | |||||||||||||||
425 | Anadarko Petroleum Corporation | 6.200% | 3/15/40 | BBB– | 410,590 | |||||||||||||||
40 | Apache Corporation | 6.000% | 1/15/37 | A– | 42,278 | |||||||||||||||
140 | Black Elk Energy Offshore Operations LLC, 144A | 13.750% | 12/01/15 | B– | 142,800 | |||||||||||||||
100 | BP Capital Markets PLC | 3.625% | 5/08/14 | A | 103,861 | |||||||||||||||
210 | Cenovus Energy Inc. | 4.500% | 9/15/14 | BBB+ | 225,494 | |||||||||||||||
125 | Chevron Corporation | 3.950% | 3/03/14 | Aa1 | 133,674 | |||||||||||||||
10 | Devon Energy Corporation | 7.950% | 4/15/32 | BBB+ | 12,971 | |||||||||||||||
210 | Diamond Offshore Drilling Inc. | 5.700% | 10/15/39 | A– | 207,372 | |||||||||||||||
195 | Enbridge Energy Partners LP | 5.200% | 3/15/20 | BBB | 202,712 | |||||||||||||||
50 | Energy XXI Gulf Coast Inc., 144A | 9.250% | 12/15/17 | B | 53,500 | |||||||||||||||
170 | Enterprise Products Operating Group LLP | 4.600% | 8/01/12 | BBB– | 176,908 | |||||||||||||||
85 | EOG Resources Inc. | 5.625% | 6/01/19 | A– | 93,262 | |||||||||||||||
260 | Nexen Inc. | 6.400% | 5/15/37 | BBB– | 259,715 | |||||||||||||||
140 | Occidental Petroleum Corporation | 4.125% | 6/01/16 | A | 148,103 | |||||||||||||||
510 | Shell International Finance BV | 4.300% | 9/22/19 | Aa1 | 525,173 | |||||||||||||||
175 | SM Energy Company, 144A | 6.625% | 2/15/19 | BB | 179,594 | |||||||||||||||
115 | StatOilHydro ASA | 2.900% | 10/15/14 | Aa2 | 118,663 |
36 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||||||||||
$ | 200 | Stone Energy Corporation | 8.625% | 2/01/17 | B | $ | 208,500 | |||||||||||||
245 | SunCor Energy Inc. | 6.100% | 6/01/18 | BBB+ | 276,661 | |||||||||||||||
135 | Tesoro Petroleum Corporation | 6.250% | 11/01/12 | BB+ | 142,425 | |||||||||||||||
10 | Tosco Corporation | 8.125% | 2/15/30 | A1 | 12,779 | |||||||||||||||
125 | United Refining Inc., 144A | 10.500% | 2/28/18 | B | 124,219 | |||||||||||||||
275 | Valero Energy Corporation | 6.125% | 2/01/20 | BBB | 297,432 | |||||||||||||||
10 | Valero Energy Corporation | 7.500% | 4/15/32 | BBB | 11,015 | |||||||||||||||
4,295 | Total Oil, Gas & Consumable Fuels | 4,490,175 | ||||||||||||||||||
Paper & Forest Products – 0.8% | ||||||||||||||||||||
180 | International Paper Company | 8.700% | 6/15/38 | BBB | 230,751 | |||||||||||||||
190 | McClatchy Company | 11.500% | 2/15/17 | B+ | 213,750 | |||||||||||||||
200 | Stora Enso Oyj, 144A | 6.404% | 4/15/16 | BB | 210,000 | |||||||||||||||
8 | Westvaco Corporation | 8.200% | 1/15/30 | BBB | 8,538 | |||||||||||||||
578 | Total Paper & Forest Products | 663,039 | ||||||||||||||||||
Pharmaceuticals – 0.2% | ||||||||||||||||||||
3 | Schering-Plough Corporation | 6.500% | 12/01/33 | AA | 3,530 | |||||||||||||||
160 | Valeant Pharmaceuticals International, 144A | 6.875% | 12/01/18 | BB– | 156,800 | |||||||||||||||
163 | Total Pharmaceuticals | 160,330 | ||||||||||||||||||
Real Estate – 0.9% | ||||||||||||||||||||
300 | Health Care REIT Inc. | 5.250% | 1/15/22 | Baa2 | 292,699 | |||||||||||||||
370 | Prologis Trust | 6.875% | 3/15/20 | Baa2 | 404,865 | |||||||||||||||
670 | Total Real Estate | 697,564 | ||||||||||||||||||
Real Estate Management & Development – 0.3% | ||||||||||||||||||||
200 | Country Garden Holding Company, 144A | 11.125% | 2/23/18 | BB– | 203,000 | |||||||||||||||
Road & Rail – 0.2% | ||||||||||||||||||||
18 | Burlington Northern Santa Fe Corporation | 6.750% | 7/15/11 | A3 | 18,329 | |||||||||||||||
10 | CSX Corporation | 5.600% | 5/01/17 | BBB– | 11,033 | |||||||||||||||
110 | DynCorp International Inc., 144A | 10.375% | 7/01/17 | B1 | 119,075 | |||||||||||||||
17 | Norfolk Southern Corporation | 7.700% | 5/15/17 | BBB+ | 20,847 | |||||||||||||||
155 | Total Road & Rail | 169,284 | ||||||||||||||||||
Specialty Retail – 1.2% | ||||||||||||||||||||
200 | Armored AutoGroup Inc., 144A | 9.250% | 11/01/18 | CCC+ | 203,500 | |||||||||||||||
300 | CenturyLink Inc. | 6.150% | 9/15/19 | BBB– | 315,002 | |||||||||||||||
25 | Ferrellgas LP, 144A | 6.500% | 5/01/21 | Ba3 | 24,250 | |||||||||||||||
280 | O’Reilly Automotive Inc. | 4.875% | 1/14/21 | BBB– | 276,950 | |||||||||||||||
145 | TJX Companies, Inc. | 4.200% | 8/15/15 | A | 154,249 | |||||||||||||||
950 | Total Specialty Retail | 973,951 | ||||||||||||||||||
Textiles, Apparel & Luxury Goods – 0.4% | ||||||||||||||||||||
50 | Hanesbrands Inc. | 6.375% | 12/15/20 | BB– | 48,750 | |||||||||||||||
250 | Polymer Group Inc., 144A | 7.750% | 2/01/19 | B1 | 257,813 | |||||||||||||||
300 | Total Textiles, Apparel & Luxury Goods | 306,563 | ||||||||||||||||||
Tobacco – 0.7% | ||||||||||||||||||||
405 | Altria Group Inc. | 9.950% | 11/10/38 | Baa1 | 564,892 | |||||||||||||||
Transportation Infrastructure – 0.4% | ||||||||||||||||||||
300 | Asciano Finance Limited, 144A, (WI/DD) | 5.000% | 4/07/18 | Baa2 | 298,374 |
Nuveen Investments | 37 |
Portfolio of Investments (Unaudited)
Nuveen Multi-Strategy Core Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Wireless Telecommunication Services – 1.1% | ||||||||||||||||||||
$ | 208 | IntelSat Bermuda Limited | 11.500% | 2/04/17 | CCC+ | $ | 228,481 | |||||||||||||
80 | MetroPCS Wireless Inc. | 6.625% | 11/15/20 | B | 79,900 | |||||||||||||||
50 | Nokia Corporation | 5.375% | 5/15/19 | A2 | 51,068 | |||||||||||||||
60 | Rogers Wireless Communications Inc. | 6.375% | 3/01/14 | BBB | 67,298 | |||||||||||||||
150 | Sprint Capital Corporation | 6.900% | 5/01/19 | BB– | 154,875 | |||||||||||||||
80 | Vodafone Group PLC | 5.350% | 2/27/12 | A– | 83,384 | |||||||||||||||
75 | Windstream Corporation, 144A | 7.750% | 10/15/20 | Ba3 | 77,064 | |||||||||||||||
140 | XM Satellite Radio Inc., 144A | 7.625% | 11/01/18 | BB– | 147,701 | |||||||||||||||
843 | Total Wireless Telecommunication Services | 889,771 | ||||||||||||||||||
$ | 37,933 | Total Corporate Bonds (cost $38,785,694) | 39,963,930 | |||||||||||||||||
Shares | Description (1) | Coupon | Ratings (2) | Value | ||||||||||||||||
$25 PAR (OR SIMILAR) PREFERRED SECURITIES – 0.2% | ||||||||||||||||||||
Diversified Financial Services – 0.2% | ||||||||||||||||||||
7,000 | Citigroup Capital Trust XII | 8.500% | BB+ | $ | 184,310 | |||||||||||||||
Total $25 Par (or similar) Preferred Securities (cost $186,980) | 184,310 |
Principal Amount (000) | Description (1) | Optional Call Provisions (5) | Ratings (2) | Value | ||||||||||||||
MUNICIPAL BONDS - 2.0% | ||||||||||||||||||
Illinois - 0.5% | ||||||||||||||||||
$ | 425 | Illinois State, General Obligation Bonds, Taxable Series 2011, 5.877%, 3/01/19 | No Opt. Call | A+ | $ | 425,693 | ||||||||||||
Massachusetts - 0.3% | ||||||||||||||||||
250 | Massachusetts School Building Authority, Dedicated Sales Tax Revenue Bonds, Series 2007A, 5.000%, 8/15/37 - AMBAC Insured | No Opt. Call | AA+ | 246,560 | ||||||||||||||
Michigan - 0.3% | ||||||||||||||||||
250 | Michigan State University, General Revenue Bonds, Refunding Series 2010C, 5.000%, 2/15/40 | 2/20 at 100.00 | Aa1 | 241,648 | ||||||||||||||
New York - 0.6% | ||||||||||||||||||
250 | New York City Transitional Finance Authority, New York, Future Tax Secured Revenue Bonds, Subordinate Lien Series 2011C, 5.000%, 11/01/39 | 11/20 at 100.00 | AAA | 243,863 | ||||||||||||||
250 | Triborough Bridge and Tunnel Authority, New York, General Purpose Revenue Bonds, Series 2008C, 5.000%, 11/15/38 | No Opt. Call | Aa2 | 242,877 | ||||||||||||||
500 | Total New York | 486,740 | ||||||||||||||||
Washington - 0.3% | ||||||||||||||||||
250 | King County, Washington, Sewer Revenue Bonds, Refunding Series 2010, 5.000%, 1/01/40 | No Opt. Call | AA+ | 243,837 | ||||||||||||||
$ | 1,675 | Total Municipal Bonds (cost $1,624,018) | 1,644,478 |
38 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
U.S. GOVERNMENT AND AGENCY OBLIGATIONS – 5.2% | ||||||||||||||||||||
U.S. Treasury Bonds/Notes – 5.2% | ||||||||||||||||||||
$ | 190 | Tennessee Valley Authority | 5.250% | 9/15/39 | AAA | $ | 199,270 | |||||||||||||
525 | United States of America Treasury Bonds/Notes | 4.630% | 7/31/12 | AAA | 553,977 | |||||||||||||||
250 | United States of America Treasury Bonds/Notes | 1.380% | 9/15/12 | AAA | 253,057 | |||||||||||||||
475 | United States of America Treasury Bonds/Notes | 5.250% | 11/15/28 | AAA | 534,746 | |||||||||||||||
450 | United States of America Treasury Bonds/Notes | 4.750% | 2/15/37 | AAA | 471,024 | |||||||||||||||
455 | United States of America Treasury Bonds/Notes | 3.500% | 2/15/39 | AAA | 381,489 | |||||||||||||||
125 | United States of America Treasury Bonds/Notes | 3.880% | 8/15/40 | AAA | 111,856 | |||||||||||||||
1,641 | United States of America Treasury Inflation Indexed Obligations, (6) | 1.250% | 7/15/20 | AAA | 1,694,387 | |||||||||||||||
$ | 4,111 | Total U.S. Government and Agency Obligations (cost $4,164,943) | 4,199,806 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES – 35.4% | ||||||||||||||||||||
Autos – Asset-Backed Securities – 6.1% | ||||||||||||||||||||
$ | 550 | AmeriCredit Automobile Receivables Trust, Series 2010-4 | 1.990% | 10/08/15 | Aa1 | $ | 547,553 | |||||||||||||
229 | Bank of America Auto Trust, Series 2009-2A, 144A | 2.130% | 9/15/13 | AAA | 230,756 | |||||||||||||||
350 | Bank of America Auto Trust, Series 2010-1A, 144A | 1.390% | 3/15/14 | AAA | 351,961 | |||||||||||||||
800 | BMW Vehicle Owners Trust, Series 2010-A | 2.100% | 10/25/16 | AAA | 813,313 | |||||||||||||||
275 | CarMax Auto Owner Trust 2010-3 | 2.000% | 5/16/16 | AA | 268,389 | |||||||||||||||
425 | Chrysler Financial Auto Securtization Trust, Series 2010A | 1.650% | 11/08/13 | AA | 425,497 | |||||||||||||||
141 | Daimler Chrysler Auto Trust 2008B | 5.320% | 11/10/14 | Aaa | 145,062 | |||||||||||||||
42 | Ford Credit Auto Owner Trust 2008A-3A | 3.960% | 4/15/12 | AAA | 42,205 | |||||||||||||||
290 | Ford Credit Auto Owners Trust 2010 | 2.930% | 11/15/15 | AA | 293,801 | |||||||||||||||
360 | Hertz Vehicle Financing LLC Series 2009, 144A | 4.260% | 3/25/14 | Aaa | 377,177 | |||||||||||||||
300 | Hyundai Auto Receivables Trust 2009A | 2.030% | 8/15/13 | AAA | 302,585 | |||||||||||||||
159 | Nissan Auto Receivables Owners Trust 2008-C | 5.930% | 7/16/12 | AAA | 160,432 | |||||||||||||||
420 | Toyota Auto Receivables Owner Trust, Class A3, Series 2003B | 1.860% | 5/16/16 | AAA | 425,625 | |||||||||||||||
618 | Volkswagen Auto Loan Enhanced Trust, 2008-2, Class A3A | 5.470% | 3/20/13 | AAA | 627,691 | |||||||||||||||
4,959 | Total Autos | 5,012,047 | ||||||||||||||||||
Credit Cards – Asset-Backed Securities – 2.7% | ||||||||||||||||||||
550 | CitiBank Credit Card Issuance Trust, Series 2009-A5 | 2.250% | 12/23/14 | AAA | 561,658 | |||||||||||||||
205 | Discover Card Master Trust 2008, Class A3 | 5.100% | 10/15/13 | AAA | 205,368 | |||||||||||||||
850 | General Electric Capital Credit Card Master Note Trust Series 2010-3 | 2.210% | 6/15/16 | Aaa | 863,563 | |||||||||||||||
530 | General Electric Master Credit Card Trust, Series 2009-3A | 2.540% | 9/15/14 | AAA | 534,594 | |||||||||||||||
2,135 | Total Credit Cards | 2,165,183 | ||||||||||||||||||
Home Equity – Asset-Backed Securities – 0.3% | ||||||||||||||||||||
275 | CNH Equipment Trust 2010-A | 1.540% | 7/15/14 | AAA | 276,513 | |||||||||||||||
Commercial – Mortgage-Backed Securities – 6.5% | ||||||||||||||||||||
�� | 220 | Banc of America Commercial Mortgage Pass-Through Certificates, | 5.200% | 4/10/49 | BBB+ | 216,056 | ||||||||||||||
70 | Bank of America Alternative Loan Trust, Series 2005-5 2 CB1 | 6.000% | 6/25/35 | Caa1 | 54,083 | |||||||||||||||
350 | Bank of America Commercial Mortgage Pass-Through Certificates, | 4.930% | 7/10/45 | AA– | 370,268 |
Nuveen Investments | 39 |
Portfolio of Investments (Unaudited)
Nuveen Multi-Strategy Core Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Commercial – Mortgage-Backed Securities (continued) | ||||||||||||||||||||
$ | 386 | Credit Suisse First Boston Mortgage Securities Corporation, Mortgage-Backed Pass-Through Certificates, Series 2003-23 | 5.750% | 9/25/33 | AAA | $ | 397,581 | |||||||||||||
500 | CS First Boston Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2004-C1 | 4.750% | 1/15/37 | AAA | 525,571 | |||||||||||||||
230 | General Electric Capital Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2002-2 | 5.350% | 8/11/36 | AAA | 238,882 | |||||||||||||||
650 | Greenwich Capital Commercial Funding Corporation, Commercial Mortgage Pass Through Certificates, Series 2007-GG11 | 5.736% | 12/10/49 | N/R | 687,507 | |||||||||||||||
230 | Merrill Lynch Mortgage Investors Inc, Commercial Mortgage Pass-Through Certificates, Series 2006, (7) | 5.200% | 12/12/49 | Aa2 | 226,085 | |||||||||||||||
750 | Merrill Lynch Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2008-C1 | 5.690% | 2/12/51 | Aaa | 794,617 | |||||||||||||||
545 | Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-IQ12 | 5.330% | 12/15/43 | AAA | 575,049 | |||||||||||||||
350 | Salomon Brothers Commercial Mortgage Trust Pass-Through Certificates, Series 2002-KEY2 | 4.870% | 3/18/36 | AAA | 361,263 | |||||||||||||||
800 | WF-RBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2011-C2 | 4.870% | 2/15/44 | AAA | 818,407 | |||||||||||||||
5,081 | Total Commercial | 5,265,369 | ||||||||||||||||||
Residential – Mortgage-Backed Securities – 19.8% | ||||||||||||||||||||
650 | FDIC Structured Sales Guaranteed Notes, Series 2010-L1A, 144A | 0.000% | 10/25/13 | N/A | 615,433 | |||||||||||||||
103 | Federal Home Loan Mortgage Corporation Non Gold Participation Certificates | 6.140% | 12/01/36 | AAA | 110,759 | |||||||||||||||
10 | Federal Home Loan Mortgage Corporation REMIC | 5.500% | 5/15/28 | AAA | 10,169 | |||||||||||||||
43 | Federal Home Loan Mortgage Corporation, Mortgage Pool 1B3220 | 5.860% | 1/01/37 | AAA | 45,281 | |||||||||||||||
82 | Federal Home Loan Mortgage Corporation, Series 2376 | 5.500% | 11/15/16 | AAA | 87,475 | |||||||||||||||
1,250 | Federal National Mortgage Association (MDR) (WI/DD) | 4.500% | TBA | AAA | 1,272,070 | |||||||||||||||
1,715 | Federal National Mortgage Association (MDR) (WI/DD) | 5.500% | TBA | AAA | 1,854,879 | |||||||||||||||
3,760 | Federal National Mortgage Association (MDR) (WI/DD) | 5.000% | TBA | AAA | 3,933,313 | |||||||||||||||
2,175 | Federal National Mortgage Interest Strip Series 366-25 | 5.000% | 10/01/35 | AAA | 251,755 | |||||||||||||||
331 | Federal National Mortgage Pool 735060 | 6.000% | 11/01/34 | AAA | 363,653 | |||||||||||||||
132 | Federal National Mortgage Pool 735606 | 2.800% | 5/01/35 | AAA | 136,870 | |||||||||||||||
150 | Federal National Mortgage Pool 838948 | 2.010% | 8/01/35 | AAA | 156,647 | |||||||||||||||
206 | Federal National Mortgage Pool 838948 | 5.500% | 4/01/35 | AAA | 221,545 | |||||||||||||||
122 | Federal National Mortgage Pool 905597 | 5.995% | 12/01/36 | AAA | 131,779 | |||||||||||||||
374 | Federal National Mortgage Pool 946228 | 6.160% | 9/01/37 | AAA | 402,076 | |||||||||||||||
1,071 | Federal National Mortgage Pool AC1877 | 4.500% | 9/01/39 | AAA | 1,091,628 | |||||||||||||||
1,645 | Federal National Mortgage Pool AD8529 | 4.500% | 8/01/40 | AAA | 1,675,948 | |||||||||||||||
609 | Government National Mortgage Association, Guaranteed REMIC Pass Through Securities and MX Securities Trust | 4.500% | 5/16/38 | AAA | 645,774 | |||||||||||||||
2,145 | Government National Mortgage Association (MDR) (WI/DD) | 5.000% | TBA | AAA | 2,274,706 | |||||||||||||||
508 | National Credit Union Administration Guaranteed Structured Collateral Notes | 2.900% | 10/29/20 | AAA | 494,569 | |||||||||||||||
319 | Sequoia Mortgage Trust, Mortgage Pass Through Certificates, Series 2011-1 | 4.130% | 2/25/41 | N/R | 319,353 | |||||||||||||||
44 | Wells Fargo Mortgage Backed Securities, 2005-AR16 Class 3A2, (7) | 2.825% | 10/25/35 | AAA | 41,566 | |||||||||||||||
17,444 | Total Residential | 16,137,248 | ||||||||||||||||||
$ | 29,894 | Total Asset-Backed and Mortgage-Backed Securities (cost $28,638,155) | 28,856,360 |
40 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CAPITAL PREFERRED SECURITIES – 3.7% | ||||||||||||||||||||
Capital Markets – 0.3% | ||||||||||||||||||||
$ | 315 | Goldman Sachs Capital II | 5.793% | 6/01/12 | Baa2 | $ | 271,688 | |||||||||||||
Commercial Banks – 1.0% | ||||||||||||||||||||
225 | Bank of America Corporation | 8.000% | 1/30/18 | BB+ | 241,958 | |||||||||||||||
8 | First Union Institutional Capital Securities I | 8.040% | 12/01/26 | A– | 8,200 | |||||||||||||||
410 | Wachovia Capital Trust III | 1.239% | 3/15/42 | A– | 376,175 | |||||||||||||||
205 | Wells Fargo Capital Trust X | 5.950% | 12/15/86 | A– | 201,853 | |||||||||||||||
848 | Total Commercial Banks | 828,186 | ||||||||||||||||||
Consumer Finance – 0.3% | ||||||||||||||||||||
235 | Capital One Capital III Corporation | 7.686% | 8/15/36 | Baa3 | 241,756 | |||||||||||||||
Diversified Financial Services – 1.2% | ||||||||||||||||||||
340 | CitiGroup Capital XXI | 8.300% | 12/21/37 | BB+ | 353,600 | |||||||||||||||
610 | JP Morgan Chase Capital Trust XX Ser T | 6.550% | 9/29/36 | A2 | 620,000 | |||||||||||||||
950 | Total Diversified Financial Services | 973,600 | ||||||||||||||||||
Industrial Conglomerates – 0.5% | ||||||||||||||||||||
430 | GE Capital Trust I | 6.375% | 11/15/17 | Aa3 | 440,213 | |||||||||||||||
Insurance – 0.4% | ||||||||||||||||||||
300 | Catlin Insurance Company Limited, 144A | 7.249% | 1/19/17 | BBB+ | 282,750 | |||||||||||||||
$ | 3,078 | Total Capital Preferred Securities (cost $3,031,688) | 3,038,193 | |||||||||||||||||
Principal Amount (000) (8) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
SOVEREIGN DEBT – 3.2% | ||||||||||||||||||||
Argentina – 0.1% | ||||||||||||||||||||
$ | 100 | Provincia de Cordoba, 144A | 12.375% | 8/17/17 | B | $ | 103,250 | |||||||||||||
Colombia – 1.7% | ||||||||||||||||||||
10 | Republic of Colombia | 8.250% | 12/22/14 | BBB– | 11,900 | |||||||||||||||
2,410,000 | COP | Republic of Colombia | 7.750% | 4/14/21 | BBB– | 1,388,953 | ||||||||||||||
Total Colombia | 1,400,853 | |||||||||||||||||||
Peru – 0.9% | ||||||||||||||||||||
2,050 | PEN | Republic of Peru | 6.950% | 8/12/31 | Baa3 | 710,606 | ||||||||||||||
South Africa – 0.5% | ||||||||||||||||||||
365 | Republic of South Africa | 6.250% | 3/08/41 | A3 | 376,176 | |||||||||||||||
Total Sovereign Debt (cost $2,518,445) | 2,590,885 |
Nuveen Investments | 41 |
Portfolio of Investments (Unaudited)
Nuveen Multi-Strategy Core Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Value | ||||||||||||||
SHORT-TERM INVESTMENTS – 18.7% | ||||||||||||||||||
$ | 15,248 | Repurchase Agreement with Fixed Income Clearing Corporation, dated 3/31/11, repurchase price $15,248,006, collateralized by $15,390,000 U.S. Treasury Bonds, 4.500%, due 8/15/39, value $15,553,142 | 0.010% | 4/01/11 | $ | 15,248,002 | ||||||||||||
Total Short-Term Investments (cost $15,248,002) | 15,248,002 | |||||||||||||||||
Total Investments (cost $94,197,925) – 117.5% | 95,725,964 | |||||||||||||||||
Other Assets Less Liabilities – (17.5)% (9) | (14,291,073) | |||||||||||||||||
Net Assets – 100% | $ | 81,434,891 |
Investments in Derivatives
Call Options Written outstanding at March 31, 2011:
Number of Contracts | Description (1) | Notional Amount (10) | Strike Price | Expiration Date | Value | |||||||||||||||
(16) | U.S. 10-Year Treasury Note Futures | $ | (195,200) | $ | 122.0 | 5/20/11 | $ | (4,250) | ||||||||||||
Total Call Options Written (premiums received $7,831) | $ | (4,250) |
Forward Foreign Currency Exchange Contracts outstanding at March 31, 2011:
Counterparty | Currency Contracts to Deliver | Amount (Local Currency) | In Exchange For Currency | Amount (Local Currency) | Settlement Date | Unrealized Appreciation Depreciation) (U.S. Dollars) | ||||||||||||||||
Morgan Stanley | Brazilian Real | 1,880,000 | U.S. Dollar | 1,131,167 | 4/04/11 | $ | (20,335 | ) | ||||||||||||||
Royal Bank of Canada | Colombian Peso | 4,820,000,000 | U.S. Dollar | 2,579,264 | 6/02/11 | (8,102 | ) | |||||||||||||||
HSBC | Euro | 850,000 | U.S. Dollar | 1,149,668 | 4/18/11 | (54,639 | ) | |||||||||||||||
Bank of America | Japanese Yen | 84,000,000 | U.S. Dollar | 1,035,490 | 5/31/11 | 25,297 | ||||||||||||||||
HSBC | Mexican Peso | 13,641,210 | U.S. Dollar | 1,137,716 | 4/04/11 | (9,139 | ) | |||||||||||||||
JPMorgan Chase | Peruvian Nuevo Sol | 2,101,250 | U.S. Dollar | 746,846 | 4/29/11 | (797 | ) | |||||||||||||||
Morgan Stanley | Polish Zloty | 3,000,000 | U.S. Dollar | 1,049,391 | 5/18/11 | (3,152 | ) | |||||||||||||||
JPMorgan Chase | South African Rand | 3,000,000 | U.S. Dollar | 431,344 | 4/26/11 | (10,730 | ) | |||||||||||||||
Bank of America | Swiss Franc | 1,000,000 | U.S. Dollar | 1,080,567 | 5/10/11 | (8,411 | ) | |||||||||||||||
Bank of America | U.S. Dollar | 813,072 | Australian Dollar | 800,000 | 5/31/11 | 8,601 | ||||||||||||||||
Morgan Stanley | U.S. Dollar | 1,120,074 | Brazilian Real | 1,884,300 | 4/04/11 | 34,062 | ||||||||||||||||
Morgan Stanley | U.S. Dollar | 1,124,940 | Brazilian Real | 1,880,000 | 5/03/11 | 20,222 | ||||||||||||||||
Morgan Stanley | U.S. Dollar | 1,233,870 | Canadian Dollar | 1,200,000 | 5/31/11 | 2,265 | ||||||||||||||||
HSBC | U.S. Dollar | 1,512,876 | Colombian Peso | 2,820,000,000 | 6/02/11 | 894 | ||||||||||||||||
Citibank | U.S. Dollar | 19,782 | Czech Koruna | 349,169 | 4/29/11 | 382 | ||||||||||||||||
HSBC | U.S. Dollar | 1,130,859 | Mexican Peso | 13,641,210 | 4/04/11 | 15,996 | ||||||||||||||||
HSBC | U.S. Dollar | 1,131,581 | Mexican Peso | 13,641,210 | 6/03/11 | 8,997 | ||||||||||||||||
Morgan Stanley | U.S. Dollar | 769,790 | New Zealand Dollar | 1,000,000 | 4/11/11 | (7,134 | ) | |||||||||||||||
Morgan Stanley | U.S. Dollar | 1,021,450 | Polish Zloty | 3,000,000 | 5/18/11 | 31,093 | ||||||||||||||||
JPMorgan Chase | U.S. Dollar | 416,927 | South African Rand | 3,000,000 | 4/26/11 | 25,147 | ||||||||||||||||
JPMorgan Chase | U.S. Dollar | 400,498 | South Korean Won | 450,000,000 | 5/16/11 | 8,862 | ||||||||||||||||
JPMorgan Chase | U.S. Dollar | 6,647 | Swedish Krona | 42,971 | 4/29/11 | 153 | ||||||||||||||||
Morgan Stanley | U.S. Dollar | 934,056 | Turkish Lira | 1,500,000 | 4/07/11 | 36,446 | ||||||||||||||||
$ | 95,978 |
42 | Nuveen Investments |
Interest Rate Swaps outstanding at March 31, 2011:
Counterparty | Notional Amount | Fund Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate* | Fixed Rate Payment Frequency | Termi- nation Date | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||||||||
Citibank | 3,600,000 | PLN | Pay | 6-Month WIBOR | 5.340 | % | Annually | 7/06/20 | $ | 2,492 | $ | 2,492 | ||||||||||||||||||||||||
Citibank | 9,800,000 | ZAR | Pay | 3-Month JIBAR | 7.655 | Quarterly | 1/07/21 | (69,552 | ) | (69,552 | ) | |||||||||||||||||||||||||
Deutsche Bank AG | 5,800,000 | ILS | Pay | 3-Month TELBOR | 4.850 | Annually | 5/20/20 | 9,664 | 9,664 | |||||||||||||||||||||||||||
JPMorgan | 726,000,000 | CLP | Pay | 6-Month CLICP | 4.580 | Semi-Annually | 8/10/14 | (64,716 | ) | 46,636 | ||||||||||||||||||||||||||
JPMorgan | 4,046,000,000 | KRW | Receive | 3-Month KRW-CD-KSDA | 4.250 | Quarterly | 3/11/15 | (19,466 | ) | (19,466 | ) | |||||||||||||||||||||||||
Morgan Stanley | 29,500,000 | SEK | Receive | 3-Month STIBOR | 2.535 | Annually | 5/06/15 | 93,699 | 93,699 | |||||||||||||||||||||||||||
Morgan Stanley | 13,250,000 | SEK | Receive | 3-Month STIBOR | 2.560 | Annually | 11/12/15 | 76,908 | 76,908 | |||||||||||||||||||||||||||
Morgan Stanley | 2,150,000 | CHF | Receive | 6-Month LIBOR-BBA | 2.358 | Annually | 4/12/20 | (69,188 | ) | (69,188 | ) | |||||||||||||||||||||||||
UBS AG | 46,100,000 | CZK | Receive | 6-Month PRIBOR | 3.000 | Annually | 6/21/20 | 21,319 | 21,319 | |||||||||||||||||||||||||||
$ | 92,512 |
* | Annualized. |
Credit Default Swaps outstanding at March 31, 2011:
Counterparty | Referenced Entity | Buy/Sell Protection (11) | Current Credit Spread (12) | Notional Amount (U.S. Dollars) | Fixed Rate* | Termination Date | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||
JPMorgan | DJ Investment Grade CDX | Sell | .96 | % | $ | 2,900,000 | 1.000 | % | 6/20/16 | $ | 6,493 | $ | (886 | ) | ||||||||||||||||
JPMorgan | DJ High Yield CDX | Sell | 4.52 | 2,000,000 | 5.000 | 6/20/16 | 43,606 | 2,356 | ||||||||||||||||||||||
UBS AG | Freescale Semiconductor, Inc. | Sell | 6.71 | 140,000 | 5.000 | 6/20/15 | (2,108 | ) | 24,492 | |||||||||||||||||||||
UBS AG | DJ High Yield CDX | Sell | 4.52 | 1,200,000 | 5.000 | 6/20/16 | 26,164 | (86 | ) | |||||||||||||||||||||
$ | 25,876 |
* | Annualized. |
Futures Contracts outstanding at March 31, 2011:
Type | Contract Position | Number of Contracts | Contract Expiration | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | |||||||||||||||
U.S. 10-Year Treasury Note | Short | (67 | ) | 6/11 | $ | (7,975,094 | ) | $ | 18,227 | |||||||||||
U.S. 30-Year Treasury Bond | Short | (2 | ) | 6/11 | (240,375 | ) | (3,881 | ) | ||||||||||||
$ | 14,346 |
Nuveen Investments | 43 |
Portfolio of Investments (Unaudited)
Nuveen Multi-Strategy Core Bond Fund (continued)
March 31, 2011
For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry subclassifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) | All percentages shown in the Portfolio of Investments are based on net assets. |
(2) | Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
(3) | Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. |
(4) | The Fund’s Adviser has concluded this issue is not likely to meet its future interest payment obligations and has directed the Fund’s custodian to cease accruing additional income on the Fund’s records. |
(5) | Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying price at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. |
(6) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives. |
(7) | For fair value measurement purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
(8) | Principal Amount (000) denominated in U.S. Dollars, unless otherwise noted. |
(9) | Other Assets Less Liabilities includes Value and/or Net Unrealized Appreciation (Depreciation) of derivative instruments as noted within Investments in Derivatives. |
(10) | For disclosure purposes, Notional Amount is calculated by multiplying the Number of contracts by strike price by 100. |
(11) | The Fund entered into the credit default swaps to gain investment exposure to the referenced entity. Selling protection has a similar credit risk position to owning the referenced entity. Buying protection has a similar credit risk position to selling the referenced entity short. |
(12) | The credit spread generally serves as an indication of the current status of the payment/performance risk and therefore the likelihood of default of the credit derivative. The credit spread also reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into a credit default swap contract. Higher credit spreads are indicative of a higher likelihood of performance by the seller of protection. |
TBA | To be announced. Maturity date not known prior to settlement of this transaction. |
MDR | Denotes investment is subject to dollar roll transactions. |
N/A | Not applicable. |
N/R | Not rated. |
WI/DD | Purchased on a when-issued or delayed delivery basis. |
144A | Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
CHF | Swiss Franc |
CLP | Chilean Peso |
COP | Colombian Peso |
CZK | Czech Koruna |
ILS | Israeli Shekel |
KRW | South Korean Won |
PEN | Peruvian Nuevo Sol |
PLN | Polish Zloty |
SEK | Swedish Krona |
ZAR | South African Rand |
CLICP | Sinacofi Chile Inter-Bank Rate Average |
JIBAR | Johannesburg Inter-Bank Agreed Rate |
KRW-CD-KSDA | Korean Won-Certificates of Deposit-Korean Securities |
LIBOR-BBA | London Inter-Bank Offered Rate-British Bankers’ Association |
PRIBOR | Prague Inter-Bank Offered Rate |
STIBOR | Stockholm Inter-Bank Offered Rate |
TELBOR | Tel-Aviv Inter-Bank Offered Rate |
WIBOR | Warsaw Inter-Bank Offered Rate |
See accompanying notes to financial statements.
44 | Nuveen Investments |
Portfolio of Investments (Unaudited)
Nuveen High Yield Bond Fund
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CORPORATE BONDS – 91.1% | ||||||||||||||||||||
Aerospace & Defense – 1.1% | ||||||||||||||||||||
$ | 700 | Huntington Ingalls Industries Inc., 144A | 6.875% | 3/15/18 | Ba3 | $ | 730,625 | |||||||||||||
1,000 | Lanza Acquistion Company, 144A | 10.000% | 6/01/17 | B+ | 1,102,500 | |||||||||||||||
1,700 | Total Aerospace & Defense | 1,833,125 | ||||||||||||||||||
Air Freight & Logistics – 0.6% | ||||||||||||||||||||
1,000 | Park-Ohio Industries Inc., 144A, (WI/DD) | 8.125% | 4/01/21 | B3 | 1,000,000 | |||||||||||||||
Airlines – 3.4% | ||||||||||||||||||||
850 | Air Canada, 144A | 12.000% | 2/01/16 | B– | 886,125 | |||||||||||||||
2,600 | Global Aviation Holdings | 14.000% | 8/15/13 | BB– | 3,048,500 | |||||||||||||||
1,600 | Gol Linhas Aereas Inteligentes SA, 144A | 9.250% | 7/20/20 | Ba3 | 1,710,000 | |||||||||||||||
5,050 | Total Airlines | 5,644,625 | ||||||||||||||||||
Auto Components – 2.3% | ||||||||||||||||||||
1,480 | American & Axle Manufacturing Inc. | 7.875% | 3/01/17 | B– | 1,502,200 | |||||||||||||||
775 | Dana Holding Corporation | 6.500% | 2/15/19 | BB– | 771,125 | |||||||||||||||
1,500 | Uncle Acquisition 2010, 144A | 8.625% | 2/15/19 | B3 | 1,575,000 | |||||||||||||||
3,755 | Total Auto Components | 3,848,325 | ||||||||||||||||||
Biotechnology – 0.3% | ||||||||||||||||||||
500 | STHI Holding Corporation, 144A | 8.000% | 3/15/18 | B | 517,500 | |||||||||||||||
Building Products – 0.8% | ||||||||||||||||||||
425 | Dayton Superior Corporation, (3), (4) | 13.000% | 6/15/11 | Caa3 | 63,750 | |||||||||||||||
1,330 | Ryland Group Inc. | 6.625% | 5/01/20 | BB– | 1,296,750 | |||||||||||||||
1,755 | Total Building Products | 1,360,500 | ||||||||||||||||||
Chemicals – 2.1% | ||||||||||||||||||||
1,495 | CF Industries Inc. | 6.875% | 5/01/18 | BB+ | 1,678,137 | |||||||||||||||
640 | Huntsman International LLC, 144A | 8.625% | 3/15/21 | B– | 697,600 | |||||||||||||||
100 | Omonva Solutions Inc., 144A | 7.875% | 11/01/18 | B2 | 101,250 | |||||||||||||||
1,000 | Rhodia SA, 144A | 6.875% | 9/15/20 | BB | 1,018,750 | |||||||||||||||
3,235 | Total Chemicals | 3,495,737 | ||||||||||||||||||
Commercial Services & Supplies – 2.9% | ||||||||||||||||||||
1,670 | Avis Budget Car Rental | 8.250% | 1/15/19 | B | 1,749,325 | |||||||||||||||
1,925 | Hertz Corporation, 144A | 6.750% | 4/15/19 | B2 | 1,908,156 | |||||||||||||||
1,000 | International Lease Finance Corporation, 144A | 8.750% | 3/15/17 | BB+ | 1,125,000 | |||||||||||||||
4,595 | Total Commercial Services & Supplies | 4,782,481 | ||||||||||||||||||
Construction Materials – 0.6% | �� | |||||||||||||||||||
1,000 | Cemex SAB de CV, 144A | 9.000% | 1/11/18 | B | 1,048,750 | |||||||||||||||
Consumer Finance – 0.8% | ||||||||||||||||||||
1,500 | Springleaf Finance Corporation | 6.900% | 12/15/17 | B | 1,370,625 | |||||||||||||||
Containers & Packaging – 2.2% | ||||||||||||||||||||
1,750 | Berry Plastics Corporation, 144A | 9.750% | 1/15/21 | Caa1 | 1,732,500 | |||||||||||||||
1,000 | Crown Americas LLC Capital Corporation III, 144A | 6.250% | 2/01/21 | BB– | 1,017,500 |
Nuveen Investments | 45 |
Portfolio of Investments (Unaudited)
Nuveen High Yield Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Containers & Packaging (continued) | ||||||||||||||||||||
$ | 955 | Intertape Polymer US Inc. | 8.500% | 8/01/14 | Caa1 | $ | 854,725 | |||||||||||||
3,705 | Total Containers & Packaging | 3,604,725 | ||||||||||||||||||
Diversified Financial Services – 0.8% | ||||||||||||||||||||
500 | Ace Cash Express Inc., 144A | 11.000% | 2/01/19 | B | 508,750 | |||||||||||||||
750 | Constellation Enterprises LLC, 144A | 10.625% | 2/01/16 | B | 772,500 | |||||||||||||||
1,250 | Total Diversified Financial Services | 1,281,250 | ||||||||||||||||||
Diversified Telecommunication Services – 5.9% | ||||||||||||||||||||
1,510 | Cequel Communication Holdings I, 144A | 8.625% | 11/15/17 | B– | 1,574,175 | |||||||||||||||
2,330 | Cincinnati Bell Inc. | 8.750% | 3/15/18 | B3 | 2,198,938 | |||||||||||||||
1,460 | Citizens Communications Company | 9.000% | 8/15/31 | BB | 1,492,850 | |||||||||||||||
1,695 | Insight Communications, 144A | 9.375% | 7/15/18 | B– | 1,881,450 | |||||||||||||||
2,515 | Paetec Holding Corporation | 8.875% | 6/30/17 | Ba3 | 2,709,912 | |||||||||||||||
50 | Qwest Communications International Inc. | 7.125% | 4/01/18 | Baa3 | 53,938 | |||||||||||||||
9,560 | Total Diversified Telecommunication Services | 9,911,263 | ||||||||||||||||||
Electric Utilities – 1.7% | ||||||||||||||||||||
1,250 | Calpine Corporation, 144A | 7.875% | 7/31/20 | B+ | 1,328,125 | |||||||||||||||
1,500 | Edison Mission Energy | 7.500% | 6/15/13 | B– | 1,492,500 | |||||||||||||||
2,750 | Total Electric Utilities | 2,820,625 | ||||||||||||||||||
Electronic Equipment & Instruments – 0.5% | ||||||||||||||||||||
700 | ViaSystems Inc., 144A | 12.000% | 1/15/15 | B+ | 791,000 | |||||||||||||||
Energy Equipment & Services – 2.0% | ||||||||||||||||||||
1,000 | Energy Transfer Equity LP | 7.500% | 10/15/20 | Ba2 | 1,087,500 | |||||||||||||||
500 | Forbes Energy Services LLC Capital | 11.000% | 2/15/15 | CCC+ | 520,625 | |||||||||||||||
1,670 | PHI Inc. | 8.625% | 10/15/18 | B+ | 1,747,237 | |||||||||||||||
3,170 | Total Energy Equipment & Services | 3,355,362 | ||||||||||||||||||
Food & Staples Retailing – 2.9% | ||||||||||||||||||||
2,000 | Ingles Markets Inc. | 8.875% | 5/15/17 | BB– | 2,147,500 | |||||||||||||||
750 | Rite Aid Corporation | 6.875% | 8/15/13 | CCC | 718,125 | |||||||||||||||
750 | Rite Aid Corporation | 9.375% | 12/15/15 | CCC | 683,437 | |||||||||||||||
1,325 | Supervalu Inc. | 7.500% | 11/15/14 | B | 1,331,625 | |||||||||||||||
4,825 | Total Food & Staples Retailing | 4,880,687 | ||||||||||||||||||
Food Products – 2.6% | ||||||||||||||||||||
850 | Blue Merger Sub Inc., 144A | 7.625% | 2/15/19 | B– | 861,687 | |||||||||||||||
1,000 | Darling International Inc., 144A | 8.500% | 12/15/18 | BB– | 1,087,500 | |||||||||||||||
1,500 | Land O Lakes Capital Trust I, 144A | 7.450% | 3/15/28 | Ba2 | 1,357,500 | |||||||||||||||
1,000 | Pilgrim’s Pride Corporation, 144A | 7.875% | 12/15/18 | BB– | 970,000 | |||||||||||||||
4,350 | Total Food Products | 4,276,687 | ||||||||||||||||||
Health Care Equipment & Supplies – 0.3% | ||||||||||||||||||||
500 | Accellent Inc., 144A | 10.000% | 11/01/17 | CCC+ | 500,000 | |||||||||||||||
Health Care Providers & Services – 2.5% | ||||||||||||||||||||
1,000 | HealthSouth Corporation | 7.750% | 9/15/22 | B+ | 1,040,000 | |||||||||||||||
500 | MedImpact Holdings Inc., 144A | 10.500% | 2/01/18 | Caa2 | 528,750 | |||||||||||||||
500 | National Mentor Holdings, 144A | 12.500% | 2/15/18 | CCC+ | 470,000 | |||||||||||||||
500 | RadNet Management Inc. | 10.375% | 4/01/18 | CCC+ | 505,625 | |||||||||||||||
750 | Res-Care Inc., 144A | 10.750% | 1/15/19 | B– | 815,625 | |||||||||||||||
1,000 | Tenet Healthcare Corporation | 6.875% | 11/15/31 | CCC+ | 828,750 | |||||||||||||||
4,250 | Total Health Care Providers & Services | 4,188,750 |
46 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Hotels, Restaurants & Leisure – 6.8% | ||||||||||||||||||||
$ | 750 | Ameristar Casinos, Inc., 144A, (WI/DD) | 7.500% | 4/15/21 | B3 | $ | 745,625 | |||||||||||||
1,985 | Boyd Gaming Corporation, 144A | 9.125% | 12/01/18 | B | 2,049,512 | |||||||||||||||
1,790 | Brunswick Corporation | 7.375% | 9/01/23 | Caa1 | 1,655,750 | |||||||||||||||
500 | Chukchansi Economic Development Authority, 144A | 8.000% | 11/15/13 | B | 370,000 | |||||||||||||||
750 | Harrahs Operating Company Escrow, 144A | 12.750% | 4/15/18 | CCC | 757,500 | |||||||||||||||
1,500 | Hilton Hotels Corporation, 144A | 4.813% | 11/15/13 | N/R | 1,451,250 | |||||||||||||||
550 | Isle of Capri Casinos, Inc., 144A | 7.750% | 3/15/19 | B– | 547,250 | |||||||||||||||
1,510 | Marina District Finance Company Limited, 144A | 9.875% | 8/15/18 | BB | 1,579,838 | |||||||||||||||
500 | Mohegan Tribal Gaming Authority | 6.125% | 2/15/13 | Caa1 | 453,750 | |||||||||||||||
750 | Rare Restaurant Group LLC, 144A | 9.250% | 5/15/14 | CCC | 660,000 | |||||||||||||||
1,000 | Wynn Las Vegas LLC Corporation | 7.750% | 8/15/20 | BB+ | 1,060,000 | |||||||||||||||
11,585 | Total Hotels, Restaurants & Leisure | 11,330,475 | ||||||||||||||||||
Household Durables – 0.6% | ||||||||||||||||||||
750 | K. Hovnanian Enterprises Inc. | 8.625% | 1/15/17 | Caa2 | 564,375 | |||||||||||||||
500 | Willima Lyon Homes Inc., Unsecured Senior Note | 10.750% | 4/01/13 | Caa3 | 416,250 | |||||||||||||||
1,250 | Total Household Durables | 980,625 | ||||||||||||||||||
Household Products – 1.2% | ||||||||||||||||||||
2,000 | Reynolds Group, 144A | 7.125% | 4/15/19 | BB | 2,050,000 | |||||||||||||||
Independent Power Producers & Energy Traders – 0.6% | ||||||||||||||||||||
950 | NRG Energy Inc. | 7.375% | 1/15/17 | BB– | 990,375 | |||||||||||||||
Industrial Conglomerates – 2.5% | ||||||||||||||||||||
1,500 | Abengoa Finance SAU, 144A | 8.875% | 11/01/17 | Ba3 | 1,496,250 | |||||||||||||||
750 | Offshore Group Investment Limited | 11.500% | 8/01/15 | B– | 832,500 | |||||||||||||||
1,700 | Panoro Energy ASA, 144A | 12.000% | 11/15/18 | N/R | 1,836,000 | |||||||||||||||
3,950 | Total Industrial Conglomerates | 4,164,750 | ||||||||||||||||||
Insurance – 0.6% | ||||||||||||||||||||
1,000 | CNO Financial Group Inc., 144A | 9.000% | 1/15/18 | B1 | 1,060,000 | |||||||||||||||
IT Services – 2.2% | ||||||||||||||||||||
1,538 | First Data Corporation, 144A | 12.625% | 1/15/21 | B– | 1,668,730 | |||||||||||||||
2,000 | First Data Corporation, 144A | 8.750% | 1/15/22 | B– | 1,990,000 | |||||||||||||||
3,538 | Total IT Services | 3,658,730 | ||||||||||||||||||
Machinery – 1.0% | ||||||||||||||||||||
1,500 | Navistar International Corporation | 8.250% | 11/01/21 | BB– | 1,663,125 | |||||||||||||||
Marine – 0.3% | ||||||||||||||||||||
500 | Navios Maritime Holdings Inc., 144A | 8.125% | 2/15/19 | B+ | 503,750 | |||||||||||||||
Media – 3.6% | ||||||||||||||||||||
1,000 | Clear Channel Communications, Inc. | 10.750% | 8/01/16 | CCC– | 952,500 | |||||||||||||||
1,000 | Media General Inc. | 11.750% | 2/15/17 | B2 | 1,097,500 | |||||||||||||||
1,300 | Regal Entertainment Group | 9.125% | 8/15/18 | B– | 1,391,000 | |||||||||||||||
1,360 | Sinclair Television Group, 144A | 9.250% | 11/01/17 | BB– | 1,516,400 | |||||||||||||||
1,000 | WMG Acquisition Corporation | 7.375% | 4/15/14 | B1 | 1,002,500 | |||||||||||||||
5,660 | Total Media | 5,959,900 |
Nuveen Investments | 47 |
Portfolio of Investments (Unaudited)
Nuveen High Yield Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Metals & Mining – 4.3% | ||||||||||||||||||||
$ | 800 | AK Steel Corporation | 7.625% | 5/15/20 | BB | $ | 816,000 | |||||||||||||
1,945 | Algoma Acquisition Corporation, 144A | 9.875% | 6/15/15 | CCC+ | 1,789,400 | |||||||||||||||
250 | JMC Steel Group, 144A | 8.250% | 3/15/18 | B | 255,625 | |||||||||||||||
1,350 | Patriot Coal Corporation | 8.250% | 4/30/18 | B+ | 1,437,750 | |||||||||||||||
580 | Steel Dynamics, Inc. | 7.750% | 4/15/16 | BB+ | 617,700 | |||||||||||||||
800 | Steel Dynamics, Inc. | 7.625% | 3/15/20 | BB+ | 858,000 | |||||||||||||||
1,200 | Vedanta Resources PLC, 144A | 9.500% | 7/18/18 | BB | 1,314,000 | |||||||||||||||
6,925 | Total Metals & Mining | 7,088,475 | ||||||||||||||||||
Multi-Line Retail – 0.6% | ||||||||||||||||||||
500 | Albertson’s, Inc. | 8.000% | 5/01/31 | B | 410,000 | |||||||||||||||
500 | Macys Retail Holdings Inc. | 7.875% | 8/15/36 | BB+ | 508,750 | |||||||||||||||
1,000 | Total Multi-Line Retail | 918,750 | ||||||||||||||||||
Oil, Gas & Consumable Fuels – 12.7% | ||||||||||||||||||||
2,000 | Berry Petroleum Company | 8.250% | 11/01/16 | B | 2,115,000 | |||||||||||||||
2,545 | Black Elk Energy Offshore Operations LLC, 144A | 13.750% | 12/01/15 | B– | 2,595,900 | |||||||||||||||
1,000 | Bumi Investment PTE Limited, 144A | 10.750% | 10/06/17 | BB | 1,128,800 | |||||||||||||||
1,350 | Energy XXI Gulf Coast Inc., 144A | 9.250% | 12/15/17 | B | 1,444,500 | |||||||||||||||
1,000 | Goden Close Marit Corporation | 11.000% | 12/09/15 | N/R | 1,080,000 | |||||||||||||||
1,000 | McMoran Exploration Corporation | 11.875% | 11/15/14 | B | 1,100,000 | |||||||||||||||
1,000 | MEG Energy Corportation, 144A | 6.500% | 3/15/21 | BB | 1,016,250 | |||||||||||||||
1,797 | OPTI Canada Inc. | 8.250% | 12/15/14 | CCC | 959,149 | |||||||||||||||
1,000 | Petrohawk Energy Corporation, 144A | 7.250% | 8/15/18 | B+ | 1,030,000 | |||||||||||||||
1,675 | PetroPlus Finance, 144A | 9.375% | 9/15/19 | B | 1,695,937 | |||||||||||||||
1,500 | RAAM Global Energy Company, 144A | 12.500% | 10/01/15 | B | 1,575,000 | |||||||||||||||
1,817 | Sabine Pass LNG LP | 7.500% | 11/30/16 | B+ | 1,866,968 | |||||||||||||||
750 | Sandridge Energy Inc., 144A | 7.500% | 3/15/21 | B | 778,125 | |||||||||||||||
1,000 | SM Energy Company, 144A | 6.625% | 2/15/19 | BB | 1,026,250 | |||||||||||||||
775 | Stone Energy Corporation | 8.625% | 2/01/17 | B | 807,938 | |||||||||||||||
1,000 | United Refining Inc., 144A | 10.500% | 2/28/18 | B | 993,750 | |||||||||||||||
21,209 | Total Oil, Gas & Consumable Fuels | 21,213,567 | ||||||||||||||||||
Paper & Forest Products – 4.1% | ||||||||||||||||||||
750 | AbitibiBowater Inc., 144A | 10.250% | 10/15/18 | B+ | 828,750 | |||||||||||||||
1,835 | McClatchy Company | 11.500% | 2/15/17 | B+ | 2,064,375 | |||||||||||||||
500 | Millar Western Forest Products Ltd, 144A, (WI/DD) | 8.500% | 4/01/21 | B– | 500,000 | |||||||||||||||
500 | Norske Skog Canada Limited | 7.375% | 3/01/14 | Caa2 | 383,750 | |||||||||||||||
1,475 | Stora Enso Oyj, 144A | 6.404% | 4/15/16 | BB | 1,548,750 | |||||||||||||||
750 | Tembec Industries, Inc. | 11.250% | 12/15/18 | B– | 832,500 | |||||||||||||||
675 | Verso Paper Holdings LLC | 11.500% | 7/01/14 | Ba2 | 737,437 | |||||||||||||||
6,485 | Total Paper & Forest Products | 6,895,562 | ||||||||||||||||||
Pharmaceuticals – 0.9% | ||||||||||||||||||||
1,465 | Valeant Pharmaceuticals International, 144A | 6.875% | 12/01/18 | BB– | 1,435,700 | |||||||||||||||
Real Estate Management & Development – 1.5% | ||||||||||||||||||||
500 | Central China Real Estate Limited, 144A | 12.250% | 10/20/15 | B+ | 508,750 | |||||||||||||||
1,000 | Country Garden Holding Company, 144A | 11.125% | 2/23/18 | BB– | 1,015,000 | |||||||||||||||
1,000 | Realogy Corporation, 144A | 11.500% | 4/15/17 | Caa3 | 1,032,500 | |||||||||||||||
2,500 | Total Real Estate Management & Development | 2,556,250 |
48 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Road & Rail – 1.2% | ||||||||||||||||||||
$ | 1,860 | DynCorp International Inc., 144A | 10.375% | 7/01/17 | B1 | $ | 2,013,450 | |||||||||||||
Specialty Retail – 0.6% | ||||||||||||||||||||
975 | Armored AutoGroup Inc., 144A | 9.250% | 11/01/18 | CCC+ | 992,062 | |||||||||||||||
Textiles, Apparel & Luxury Goods – 1.4% | ||||||||||||||||||||
500 | Burlington Coat Factory, 144A | 10.000% | 2/15/19 | Caa1 | 485,000 | |||||||||||||||
1,750 | Polymer Group Inc., 144A | 7.750% | 2/01/19 | B1 | 1,804,687 | |||||||||||||||
2,250 | Total Textiles, Apparel & Luxury Goods | 2,289,687 | ||||||||||||||||||
Wireless Telecommunication Services – 8.1% | ||||||||||||||||||||
680 | Buccaneer Merger Sub Inc. Syniverse, 144A | 9.125% | 1/15/19 | B– | 720,800 | |||||||||||||||
750 | Clearwire Corporation, 144A | 12.000% | 12/01/17 | Caa2 | 801,563 | |||||||||||||||
1,225 | Digicel Group, Limited, 144A | 10.500% | 4/15/18 | Caa1 | 1,402,625 | |||||||||||||||
2,564 | IntelSat Bermuda Limited | 11.500% | 2/04/17 | CCC+ | 2,813,930 | |||||||||||||||
1,490 | MetroPCS Wireless Inc. | 6.625% | 11/15/20 | B | 1,488,138 | |||||||||||||||
2,555 | Sprint Capital Corporation | 6.900% | 5/01/19 | BB– | 2,638,038 | |||||||||||||||
1,250 | UPC Germany GmbH, 144A | 8.125% | 12/01/17 | BB– | 1,315,625 | |||||||||||||||
1,250 | Windstream Corporation, 144A | 7.750% | 10/15/20 | Ba3 | 1,284,375 | |||||||||||||||
1,045 | XM Satellite Radio Inc., 144A | 7.625% | 11/01/18 | BB– | 1,102,475 | |||||||||||||||
12,809 | Total Wireless Telecommunication Services | 13,567,569 | ||||||||||||||||||
$ | 148,561 | Total Corporate Bonds (cost $148,349,447) | 151,844,819 | |||||||||||||||||
Shares | Description (1) | Coupon | Ratings (2) | Value | ||||||||||||||||
$25 PAR (OR SIMILAR) PREFERRED SECURITIES – 2.7% | ||||||||||||||||||||
Capital Markets – 0.2% | ||||||||||||||||||||
20,000 | Morgan Stanley, Series 2006A | 0.000% | BB+ | $ | 413,800 | |||||||||||||||
Commercial Banks – 0.6% | ||||||||||||||||||||
1,000 | Ally Financial Inc., 144A | 7.000% | B3 | 930,500 | ||||||||||||||||
Diversified Financial Services – 0.9% | ||||||||||||||||||||
18,000 | Bank of America Corporation | 4.000% | BB+ | 344,700 | ||||||||||||||||
47,000 | Citigroup Capital Trust XII | 8.500% | BB+ | 1,237,510 | ||||||||||||||||
Total Diversified Financial Services | 1,582,210 | |||||||||||||||||||
Insurance – 0.7% | ||||||||||||||||||||
5,000 | American International Group | 7.700% | BBB | 124,650 | ||||||||||||||||
1,000,000 | Dai-Ichi Mutual Life, 144A | 7.250% | A3 | 988,554 | ||||||||||||||||
Total Insurance | 1,113,204 | |||||||||||||||||||
Real Estate Investment Trust – 0.3% | ||||||||||||||||||||
5,000 | Equity Lifestyle Properties Inc. | 8.034% | N/R | 123,950 | ||||||||||||||||
15,000 | Pebblebrook Hotel Trust | 7.875% | N/R | 374,850 | ||||||||||||||||
Total Real Estate Investment Trust | 498,800 | |||||||||||||||||||
Total $25 Par (or similar) Preferred Securities (cost $3,895,062) |
| 4,538,514 | ||||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
U.S. GOVERNMENT AND AGENCY OBLIGATIONS – 0.7% | ||||||||||||||||||||
U.S. Treasury Bonds/Notes – 0.7% | ||||||||||||||||||||
$ | 155 | United States of America Treasury Notes/Bonds, (5) | 3.380% | 6/30/13 | AAA | $ | 163,561 | |||||||||||||
1,000 | United States of America Treasury Notes/Bonds | 1.500% | 12/31/13 | AAA | 1,009,453 | |||||||||||||||
$ | 1,155 | Total U.S. Government and Agency Obligations (cost $1,158,942) |
| 1,173,014 |
Nuveen Investments | 49 |
Portfolio of Investments (Unaudited)
Nuveen High Yield Bond Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CAPITAL PREFERRED SECURITIES – 2.4% | ||||||||||||||||||||
Consumer Finance – 0.2% | ||||||||||||||||||||
$ | 500 | AFGC Capital Trust I, 144A | 6.000% | 1/15/17 | Caa2 | $ | 302,500 | |||||||||||||
Insurance – 2.2% | ||||||||||||||||||||
2,000 | American International Group, Inc. | 6.250% | 3/15/37 | BBB | 1,830,000 | |||||||||||||||
1,000 | Glen Meadows Pass Through Trust, 144A | 6.505% | 2/15/17 | BB+ | 882,500 | |||||||||||||||
1,000 | XL Capital Ltd | 6.500% | 10/15/57 | BBB– | 917,500 | |||||||||||||||
4,000 | Total Insurance | 3,630,000 | ||||||||||||||||||
$ | 4,500 | Total Capital Preferred Securities (cost $4,554,720) | 3,932,500 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Value | ||||||||||||||||
SHORT-TERM INVESTMENTS – 3.9% | ||||||||||||||||||||
$ | 6,439 | Repurchase Agreement with Fixed Income Clearing Corporation, dated 3/31/11, repurchase price $6,438,823, collateralized by $6,070,000 U.S. Treasury Notes, 4.250%, due 8/15/13, value $6,570,775 | 0.010% | 4/01/11 | $ | 6,438,821 | ||||||||||||||
Total Short-Term Investments (cost $6,438,821) | 6,438,821 | |||||||||||||||||||
Total Investments (cost $164,396,992) – 100.8% | 167,927,668 | |||||||||||||||||||
Other Assets Less Liabilities – (0.8)% (6) | (1,332,198) | |||||||||||||||||||
Net Assets – 100% | $ | 166,595,470 |
Investments in Derivatives
Credit Default Swaps outstanding at March 31, 2011:
Counterparty | Referenced Entity | Buy/Sell Protection (7) | Current Credit Spread (8) | Notional Amount (U.S. Dollars) | Fixed Rate* | Termination Date | Value (U.S. Dollars) | Unrealized Appreciation (Depreciation) (U.S. Dollars) | ||||||||||||||||||||||||
UBS AG | Freescale Semiconductor, Inc. | Sell | 6.71 | % | $ | 2,530,000 | 5.000 | % | 6/20/15 | $ | (38,086 | ) | $ | 442,614 |
* | Annualized. |
For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) | All percentages shown in the Portfolio of Investments are based on net assets. |
(2) | Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
(3) | Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board of Trustees. For fair value measurement disclosure purposes, investment categorized as Level 3. See Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies, Investment Valuation for more information. |
(4) | The Fund’s Adviser has concluded this issue is not likely to meet its future interest payment obligations and has directed the Fund’s custodian to cease accruing additional income on the Fund’s records. |
(5) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives. |
(6) | Other Assets Less Liabilities includes Value and/or Net Unrealized Appreciation (Depreciation) of derivative instruments as noted within Investments in Derivatives. |
(7) | The Fund entered into the credit default swaps to gain investment exposure to the referenced entity. Selling protection has a similar credit risk position to owning the referenced entity. Buying protection has a similar credit risk position to selling the referenced entity short. |
(8) | The credit spread generally serves as an indication of the current status of the payment/performance risk and therefore the likelihood of default of the credit derivative. The credit spread also reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into a credit default swap contract. Higher credit spreads are indicative of a higher likelihood of performance by the seller of protection. |
N/R | Not rated. |
WI/DD | Purchased on a when-issued or delayed delivery basis. |
144A | Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
See accompanying notes to financial statements.
50 | Nuveen Investments |
Portfolio of Investments (Unaudited)
Nuveen Symphony Credit Opportunities Fund
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CONVERTIBLE BONDS – 0.3% | ||||||||||||||||||||
Multi-Line Retail – 0.3% | ||||||||||||||||||||
$ | 200 | Saks, Inc., Convertible Bonds | 2.000% | 3/15/24 | BB– | $ | 211,500 | |||||||||||||
$ | 200 | Total Convertible Bonds (cost $202,119) | 211,500 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
CORPORATE BONDS – 66.7% | ||||||||||||||||||||
Aerospace & Defense – 1.3% | ||||||||||||||||||||
$ | 1,000 | TransDigm Inc., 144A | 7.750% | 12/15/18 | B– | $ | 1,073,751 | |||||||||||||
Auto Components – 0.6% | ||||||||||||||||||||
500 | Tenneco Inc. | 7.750% | 8/15/18 | B+ | 533,751 | |||||||||||||||
Chemicals – 1.8% | ||||||||||||||||||||
500 | Ferro Corporation | 7.875% | 8/15/18 | B | 530,000 | |||||||||||||||
200 | Hexion US Finance Corporation | 8.875% | 2/01/18 | B3 | 211,500 | |||||||||||||||
200 | Phibro Animal Health Corporation, 144A | 9.250% | 7/01/18 | B– | 213,500 | |||||||||||||||
500 | PolyOne Corporation | 7.375% | 9/15/20 | Ba3 | 526,250 | |||||||||||||||
1,400 | Total Chemicals | 1,481,250 | ||||||||||||||||||
Commercial Services & Supplies – 2.4% | ||||||||||||||||||||
2,000 | McJunkin Red Man Corporation, 144A | 9.500% | 12/15/16 | B– | 2,025,000 | |||||||||||||||
Communications Equipment – 1.4% | ||||||||||||||||||||
1,000 | Avaya Inc., 144A | 7.000% | 4/01/19 | B1 | 975,000 | |||||||||||||||
200 | Avaya Inc. | 10.125% | 11/01/15 | CCC+ | 204,500 | |||||||||||||||
1,200 | Total Communications Equipment | 1,179,500 | ||||||||||||||||||
Computers & Peripherals – 1.0% | ||||||||||||||||||||
800 | Seagate HDD Cayman, 144A | 7.750% | 12/15/18 | BB+ | 828,000 | |||||||||||||||
Diversified Financial Services – 4.1% | ||||||||||||||||||||
500 | Ally Financial Inc., 144A | 7.500% | 9/15/20 | B1 | 533,125 | |||||||||||||||
1,000 | AMO Escrow Corporation, 144A | 11.500% | 12/15/17 | B | 1,067,500 | |||||||||||||||
500 | CIT Group Inc. | 7.000% | 5/10/15 | B+ | 504,375 | |||||||||||||||
400 | CIT Group Inc. | 7.000% | 5/01/17 | B+ | 400,500 | |||||||||||||||
800 | Energy Future Intermediate Holding Company LLC | 10.000% | 12/01/20 | B | 847,741 | |||||||||||||||
3,200 | Total Diversified Financial Services | 3,353,241 | ||||||||||||||||||
Diversified Telecommunication Services – 8.1% | ||||||||||||||||||||
1,500 | Cincinnati Bell Inc. | 8.375% | 10/15/20 | B | 1,473,750 | |||||||||||||||
200 | Insight Communications, 144A | 9.375% | 7/15/18 | B– | 222,000 | |||||||||||||||
1,000 | IntelSat Jackson Holdings, 144A, (WI/DD) | 7.250% | 4/01/19 | B | 1,001,250 | |||||||||||||||
1,000 | IntelSat Jackson Holdings, 144A, (WI/DD) | 7.500% | 4/01/21 | B | 1,002,500 | |||||||||||||||
2,000 | Nortel Networks Limited | 0.000% | 7/15/11 | N/R | 1,735,000 | |||||||||||||||
1,000 | Windstream Corporation, 144A | 7.500% | 4/01/23 | Ba3 | 985,000 | |||||||||||||||
250 | Windstream Corporation | 8.125% | 9/01/18 | Ba3 | 266,875 | |||||||||||||||
6,950 | Total Diversified Telecommunication Services | 6,686,375 | ||||||||||||||||||
Electric Utilities – 0.8% | ||||||||||||||||||||
400 | Calpine Corporation, 144A | 7.875% | 7/31/20 | B+ | 425,000 | |||||||||||||||
200 | Energy Future Holdings | 10.250% | 1/15/20 | B | 211,935 | |||||||||||||||
600 | Total Electric Utilities | 636,935 |
Nuveen Investments | 51 |
Portfolio of Investments (Unaudited)
Nuveen Symphony Credit Opportunities Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Energy Equipment & Services – 1.3% | ||||||||||||||||||||
$ | 1,000 | Trinidad Drilling Limited, 144A | 7.875% | 1/15/19 | BB– | $ | 1,055,000 | |||||||||||||
Food & Staples Retailing – 0.6% | ||||||||||||||||||||
500 | Rite Aid Corporation | 8.000% | 8/15/20 | B+ | 529,375 | |||||||||||||||
Food Products – 2.5% | ||||||||||||||||||||
2,000 | Blue Merger Sub Inc., 144A | 7.625% | 2/15/19 | B– | 2,027,500 | |||||||||||||||
Health Care Equipment & Supplies – 1.3% | ||||||||||||||||||||
1,000 | Biomet Inc. | 11.625% | 10/15/17 | B– | 1,115,000 | |||||||||||||||
Health Care Providers & Services – 3.7% | ||||||||||||||||||||
1,000 | Aviv Healthcare Properties LP, 144A | 7.750% | 2/15/19 | B+ | 1,042,500 | |||||||||||||||
200 | Capella Healthcare Inc., 144A | 9.250% | 7/01/17 | B | 213,000 | |||||||||||||||
1,000 | HealthSouth Corporation | 7.750% | 9/15/22 | B+ | 1,040,000 | |||||||||||||||
250 | Select Medical Corporation | 7.625% | 2/01/15 | B– | 254,375 | |||||||||||||||
500 | UHS Escrow Corporation, 144A | 7.000% | 10/01/18 | B+ | 516,250 | |||||||||||||||
2,950 | Total Health Care Providers & Services | 3,066,125 | ||||||||||||||||||
Health Care Technology – 0.6% | ||||||||||||||||||||
500 | MedAssets Inc., 144A | 8.000% | 11/15/18 | B3 | 511,250 | |||||||||||||||
Hotels, Restaurants & Leisure – 1.7% | ||||||||||||||||||||
200 | Harrah’s Operating Company, Inc. | 11.250% | 6/01/17 | B | 227,250 | |||||||||||||||
500 | Harrah’s Operating Company, Inc. | 10.000% | 12/15/18 | N/R | 456,250 | |||||||||||||||
200 | Pinnacle Entertainment Inc. | 8.750% | 5/15/20 | B | 208,000 | |||||||||||||||
500 | Scientific Games Corporation, 144A | 8.125% | 9/15/18 | BB– | 527,500 | |||||||||||||||
1,400 | Total Hotels, Restaurants & Leisure | 1,419,000 | ||||||||||||||||||
Household Durables – 0.6% | ||||||||||||||||||||
500 | Reynolds Group, 144A | 6.875% | 2/15/21 | BB | 503,750 | |||||||||||||||
Household Products – 0.3% | ||||||||||||||||||||
200 | Central Garden & Pet Company | 8.250% | 3/01/18 | B+ | 209,500 | |||||||||||||||
Independent Power Producers & Energy Traders – 1.3% | ||||||||||||||||||||
1,000 | NRG Energy Inc., 144A | 7.625% | 1/15/18 | BB– | 1,037,500 | |||||||||||||||
IT Services – 3.7% | ||||||||||||||||||||
2,000 | First Data Corporation, 144A, (WI/DD) | 7.375% | 6/15/19 | B+ | 2,032,500 | |||||||||||||||
800 | First Data Corporation | 9.875% | 9/24/15 | B– | 820,000 | |||||||||||||||
200 | Seagate HDD Cayman, 144A | 6.875% | 5/01/20 | BB+ | 199,500 | |||||||||||||||
3,000 | Total IT Services | 3,052,000 | ||||||||||||||||||
Machinery – 1.5% | ||||||||||||||||||||
250 | Accuride Corporation | 9.500% | 8/01/18 | B | 278,125 | |||||||||||||||
1,000 | NES Rental Holdings Inc., 144A | 12.250% | 4/15/15 | CCC+ | 982,500 | |||||||||||||||
1,250 | Total Machinery | 1,260,625 | ||||||||||||||||||
Media – 7.7% | ||||||||||||||||||||
1,000 | Charter Communications, CCO Holdings LLC | 7.000% | 1/15/19 | B+ | 1,025,000 | |||||||||||||||
500 | Clear Channel Communications, Inc. | 10.750% | 8/01/16 | CCC– | 476,250 | |||||||||||||||
500 | Clear Channel Communications, Inc. | 6.875% | 6/15/18 | CCC– | 352,500 | |||||||||||||||
400 | Entravision Communications Corporation | 8.750% | 8/01/17 | B1 | 426,000 | |||||||||||||||
500 | Kabel BW Erste Beteilgungs GmbH, 144A | 7.500% | 3/15/19 | B+ | 512,500 | |||||||||||||||
500 | Nielsen Finance LLC Co., 144A | 7.750% | 10/15/18 | B+ | 536,250 | |||||||||||||||
2,000 | Readers Digest Association | 9.500% | 2/15/17 | B1 | 2,065,000 | |||||||||||||||
1,000 | TL Acquisitions Inc., 144A | 10.500% | 1/15/15 | CCC+ | 1,020,000 | |||||||||||||||
6,400 | Total Media | 6,413,500 |
52 | Nuveen Investments |
Principal Amount (000) | Description (1) | Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Metals & Mining – 0.7% | ||||||||||||||||||||
$ | 500 | Novelis Inc., 144A | 8.750% | 12/15/20 | B | $ | 550,000 | |||||||||||||
Multi-Line Retail – 0.3% | ||||||||||||||||||||
200 | Neiman Marcus Group Inc., Term Loan | 9.000% | 10/15/15 | B– | 209,000 | |||||||||||||||
Oil, Gas & Consumable Fuels – 3.7% | ||||||||||||||||||||
200 | Chaparral Energy Inc. | 8.875% | 2/01/17 | B– | 210,000 | |||||||||||||||
600 | Energy XXI Gulf Coast Inc., 144A | 7.750% | 6/15/19 | B | 601,500 | |||||||||||||||
1,000 | Genesis Energy LP, 144A | 7.875% | 12/15/18 | B+ | 1,010,000 | |||||||||||||||
1,000 | Venoco Inc., 144A | 8.875% | 2/15/19 | B | 1,000,000 | |||||||||||||||
250 | Western Refining Inc., 144A | 10.750% | 6/15/14 | B3 | 270,000 | |||||||||||||||
3,050 | Total Oil, Gas & Consumable Fuels | 3,091,500 | ||||||||||||||||||
Paper & Forest Products – 2.7% | ||||||||||||||||||||
1,500 | Catalyst Paper Corporation, 144A | 11.000% | 12/15/16 | B3 | 1,507,500 | |||||||||||||||
1,000 | Norske Skog Canada Limited | 7.375% | 3/01/14 | Caa2 | 767,500 | |||||||||||||||
2,500 | Total Paper & Forest Products | 2,275,000 | ||||||||||||||||||
Pharmaceuticals – 1.9% | ||||||||||||||||||||
500 | Valeant Pharmaceuticals International, 144A | 7.000% | 10/01/20 | BB– | 485,000 | |||||||||||||||
1,000 | Warner Chilcott Company LLC, 144A | 7.750% | 9/15/18 | BB | 1,047,500 | |||||||||||||||
1,500 | Total Pharmaceuticals | 1,532,500 | ||||||||||||||||||
Road & Rail – 0.9% | ||||||||||||||||||||
200 | Florida East Railway Corporation, 144A | 8.125% | 2/01/17 | B– | 208,750 | |||||||||||||||
500 | Swift Services Holdings Inc., 144A | 10.000% | 11/15/18 | B– | 542,500 | |||||||||||||||
700 | Total Road & Rail | 751,250 | ||||||||||||||||||
Semiconductors & Equipment – 0.3% | ||||||||||||||||||||
250 | Advanced Micro Devices, Inc. | 7.750% | 8/01/20 | Ba3 | 256,875 | |||||||||||||||
Specialty Retail – 4.4% | ||||||||||||||||||||
700 | Brookstone Company Inc., 144A | 13.000% | 10/15/14 | CCC+ | 628,250 | |||||||||||||||
1,000 | Claires Stores, Inc. | 10.500% | 6/01/17 | CCC | 985,000 | |||||||||||||||
2,000 | Toys “R” Us, Inc. | 7.375% | 10/15/18 | B3 | 2,005,000 | |||||||||||||||
3,700 | Total Specialty Retail | 3,618,250 | ||||||||||||||||||
Textiles, Apparel & Luxury Goods – 1.6% | ||||||||||||||||||||
1,000 | Perry Ellis International | 7.875% | 4/01/19 | B+ | 1,035,000 | |||||||||||||||
250 | Polymer Group Inc., 144A | 7.750% | 2/01/19 | B1 | 257,812 | |||||||||||||||
1,250 | Total Textiles, Apparel & Luxury Goods | 1,292,812 | ||||||||||||||||||
Wireless Telecommunication Services – 1.9% | ||||||||||||||||||||
1,000 | Buccaneer Merger Sub Inc. Syniverse, 144A | 9.125% | 1/15/19 | B– | 1,059,999 | |||||||||||||||
500 | Clearwire Communications Finance, 144A | 12.000% | 12/01/15 | B2 | 539,999 | |||||||||||||||
1,500 | Total Wireless Telecommunication Services | 1,599,998 | ||||||||||||||||||
$ | 54,500 | Total Corporate Bonds (cost $53,701,622) | 55,175,113 | |||||||||||||||||
Principal Amount (000) | Description (1) | Weighted Average Coupon | Maturity (3) | Ratings (2) | Value | |||||||||||||||
VARIABLE RATE SENIOR LOAN INTERESTS – 27.7% (4) | ||||||||||||||||||||
Aerospace & Defense – 0.3% | ||||||||||||||||||||
$ | 212 | Transdigm Inc., Term Loan | 4.000% | 6/30/17 | Ba2 | $ | 214,124 | |||||||||||||
Airlines – 0.6% | ||||||||||||||||||||
247 | Delta Air Lines, Inc., Second Lien Term Loan | 3.506% | 4/30/14 | B | 245,303 | |||||||||||||||
246 | United Air Lines Inc., Term Loan B | 2.313% | 2/01/14 | BB– | 240,825 | |||||||||||||||
493 | Total Airlines | 486,128 |
Nuveen Investments | 53 |
Portfolio of Investments (Unaudited)
Nuveen Symphony Credit Opportunities Fund (continued)
March 31, 2011
Principal Amount (000) | Description (1) | Weighted Average Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Biotechnology – 0.3% | ||||||||||||||||||||
$ | 300 | Grifols, Term Loan, (WI/DD) | TBD | TBD | BB | $ | 302,561 | |||||||||||||
Building Products – 0.4% | ||||||||||||||||||||
332 | Goodman Global Inc., Term Loan | 5.750% | 10/28/16 | B+ | 334,127 | |||||||||||||||
Chemicals – 0.6% | ||||||||||||||||||||
499 | Univar, Inc., Term Loan | 5.000% | 6/30/17 | B | 501,333 | |||||||||||||||
Communications Equipment – 3.2% | ||||||||||||||||||||
831 | Avaya Inc., Term Loan B3 | 3.061% | 10/27/14 | B1 | 812,031 | |||||||||||||||
414 | Avaya Inc., Term Loan B1 | 4.811% | 10/26/17 | B1 | 401,068 | |||||||||||||||
750 | CommScope Inc., Term Loan | 5.000% | 1/14/18 | BB | 756,094 | |||||||||||||||
650 | Intelsat Jackson Holdings, Term Loan B | 5.250% | 4/02/18 | BB– | 655,127 | |||||||||||||||
2,645 | Total Communications Equipment | 2,624,320 | ||||||||||||||||||
Diversified Financial Services – 0.4% | ||||||||||||||||||||
344 | Pinafore LLC, Term Loan | 4.250% | 9/29/16 | BB | 346,262 | |||||||||||||||
Electronic Equipment & Instruments – 0.6% | ||||||||||||||||||||
500 | NDS Group, Ltd., Term Loan | 4.000% | 3/10/18 | Ba2 | 499,219 | |||||||||||||||
Food & Staples Retailing – 2.3% | ||||||||||||||||||||
1,995 | U.S. Foodservice, Inc., Term Loan | 2.753% | 7/03/14 | B2 | 1,938,160 | |||||||||||||||
Food Products – 0.6% | ||||||||||||||||||||
498 | Pierre Foods Inc., Term Loan | 7.000% | 9/30/16 | B+ | 500,713 | |||||||||||||||
Health Care Providers & Services – 3.1% | ||||||||||||||||||||
458 | Kindred Healthcare, Term Loan, (WI/DD) | TBD | TBD | Ba3 | 457,044 | |||||||||||||||
501 | LifeCare Holdings Inc., Term Loan | 8.063% | 2/01/16 | B2 | 504,827 | |||||||||||||||
385 | MultiPlan, Inc., Term Loan B | 4.750% | 8/26/17 | Ba3 | 386,490 | |||||||||||||||
750 | National MENTOR Holdings, Inc., Tranche B | 7.000% | 2/09/17 | B+ | 736,250 | |||||||||||||||
248 | Skilled Healthcare Group Inc., Term Loan | 5.250% | 4/09/16 | B+ | 248,379 | |||||||||||||||
230 | Universal Health Services, Inc., Term Loan B | 4.000% | 11/15/16 | BB+ | 231,330 | |||||||||||||||
2,572 | Total Health Care Providers & Services | 2,564,320 | ||||||||||||||||||
Hotels, Restaurants & Leisure – 1.0% | ||||||||||||||||||||
449 | Burger King Corporation, Tranche B | 4.500% | 10/19/16 | BB– | 448,833 | |||||||||||||||
350 | Six Flags Theme Parks, Inc., Tranche B, Term Loan | 5.250% | 6/30/16 | BB | 353,412 | |||||||||||||||
799 | Total Hotels, Restaurants & Leisure | 802,245 | ||||||||||||||||||
Household Products – 0.6% | ||||||||||||||||||||
499 | Visant Corporation, Term Loan | 5.250% | 12/22/16 | B3 | 498,937 | |||||||||||||||
IT Services – 2.4% | ||||||||||||||||||||
500 | Attachmate Corporation, Term Loan, (WI/DD) | TBD | TBD | BB– | 498,125 | |||||||||||||||
239 | First Data Corporation, Term Loan B2 | 3.002% | 9/24/14 | B+ | 229,290 | |||||||||||||||
367 | Infor Global Solutions Intermediate Holdings, Ltd., Second Lien Delayed Draw | 6.496% | 3/02/14 | CCC+ | 341,000 | |||||||||||||||
633 | Infor Global Solutions Intermediate Holdings, Ltd., Term Loan, Second Lien | 6.496% | 3/02/14 | CCC+ | 589,000 | |||||||||||||||
300 | Syniverse Holdings, Inc., Term Loan | 5.250% | 12/21/17 | BB– | 302,719 | |||||||||||||||
2,039 | Total IT Services | 1,960,134 | ||||||||||||||||||
Media – 1.2% | ||||||||||||||||||||
312 | Bresnan Broadband Holdings LLC, Term Loan B | 4.500% | 12/14/17 | BB+ | 314,154 | |||||||||||||||
1,000 | Tribune Company, Term Loan B, (5), (6) | 0.000% | 6/04/14 | Ca | 699,375 | |||||||||||||||
1,312 | Total Media | 1,013,529 |
54 | Nuveen Investments |
Principal Amount (000) | Description (1) | Weighted Average Coupon | Maturity | Ratings (2) | Value | |||||||||||||||
Metals & Mining – 1.3% | ||||||||||||||||||||
$ | 499 | Novelis Inc., Term Loan | 4.000% | 3/10/17 | BB– | $ | 500,664 | |||||||||||||
583 | Walter Energy, Term Loan | 4.000% | 3/08/18 | BB– | 587,854 | |||||||||||||||
1,082 | Total Metals & Mining | 1,088,518 | ||||||||||||||||||
Oil, Gas & Consumable Fuels – 0.7% | ||||||||||||||||||||
567 | Western Refining, Inc., Term Loan, (WI/DD) | TBD | TBD | B | 571,413 | |||||||||||||||
Personal Products – 0.4% | ||||||||||||||||||||
311 | NBTY Inc, Term Loan B | 4.250% | 10/01/17 | BB– | 312,118 | |||||||||||||||
Pharmaceuticals – 0.3% | ||||||||||||||||||||
279 | ConvaTec Healthcare, Term Loan | 5.750% | 12/30/16 | Ba3 | 280,433 | |||||||||||||||
Real Estate Management & Development – 0.6% | ||||||||||||||||||||
499 | Capital Automotive LP, Tranche B | 5.000% | 3/13/17 | Ba3 | 495,685 | |||||||||||||||
Road & Rail – 0.8% | ||||||||||||||||||||
649 | Swift Transportation Company, Inc., Term Loan | 6.000% | 12/21/16 | BB– | 652,528 | |||||||||||||||
Semiconductors & Equipment – 0.6% | ||||||||||||||||||||
500 | NXP Semiconductor LLC, Term Loan | 4.500% | 3/04/17 | B– | 505,938 | |||||||||||||||
Specialty Retail – 4.9% | ||||||||||||||||||||
250 | Burlington Coat Factory Warehouse Corporation, Term Loan B | 6.250% | 2/23/17 | B– | 247,226 | |||||||||||||||
828 | Claires Stores, Inc., Term Loan B | 3.063% | 5/29/14 | B | 792,010 | |||||||||||||||
249 | Gymboree Corporation, Term Loan | 5.000% | 2/23/18 | B+ | 249,635 | |||||||||||||||
300 | J Crew Group, Term Loan | 4.750% | 3/07/18 | B1 | 299,383 | |||||||||||||||
458 | Jo-Ann Stores, Inc., Term Loan | 4.750% | 3/15/18 | B+ | 455,298 | |||||||||||||||
1,980 | Petco Animal Supplies, Inc., Term Loan | 4.500% | 11/24/17 | B1 | 1,987,949 | |||||||||||||||
4,065 | Total Specialty Retail | 4,031,501 | ||||||||||||||||||
Wireless Telecommunication Services – 0.5% | ||||||||||||||||||||
482 | Clear Channel Communications Inc., Tranche B, Term Loan | 3.896% | 11/13/15 | CCC+ | 424,907 | |||||||||||||||
$ | 23,473 | Total Variable Rate Senior Loan Interests (cost $22,497,034) | 22,949,153 | |||||||||||||||||
Principal Amount (000) | Description (1) | Coupon | Maturity | Value | ||||||||||||||||
SHORT-TERM INVESTMENTS – 9.6% | ||||||||||||||||||||
$ | 7,912 | Repurchase Agreement with State Street Bank, dated 3/31/11, repurchase price $7,911,797, collateralized by $8,075,000 U.S. Treasury Bills, 0.000%, due 4/21/11, value $8,074,774 | 0.010% | 4/01/11 | $ | 7,911,795 | ||||||||||||||
Total Short-Term Investments (cost $7,911,795) | 7,911,795 | |||||||||||||||||||
Total Investments (cost $84,312,570) – 104.3% | 86,247,561 | |||||||||||||||||||
Other Assets Less Liabilities – (4.3)% | (3,563,958) | |||||||||||||||||||
Net Assets – 100% | $ | 82,683,603 |
Nuveen Investments | 55 |
Portfolio of Investments (Unaudited)
Nuveen Symphony Credit Opportunities Fund (continued)
March 31, 2011
For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) | All percentages shown in the Portfolio of Investments are based on net assets. |
(2) | Ratings: Using the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. |
(3) | Senior Loans generally are subject to mandatory and/or optional prepayment. Because of these mandatory prepayment conditions and because there may be significant economic incentives for a Borrower to prepay, prepayments of Senior Loans may occur. As a result, the actual remaining maturity of Senior Loans held may be substantially less than the stated maturities shown. |
(4) | Senior Loans generally pay interest at rates which are periodically adjusted by reference to a base short-term, floating lending rate plus an assigned fixed rate. These floating lending rates are generally (i) the lending rate referenced by the London Inter-Bank Offered Rate (“LIBOR”), or (ii) the prime rate offered by one or more major United States banks. |
Senior Loans may be considered restricted in that the Fund ordinarily is contractually obligated to receive approval from the Agent Bank and/or Borrower prior to the disposition of a Senior Loan. |
(5) | At or subsequent to March 31, 2011, this issue was under the protection of the Federal Bankruptcy Court. |
(6) | Non-income producing, in the case of a Senior Loan, denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy. |
N/R | Not rated. |
WI/DD | Purchased on a when-issued or delayed delivery basis. |
144A | Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
TBD | Senior Loan purchased on a when-issued or delayed-delivery basis. Certain details associated with this purchase are not known prior to the settlement date of the transaction. In addition, Senior Loans typically trade without accrued interest and therefore a weighted average coupon rate is not available prior to settlement. At settlement, if still unknown, the Borrower or counterparty will provide the Fund with the final weighted average coupon rate and maturity date. |
See accompanying notes to financial statements.
56 | Nuveen Investments |
Statement of Assets and Liabilities (Unaudited)
March 31, 2011
Short Duration | Multi-Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Assets | ||||||||||||||||
Investments, at value (cost $181,230,375, $78,949,923, | $ | 183,387,595 | $ | 80,477,962 | $ | 161,488,847 | $ | 78,335,766 | ||||||||
Short-term investments (cost $6,415,206, $15,248,002, $6,438,821 and $7,911,795, respectively) | 6,378,347 | 15,248,002 | 6,438,821 | 7,911,795 | ||||||||||||
Cash | — | — | — | 39,501 | ||||||||||||
Cash denominated in foreign currencies (cost $27,303, | 28,163 | 65,672 | — | — | ||||||||||||
Unrealized appreciation on: | ||||||||||||||||
Forward foreign currency exchange contracts | 429,278 | 218,417 | — | — | ||||||||||||
Interest rate swaps | — | 159,572 | — | — | ||||||||||||
Credit default swaps | 62,706 | 25,876 | 442,614 | — | ||||||||||||
Credit default swaps premiums paid | 183,798 | 74,880 | — | — | ||||||||||||
Receivables: | ||||||||||||||||
Due from broker (net of amounts deemed uncollectible of $14,342, | 51,088 | 82,768 | — | — | ||||||||||||
Dividends | — | — | 7,789 | — | ||||||||||||
Interest | 1,182,808 | 827,809 | 3,561,197 | 1,106,246 | ||||||||||||
Investments sold | 41,173,795 | 14,904,181 | 8,735,580 | 940,658 | ||||||||||||
Paydowns | — | 12,857 | — | — | ||||||||||||
Shares sold | 318,425 | 505,085 | 714,100 | 1,887,110 | ||||||||||||
Variation margin on futures contracts | 11,438 | 6,157 | — | — | ||||||||||||
Other assets | 201 | 109 | 127 | 10 | ||||||||||||
Total assets | 233,207,642 | 112,609,347 | 181,389,075 | 90,221,086 | ||||||||||||
Liabilities | ||||||||||||||||
Cash overdraft | 49,494 | 81,979 | — | — | ||||||||||||
Call options written, at value (premiums received $0, $7,831, $0 and $0, respectively) | — | 4,250 | — | — | ||||||||||||
Unrealized depreciation on: | ||||||||||||||||
Forward foreign currency exchange contracts | 226,934 | 122,439 | — | — | ||||||||||||
Interest rate swaps | — | 67,060 | — | — | ||||||||||||
Interest rate swaps premiums received | — | 111,353 | — | — | ||||||||||||
Credit default swaps premiums received | 62,700 | 26,600 | 480,700 | — | ||||||||||||
Payables: | ||||||||||||||||
Dividends | 183,739 | 99,959 | 378,023 | 141,691 | ||||||||||||
Due to broker | — | — | 381,691 | — | ||||||||||||
Investments purchased | 42,534,222 | 29,030,846 | 12,876,147 | 7,198,632 | ||||||||||||
Shares redeemed | 912,404 | 1,478,057 | 368,359 | 83,670 | ||||||||||||
Accrued expenses: | ||||||||||||||||
Management fees | 62,985 | 20,527 | 95,991 | 42,991 | ||||||||||||
12b-1 distribution and service fees | 68,810 | 26,444 | 47,461 | 9,974 | ||||||||||||
Other | 125,241 | 104,942 | 165,233 | 60,525 | ||||||||||||
Total liabilities | 44,226,529 | 31,174,456 | 14,793,605 | 7,537,483 | ||||||||||||
Net assets | $ | 188,981,113 | $ | 81,434,891 | $ | 166,595,470 | $ | 82,683,603 | ||||||||
Class A Shares | ||||||||||||||||
Net assets | $ | 72,557,304 | $ | 29,414,741 | $ | 44,410,627 | $ | 14,687,032 | ||||||||
Shares outstanding | 3,670,897 | 1,447,280 | 2,439,336 | 693,082 | ||||||||||||
Net asset value per share | $ | 19.77 | $ | 20.32 | $ | 18.21 | $ | 21.19 | ||||||||
Offering price per share (net asset value per share plus | $ | 20.23 | $ | 21.22 | $ | 19.12 | $ | 22.25 | ||||||||
Class B Shares | ||||||||||||||||
Net assets | N/A | $ | 1,929,079 | $ | 1,626,502 | N/A | ||||||||||
Shares outstanding | N/A | 94,397 | 89,445 | N/A | ||||||||||||
Net asset value and offering price per share | N/A | $ | 20.44 | $ | 18.18 | N/A | ||||||||||
Class C Shares | ||||||||||||||||
Net assets | $ | 61,799,751 | $ | 21,577,329 | $ | 43,008,299 | $ | 8,651,101 | ||||||||
Shares outstanding | 3,122,681 | 1,059,115 | 2,368,427 | 408,683 | ||||||||||||
Net asset value and offering price per share | $ | 19.79 | $ | 20.37 | $ | 18.16 | $ | 21.17 | ||||||||
Class R3 Shares | ||||||||||||||||
Net assets | $ | 536,669 | $ | 145,629 | $ | 88,906 | $ | 1,326,630 | ||||||||
Shares outstanding | 27,172 | 7,164 | 4,887 | 62,641 | ||||||||||||
Net asset value and offering price per share | $ | 19.75 | $ | 20.33 | $ | 18.19 | $ | 21.18 | ||||||||
Class I Shares | ||||||||||||||||
Net assets | $ | 54,087,389 | $ | 28,368,113 | $ | 77,461,136 | $ | 58,018,840 | ||||||||
Shares outstanding | 2,741,659 | 1,397,854 | 4,259,187 | 2,736,970 | ||||||||||||
Net asset value and offering price per share | $ | 19.73 | $ | 20.29 | $ | 18.19 | $ | 21.20 | ||||||||
Net Assets Consist of: | ||||||||||||||||
Capital paid-in | $ | 187,206,995 | $ | 80,479,499 | $ | 158,930,732 | $ | 80,485,193 | ||||||||
Undistributed (Over-distribution of) net investment income | (2,419,765 | ) | (833,577 | ) | (372,161 | ) | 41,460 | |||||||||
Accumulated net realized gain (loss) | 1,867,129 | 39,550 | 4,063,609 | 221,959 | ||||||||||||
Net unrealized appreciation (depreciation) | 2,326,754 | 1,749,419 | 3,973,290 | 1,934,991 | ||||||||||||
Net assets | $ | 188,981,113 | $ | 81,434,891 | $ | 166,595,470 | $ | 82,683,603 | ||||||||
Authorized shares | Unlimited | Unlimited | Unlimited | Unlimited | ||||||||||||
Per value per share | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.01 |
N/A – Short Duration and Symphony Credit Opportunities do not offer Class B Shares.
See accompanying notes to financial statements.
Nuveen Investments | 57 |
Statement of Operations (Unaudited)
Six Months Ended March 31, 2011
Short Duration | Multi-Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Investment Income | $ | 2,728,988 | $ | 1,730,292 | $ | 7,063,500 | $ | 1,824,743 | ||||||||
Expenses | ||||||||||||||||
Management fees | 374,886 | 205,386 | 461,658 | 155,164 | ||||||||||||
12b-1 service fees – Class A | 104,853 | 37,324 | 52,248 | 10,553 | ||||||||||||
12b-1 distribution and service fees – Class B | N/A | 11,023 | 7,655 | N/A | ||||||||||||
12b-1 distribution and service fees – Class C | 285,739 | 106,428 | 194,215 | 19,732 | ||||||||||||
12b-1 distribution and service fees – Class R3 | 1,571 | 406 | 220 | 3,264 | ||||||||||||
Shareholders’ servicing agent fees and expenses | 60,927 | 28,416 | 97,645 | 9,141 | ||||||||||||
Custodian’s fees and expenses | 52,519 | 43,338 | 17,231 | 8,669 | ||||||||||||
Trustees’ fees and expenses | 2,210 | 964 | 1,680 | 495 | ||||||||||||
Professional fees | 20,225 | 20,016 | 21,306 | 28,068 | ||||||||||||
Shareholders’ reports – printing and mailing expenses | 26,094 | 11,469 | 30,072 | 9,732 | ||||||||||||
Federal and state registration fees | 25,718 | 33,067 | 51,965 | 36,099 | ||||||||||||
Other expenses | 8,027 | 8,234 | 11,272 | 1,520 | ||||||||||||
Total expenses before custodian fee credit and expense reimbursement | 962,769 | 506,071 | 947,167 | 282,437 | ||||||||||||
Custodian fee credit | (205 | ) | (73 | ) | (534 | ) | (86 | ) | ||||||||
Expense reimbursement | (8,487 | ) | (59,953 | ) | (52 | ) | (44,250 | ) | ||||||||
Net expenses | 954,077 | 446,045 | 946,581 | 238,101 | ||||||||||||
Net investment income | 1,774,911 | 1,284,247 | 6,116,919 | 1,586,642 | ||||||||||||
Realized and Unrealized Gain (Loss) | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments and foreign currency | 1,790,106 | 540,227 | 9,118,643 | 274,234 | ||||||||||||
Forward foreign currency exchange contracts | (34,656 | ) | 108,129 | — | — | |||||||||||
Futures contracts | 778,650 | (77,744 | ) | — | — | |||||||||||
Options purchased | — | (17,029 | ) | — | — | |||||||||||
Swaps | 1,257,294 | 396,680 | 1,587,537 | — | ||||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||||||
Investments and foreign currency | (3,341,067 | ) | (2,595,627 | ) | (4,544,479 | ) | 1,375,521 | |||||||||
Forward foreign currency exchange contracts | 283,767 | 141,607 | — | — | ||||||||||||
Futures contracts | 174,684 | 19,594 | — | — | ||||||||||||
Options written | — | 3,581 | — | — | ||||||||||||
Swaps | (554,178 | ) | 16,864 | (10,728 | ) | — | ||||||||||
Net realized and unrealized gain (loss) | 354,600 | (1,463,718 | ) | 6,150,973 | 1,649,755 | |||||||||||
Net increase (decrease) in net assets from operations | $ | 2,129,511 | $ | (179,471 | ) | $ | 12,267,892 | $ | 3,236,397 |
N/A – Short Duration and Symphony Credit Opportunities do not offer Class B Shares.
See accompanying notes to financial statements.
58 | Nuveen Investments |
Statement of Changes in Net Assets (Unaudited)
Short Duration | Multi-Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||||||||||||||||||
Six Months Ended 3/31/2011 | Year Ended 9/30/10 | Six Months Ended 3/31/2011 | Year Ended 9/30/10 | Six Months Ended 3/31/2011 | Year Ended 9/30/10 | Six Months Ended 3/31/2011 | For the Period 4/28/10 (commencement of operations) through 9/30/10 | |||||||||||||||||||||||||
Operations | ||||||||||||||||||||||||||||||||
Net investment income | $ | 1,774,911 | $ | 3,659,523 | $ | 1,284,247 | $ | 2,544,278 | $ | 6,116,919 | $ | 12,580,031 | $ | 1,586,642 | $ | 273,603 | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||||||||||||||||||
Investments and foreign currency | 1,790,106 | 2,086,606 | 540,227 | 2,255,898 | 9,118,643 | 16,797,698 | 274,234 | 124,820 | ||||||||||||||||||||||||
Forward foreign currency exchange contracts | (34,656 | ) | 22,777 | 108,129 | (72,221 | ) | — | — | — | — | ||||||||||||||||||||||
Futures contracts | 778,650 | (2,328,438 | ) | (77,744 | ) | (436,947 | ) | — | — | — | — | |||||||||||||||||||||
Options purchased | — | — | (17,029 | ) | — | — | — | — | — | |||||||||||||||||||||||
Options written | — | 20,160 | — | 12,096 | — | — | — | — | ||||||||||||||||||||||||
Swaps | 1,257,294 | 198,509 | 396,680 | (344,998 | ) | 1,587,537 | (79,470 | ) | — | — | ||||||||||||||||||||||
Swaptions written | — | 10,130 | — | 5,559 | — | — | — | — | ||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||||||||||||||||||||||
Investments and foreign currency | (3,341,067 | ) | 2,868,064 | (2,595,627 | ) | 1,949,676 | (4,544,479 | ) | (5,683,655 | ) | 1,375,521 | 559,470 | ||||||||||||||||||||
Forward foreign currency exchange contracts | 283,767 | (45,169 | ) | 141,607 | (6,777 | ) | — | — | — | — | ||||||||||||||||||||||
Futures contracts | 174,684 | (109,828 | ) | 19,594 | 24,994 | — | — | — | — | |||||||||||||||||||||||
Options written | — | (19,500 | ) | 3,581 | (11,700 | ) | — | — | — | — | ||||||||||||||||||||||
Swaps | (554,178 | ) | 533,943 | 16,864 | 622,286 | (10,728 | ) | 1,196,431 | — | — | ||||||||||||||||||||||
Swaptions written | — | 25,200 | — | 12,600 | — | — | — | — | ||||||||||||||||||||||||
Net increase (decrease) in net assets from operations | 2,129,511 | 6,921,977 | (179,471 | ) | 6,554,744 | 12,267,892 | 24,811,035 | 3,236,397 | 957,893 | |||||||||||||||||||||||
Distributions to Shareholders | ||||||||||||||||||||||||||||||||
From undistributed net investment income: | ||||||||||||||||||||||||||||||||
Class A | (1,203,036 | ) | (2,625,472 | ) | (576,867 | ) | (1,190,698 | ) | (1,629,521 | ) | (2,955,101 | ) | (254,287 | ) | (58,974 | ) | ||||||||||||||||
Class B | N/A | N/A | (34,315 | ) | (105,619 | ) | (54,139 | ) | (122,514 | ) | N/A | N/A | ||||||||||||||||||||
Class C | (607,446 | ) | (1,197,500 | ) | (331,280 | ) | (687,333 | ) | (1,372,016 | ) | (2,522,196 | ) | (103,084 | ) | (25,924 | ) | ||||||||||||||||
Class R3 | (8,349 | ) | (27,140 | ) | (2,969 | ) | (9,853 | ) | (3,333 | ) | (11,145 | ) | (39,508 | ) | (27,750 | ) | ||||||||||||||||
Class I | (891,439 | ) | (2,178,774 | ) | (655,831 | ) | (1,415,010 | ) | (3,094,197 | ) | (6,476,954 | ) | (1,119,583 | ) | (198,035 | ) | ||||||||||||||||
From accumulated net realized gains: | ||||||||||||||||||||||||||||||||
Class A | — | — | (714,325 | ) | (16,696 | ) | — | — | (35,150 | ) | — | |||||||||||||||||||||
Class B | N/A | N/A | (56,228 | ) | (2,306 | ) | — | — | N/A | N/A | ||||||||||||||||||||||
Class C | — | — | (529,303 | ) | (12,323 | ) | — | — | (11,027 | ) | — | |||||||||||||||||||||
Class R3 | — | — | (2,961 | ) | (171 | ) | — | — | (6,531 | ) | — | |||||||||||||||||||||
Class I | — | — | (868,440 | ) | (20,397 | ) | — | — | (121,505 | ) | — | |||||||||||||||||||||
Return of capital: | ||||||||||||||||||||||||||||||||
Class A | — | (167,732 | ) | — | — | — | — | — | — | |||||||||||||||||||||||
Class B | N/A | N/A | — | — | — | — | N/A | N/A | ||||||||||||||||||||||||
Class C | — | (76,504 | ) | — | — | — | — | — | — | |||||||||||||||||||||||
Class R3 | — | (1,734 | ) | — | — | — | — | — | — | |||||||||||||||||||||||
Class I | — | (139,195 | ) | — | — | — | — | — | — | |||||||||||||||||||||||
Decrease in net assets from distributions to shareholders | (2,710,270 | ) | (6,414,051 | ) | (3,772,519 | ) | (3,460,406 | ) | (6,153,206 | ) | (12,087,910 | ) | (1,690,675 | ) | (310,683 | ) | ||||||||||||||||
Fund Share Transactions | ||||||||||||||||||||||||||||||||
Proceeds from sale of shares | 92,400,134 | 187,057,409 | 17,808,084 | 61,002,744 | 65,545,256 | 67,376,338 | 57,343,019 | 22,696,185 | ||||||||||||||||||||||||
Proceeds from shares issued to shareholders due to reinvestment of distributions | 1,474,347 | 3,227,482 | 2,198,407 | 1,789,255 | 3,765,727 | 6,859,306 | 1,150,630 | 198,317 | ||||||||||||||||||||||||
93,874,481 | 190,284,891 | 20,006,491 | 62,791,999 | 69,310,983 | 74,235,644 | 58,493,649 | 22,894,502 | |||||||||||||||||||||||||
Cost of shares redeemed | (91,624,094 | ) | (101,120,898 | ) | (25,102,436 | ) | (23,581,255 | ) | (55,975,615 | ) | (123,964,115 | ) | (811,621 | ) | (85,859 | ) | ||||||||||||||||
Net increase (decrease) in net assets from Fund share transactions | 2,250,387 | 89,163,993 | (5,095,945 | ) | 39,210,744 | 13,335,368 | (49,728,471 | ) | 57,682,028 | 22,808,643 | ||||||||||||||||||||||
Net increase (decrease) in net assets | 1,669,628 | 89,671,919 | (9,047,935 | ) | 42,305,082 | 19,450,054 | (37,005,346 | ) | 59,227,750 | 23,455,853 | ||||||||||||||||||||||
Net assets at the beginning of period | 187,311,485 | 97,639,566 | 90,482,826 | 48,177,744 | 147,145,416 | 184,150,762 | 23,455,853 | — | ||||||||||||||||||||||||
Net assets at the end of period | $ | 188,981,113 | $ | 187,311,485 | $ | 81,434,891 | $ | 90,482,826 | $ | 166,595,470 | $ | 147,145,416 | $ | 82,683,603 | $ | 23,455,853 | ||||||||||||||||
Undistributed (Over-distribution of) net investment income at the end of period | $ | (2,419,765 | ) | $ | (1,484,406 | ) | $ | (833,577 | ) | $ | (516,562 | ) | $ | (372,161 | ) | $ | (335,874 | ) | $ | 41,460 | $ | (28,720 | ) |
N/A – Short Duration and Symphony Credit Opportunities do not offer Class B Shares.
See accompanying notes to financial statements.
Nuveen Investments | 59 |
Financial Highlights (Unaudited)
Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||||||
SHORT DURATION | ||||||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Invest- ment Income (Loss)(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Return of Capital | Total | Ending Net Asset Value | Total Return(c) | ||||||||||||||||||||||||||||||
Class A (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2011(h) | $ | 19.82 | $ | .19 | $ | .04 | $ | .23 | $ | (.28 | ) | $ | — | $ | — | $ | (.28 | ) | $ | 19.77 | 1.18 | % | ||||||||||||||||||
2010 | 19.74 | .46 | .39 | .85 | (.72 | ) | — | (0.05 | ) | (.77 | ) | 19.82 | 4.36 | |||||||||||||||||||||||||||
2009 | 19.31 | .56 | .72 | 1.28 | (.85 | ) | — | — | (.85 | ) | 19.74 | 7.02 | ||||||||||||||||||||||||||||
2008 | 19.40 | .84 | (.05 | ) | .79 | (.88 | ) | — | — | (.88 | ) | 19.31 | 4.03 | |||||||||||||||||||||||||||
2007 | 19.24 | .91 | .12 | 1.03 | (.87 | ) | — | — | (.87 | ) | 19.40 | 5.49 | ||||||||||||||||||||||||||||
2006 | 19.69 | .77 | (.14 | ) | .63 | (1.08 | ) | — | — | (1.08 | ) | 19.24 | 3.29 | |||||||||||||||||||||||||||
Class C (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2011(h) | 19.85 | .12 | .03 | .15 | (.21 | ) | — | — | (.21 | ) | 19.79 | .76 | ||||||||||||||||||||||||||||
2010 | 19.77 | .30 | .41 | .71 | (.59 | ) | — | (0.04 | ) | (.63 | ) | 19.85 | 3.65 | |||||||||||||||||||||||||||
2009 | 19.33 | .43 | .72 | 1.15 | (.71 | ) | — | — | (.71 | ) | 19.77 | 6.27 | ||||||||||||||||||||||||||||
2008 | 19.42 | .70 | (.05 | ) | .65 | (.74 | ) | — | — | (.74 | ) | 19.33 | 3.19 | |||||||||||||||||||||||||||
2007 | 19.26 | .73 | .16 | .89 | (.73 | ) | — | — | (.73 | ) | 19.42 | 4.71 | ||||||||||||||||||||||||||||
2006 | 19.69 | .63 | (.14 | ) | .49 | (.92 | ) | — | — | (.92 | ) | 19.26 | 2.54 | |||||||||||||||||||||||||||
Class R3 (8/08) |
| |||||||||||||||||||||||||||||||||||||||
2011(h) | 19.80 | .20 | .01 | .21 | (.26 | ) | — | — | (.26 | ) | 19.75 | 1.06 | ||||||||||||||||||||||||||||
2010 | 19.72 | .48 | .33 | .81 | (.69 | ) | — | (0.04 | ) | (.73 | ) | 19.80 | 4.06 | |||||||||||||||||||||||||||
2009 | 19.31 | .53 | .68 | 1.21 | (.80 | ) | — | — | (.80 | ) | 19.72 | 6.82 | ||||||||||||||||||||||||||||
2008(g) | 19.49 | — | ** | (.04 | ) | (.04 | ) | (.14 | ) | — | — | (.14 | ) | 19.31 | (.40 | ) | ||||||||||||||||||||||||
Class I (12/04)(f) |
| |||||||||||||||||||||||||||||||||||||||
2011(h) | 19.78 | .22 | .04 | .26 | (.31 | ) | — | — | (.31 | ) | 19.73 | 1.31 | ||||||||||||||||||||||||||||
2010 | 19.71 | .50 | .39 | .89 | (.77 | ) | — | (0.05 | ) | (.82 | ) | 19.78 | 4.52 | |||||||||||||||||||||||||||
2009 | 19.30 | .61 | .70 | 1.31 | (.90 | ) | — | — | (.90 | ) | 19.71 | 7.29 | ||||||||||||||||||||||||||||
2008 | 19.38 | .88 | (.03 | ) | .85 | (.93 | ) | — | — | (.93 | ) | 19.30 | 4.29 | |||||||||||||||||||||||||||
2007 | 19.21 | .92 | .17 | 1.09 | (.92 | ) | — | — | (.92 | ) | 19.38 | 5.82 | ||||||||||||||||||||||||||||
2006 | 19.68 | .77 | (.11 | ) | .66 | (1.13 | ) | — | — | (1.13 | ) | 19.21 | 3.46 |
60 | Nuveen Investments |
Ratios/Supplemental Data | ||||||||||||||||||||||
Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(d) | |||||||||||||||||||||
Ending Net Assets (000) | Expenses | Net Invest- ment Income (Loss) | Expenses | Net Invest- ment Income (Loss) | Portfolio Turnover Rate(e) | |||||||||||||||||
$ | 72,557 | .82 | %* | 1.90 | %* | .81 | %* | 1.90 | %* | 67 | % | |||||||||||
76,629 | .90 | 2.21 | .78 | 2.33 | 72 | |||||||||||||||||
47,607 | 1.14 | 2.44 | .65 | 2.93 | 117 | |||||||||||||||||
10,450 | 1.63 | 3.26 | .64 | 4.26 | 90 | |||||||||||||||||
4,101 | 1.93 | 3.37 | .62 | 4.67 | 138 | |||||||||||||||||
439 | 3.41 | 1.25 | .64 | 4.02 | 234 | |||||||||||||||||
61,800 | 1.58 | * | 1.19 | * | 1.56 | * | 1.21 | * | 67 | |||||||||||||
50,187 | 1.65 | 1.43 | 1.53 | 1.54 | 72 | |||||||||||||||||
25,215 | 1.88 | 1.73 | 1.40 | 2.21 | 117 | |||||||||||||||||
8,068 | 2.42 | 2.54 | 1.39 | 3.57 | 90 | |||||||||||||||||
2,260 | 2.42 | 2.71 | 1.38 | 3.76 | 138 | |||||||||||||||||
1,067 | 3.52 | 1.09 | 1.36 | 3.25 | 234 | |||||||||||||||||
537 | 1.07 | * | 2.00 | * | 1.06 | * | 2.01 | * | 67 | |||||||||||||
874 | 1.15 | 2.30 | 1.03 | 2.42 | 72 | |||||||||||||||||
653 | 1.38 | 2.29 | .90 | 2.77 | 117 | |||||||||||||||||
149 | 2.98 | * | (2.24 | )* | .87 | * | (.13 | )* | 90 | |||||||||||||
54,087 | .57 | * | 2.17 | * | .56 | * | 2.18 | * | 67 | |||||||||||||
59,622 | .65 | 2.42 | .53 | 2.53 | 72 | |||||||||||||||||
24,164 | .86 | 2.70 | .40 | 3.16 | 117 | |||||||||||||||||
14,827 | 1.36 | 3.52 | .39 | 4.49 | 90 | |||||||||||||||||
9,717 | 1.34 | 3.76 | .38 | 4.72 | 138 | |||||||||||||||||
9,602 | 1.44 | 3.07 | .53 | 3.97 | 234 |
(a) | Per share Net Investment Income (Loss) is calculated using the average daily shares method. |
(b) | Distributions from Capital Gains include short-term capital gains, if any. |
(c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
(d) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
(e) | Excluding dollar roll transactions, where applicable. |
(f) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(g) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
(h) | For the six months ended March 31, 2011. |
* | Annualized. |
** | Rounds to less than $.01 per share. |
See accompanying notes to financial statements.
Nuveen Investments | 61 |
Financial Highlights (Unaudited) (continued)
Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
MULTI-STRATEGY CORE BOND | ||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | |||||||||||||||||||||||||||
Class A (12/04) |
| |||||||||||||||||||||||||||||||||||
2011(h) | $ | 21.25 | $ | .32 | $ | (.33 | ) | $ | (.01 | ) | $ | (.40 | ) | $ | (.52 | ) | $ | (.92 | ) | $ | 20.32 | (.05 | )% | |||||||||||||
2010 | 20.40 | .77 | 1.14 | 1.91 | (1.04 | ) | (.02 | ) | (1.06 | ) | 21.25 | 9.49 | ||||||||||||||||||||||||
2009 | 19.06 | .87 | 1.58 | 2.45 | (.91 | ) | (.20 | ) | (1.11 | ) | 20.40 | 13.76 | ||||||||||||||||||||||||
2008 | 19.28 | .95 | (.23 | ) | .72 | (.94 | ) | — | (.94 | ) | 19.06 | 3.57 | ||||||||||||||||||||||||
2007 | 19.29 | 1.00 | (.08 | ) | .92 | (.93 | ) | — | (.93 | ) | 19.28 | 4.92 | ||||||||||||||||||||||||
2006 | 19.73 | .88 | (.34 | ) | .54 | (.98 | ) | — | (.98 | ) | 19.29 | 2.86 | ||||||||||||||||||||||||
Class B (12/04) |
| |||||||||||||||||||||||||||||||||||
2011(h) | 21.36 | .25 | (.33 | ) | (.08 | ) | (.32 | ) | (.52 | ) | (.84 | ) | 20.44 | (.42 | ) | |||||||||||||||||||||
2010 | 20.50 | .66 | 1.11 | 1.77 | (.89 | ) | (.02 | ) | (.91 | ) | 21.36 | 8.74 | ||||||||||||||||||||||||
2009 | 19.15 | .70 | 1.63 | 2.33 | (.78 | ) | (.20 | ) | (.98 | ) | 20.50 | 12.87 | ||||||||||||||||||||||||
2008 | 19.34 | .85 | (.25 | ) | .60 | (.79 | ) | — | (.79 | ) | 19.15 | 3.04 | ||||||||||||||||||||||||
2007 | 19.30 | .88 | (.06 | ) | .82 | (.78 | ) | — | (.78 | ) | 19.34 | 4.35 | ||||||||||||||||||||||||
2006 | 19.73 | .74 | (.35 | ) | .39 | (.82 | ) | — | (.82 | ) | 19.30 | 2.06 | ||||||||||||||||||||||||
Class C (12/04) |
| |||||||||||||||||||||||||||||||||||
2011(h) | 21.30 | .25 | (.34 | ) | (.09 | ) | (.32 | ) | (.52 | ) | (.84 | ) | 20.37 | (.42 | ) | |||||||||||||||||||||
2010 | 20.42 | .63 | 1.16 | 1.79 | (.89 | ) | (.02 | ) | (.91 | ) | 21.30 | 8.85 | ||||||||||||||||||||||||
2009 | 19.08 | .76 | 1.55 | 2.31 | (.77 | ) | (.20 | ) | (.97 | ) | 20.42 | 12.91 | ||||||||||||||||||||||||
2008 | 19.30 | .80 | (.23 | ) | .57 | (.79 | ) | — | (.79 | ) | 19.08 | 2.84 | ||||||||||||||||||||||||
2007 | 19.29 | .84 | (.05 | ) | .79 | (.78 | ) | — | (.78 | ) | 19.30 | 4.19 | ||||||||||||||||||||||||
2006 | 19.73 | .73 | (.35 | ) | .38 | (.82 | ) | — | (.82 | ) | 19.29 | 2.01 | ||||||||||||||||||||||||
Class R3 (8/08) |
| |||||||||||||||||||||||||||||||||||
2011(h) | 21.26 | .29 | (.33 | ) | (.04 | ) | (.37 | ) | (.52 | ) | (.89 | ) | 20.33 | (.16 | ) | |||||||||||||||||||||
2010 | 20.39 | .80 | 1.08 | 1.88 | (.99 | ) | (.02 | ) | (1.01 | ) | 21.26 | 9.35 | ||||||||||||||||||||||||
2009 | 19.04 | .80 | 1.61 | 2.41 | (.86 | ) | (.20 | ) | (1.06 | ) | 20.39 | 13.49 | ||||||||||||||||||||||||
2008(g) | 19.05 | .05 | .09 | .14 | (.15 | ) | — | (.15 | ) | 19.04 | .64 | |||||||||||||||||||||||||
Class I (12/04)(f) |
| |||||||||||||||||||||||||||||||||||
2011(h) | 21.23 | .35 | (.34 | ) | .01 | (.43 | ) | (.52 | ) | (.95 | ) | 20.29 | .03 | |||||||||||||||||||||||
2010 | 20.39 | .84 | 1.11 | 1.95 | (1.09 | ) | (.02 | ) | (1.11 | ) | 21.23 | 9.73 | ||||||||||||||||||||||||
2009 | 19.05 | .83 | 1.67 | 2.50 | (.96 | ) | (.20 | ) | (1.16 | ) | 20.39 | 14.05 | ||||||||||||||||||||||||
2008 | 19.28 | .86 | (.10 | ) | .76 | (.99 | ) | — | (.99 | ) | 19.05 | 3.83 | ||||||||||||||||||||||||
2007 | 19.26 | 1.01 | (.01 | ) | 1.00 | (.98 | ) | — | (.98 | ) | 19.28 | 5.29 | ||||||||||||||||||||||||
2006 | 19.72 | .86 | (.29 | ) | .57 | (1.03 | ) | — | (1.03 | ) | 19.26 | 3.03 |
62 | Nuveen Investments |
Ratios/Supplemental Data | ||||||||||||||||||||||
Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(d) | |||||||||||||||||||||
Ending Net Assets (000) | Expenses | Net Invest- ment Income | Expenses | Net Invest- ment Income | Portfolio Turnover Rate(e) | |||||||||||||||||
$ | 29,415 | 1.07 | %* | 2.99 | %* | .93 | %* | 3.13 | %* | 89 | % | |||||||||||
32,191 | 1.18 | 3.44 | .88 | 3.73 | 157 | |||||||||||||||||
13,740 | 1.38 | 3.88 | .75 | 4.50 | 360 | |||||||||||||||||
6,787 | 1.72 | 3.91 | .74 | 4.90 | 289 | |||||||||||||||||
3,281 | 2.32 | 3.59 | .73 | 5.17 | 278 | |||||||||||||||||
1,282 | 4.46 | .90 | .75 | 4.62 | 241 | |||||||||||||||||
1,929 | 1.83 | * | 2.24 | * | 1.68 | * | 2.38 | * | 89 | |||||||||||||
2,383 | 1.96 | 2.82 | 1.63 | 3.17 | 157 | |||||||||||||||||
2,416 | 2.12 | 3.00 | 1.50 | 3.62 | 360 | |||||||||||||||||
1,572 | 2.30 | 3.36 | 1.27 | 4.39 | 289 | |||||||||||||||||
474 | 3.14 | 2.85 | 1.42 | 4.57 | 278 | |||||||||||||||||
51 | 3.54 | 1.68 | 1.38 | 3.84 | 241 | |||||||||||||||||
21,577 | 1.83 | * | 2.26 | * | 1.68 | * | 2.40 | * | 89 | |||||||||||||
21,085 | 1.94 | 2.75 | 1.63 | 3.06 | 157 | |||||||||||||||||
11,323 | 2.16 | 3.29 | 1.50 | 3.95 | 360 | |||||||||||||||||
2,531 | 2.48 | 3.14 | 1.49 | 4.14 | 289 | |||||||||||||||||
1,578 | 2.98 | 2.85 | 1.48 | 4.34 | 278 | |||||||||||||||||
266 | 3.65 | 1.69 | 1.44 | 3.90 | 241 | |||||||||||||||||
146 | 1.30 | * | 2.64 | * | 1.18 | * | 2.76 | * | 89 | |||||||||||||
238 | 1.45 | 3.53 | 1.13 | 3.85 | 157 | |||||||||||||||||
182 | 1.61 | 3.58 | 1.00 | 4.19 | 360 | |||||||||||||||||
150 | 1.76 | * | 1.00 | * | .99 | * | 1.77 | * | 289 | |||||||||||||
28,368 | .82 | * | 3.21 | * | .68 | * | 3.35 | * | 89 | |||||||||||||
34,586 | .95 | 3.75 | .63 | 4.07 | 157 | |||||||||||||||||
20,516 | 1.06 | 3.80 | .50 | 4.36 | 360 | |||||||||||||||||
49,336 | 1.40 | 3.55 | .49 | 4.47 | 289 | |||||||||||||||||
9,689 | 1.86 | 3.87 | .48 | 5.24 | 278 | |||||||||||||||||
9,623 | 1.84 | 3.24 | .63 | 4.44 | 241 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Distributions from Capital Gains include short-term capital gains, if any. |
(c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
(d) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
(e) | Excluding dollar roll transactions. |
(f) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(g) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
(h) | For the six months ended March 31, 2011. |
* | Annualized. |
See accompanying notes to financial statements.
Nuveen Investments | 63 |
Financial Highlights (Unaudited) (continued)
Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||||||
HIGH YIELD | ||||||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Return of Capital | Total | Ending Net Asset Value | Total Return(c) | ||||||||||||||||||||||||||||||
Class A (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2011(g) | $ | 17.44 | $ | .69 | $ | .78 | $ | 1.47 | $ | (.70 | ) | $ | — | $ | — | $ | (.70 | ) | $ | 18.21 | 8.53 | % | ||||||||||||||||||
2010 | 16.15 | 1.44 | 1.25 | 2.69 | (1.40 | ) | — | — | (1.40 | ) | 17.44 | 17.31 | ||||||||||||||||||||||||||||
2009 | 16.92 | 1.30 | (.62 | ) | .68 | (1.19 | ) | — | (.26 | ) | (1.45 | ) | 16.15 | 5.94 | ||||||||||||||||||||||||||
2008 | 19.55 | 1.25 | (2.41 | ) | (1.16 | ) | (1.35 | ) | — | (.12 | ) | (1.47 | ) | 16.92 | (6.41 | ) | ||||||||||||||||||||||||
2007 | 19.37 | 1.55 | .08 | 1.63 | (1.45 | ) | — | — | (1.45 | ) | 19.55 | 8.61 | ||||||||||||||||||||||||||||
2006 | 19.39 | 1.33 | .16 | 1.49 | (1.51 | ) | — | — | (1.51 | ) | 19.37 | 8.01 | ||||||||||||||||||||||||||||
Class B (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2011(g) | 17.42 | .63 | .76 | 1.39 | (.63 | ) | — | — | (.63 | ) | 18.18 | 8.08 | ||||||||||||||||||||||||||||
2010 | 16.13 | 1.32 | 1.24 | 2.56 | (1.27 | ) | — | — | (1.27 | ) | 17.42 | 16.48 | ||||||||||||||||||||||||||||
2009 | 16.91 | 1.22 | (.66 | ) | .56 | (1.09 | ) | — | (.25 | ) | (1.34 | ) | 16.13 | 5.11 | ||||||||||||||||||||||||||
2008 | 19.53 | 1.08 | (2.37 | ) | (1.29 | ) | (1.25 | ) | — | (.08 | ) | (1.33 | ) | 16.91 | (7.17 | ) | ||||||||||||||||||||||||
2007 | 19.36 | 1.34 | .14 | 1.48 | (1.31 | ) | — | — | (1.31 | ) | 19.53 | 7.82 | ||||||||||||||||||||||||||||
2006 | 19.39 | 1.13 | .19 | 1.32 | (1.35 | ) | — | — | (1.35 | ) | 19.36 | 7.07 | ||||||||||||||||||||||||||||
Class C (12/04) |
| |||||||||||||||||||||||||||||||||||||||
2011(g) | 17.40 | .63 | .76 | 1.39 | (.63 | ) | — | — | (.63 | ) | 18.16 | 8.09 | ||||||||||||||||||||||||||||
2010 | 16.11 | 1.31 | 1.25 | 2.56 | (1.27 | ) | — | — | (1.27 | ) | 17.40 | 16.49 | ||||||||||||||||||||||||||||
2009 | 16.88 | 1.20 | (.63 | ) | .57 | (1.09 | ) | — | (.25 | ) | (1.34 | ) | 16.11 | 5.12 | ||||||||||||||||||||||||||
2008 | 19.51 | 1.10 | (2.40 | ) | (1.30 | ) | (1.22 | ) | — | (.11 | ) | (1.33 | ) | 16.88 | (7.13 | ) | ||||||||||||||||||||||||
2007 | 19.35 | 1.38 | .09 | 1.47 | (1.31 | ) | — | — | (1.31 | ) | 19.51 | 7.72 | ||||||||||||||||||||||||||||
2006 | 19.39 | 1.13 | .18 | 1.31 | (1.35 | ) | — | — | (1.35 | ) | 19.35 | 7.01 | ||||||||||||||||||||||||||||
Class R3 (8/08) |
| |||||||||||||||||||||||||||||||||||||||
2011(g) | 17.42 | .66 | .79 | 1.45 | (.68 | ) | — | — | (.68 | ) | 18.19 | 8.41 | ||||||||||||||||||||||||||||
2010 | 16.13 | 1.44 | 1.21 | 2.65 | (1.36 | ) | — | — | (1.36 | ) | 17.42 | 17.05 | ||||||||||||||||||||||||||||
2009 | 16.91 | 1.28 | (.64 | ) | .64 | (1.17 | ) | — | (.25 | ) | (1.42 | ) | 16.13 | 5.66 | ||||||||||||||||||||||||||
2008(f) | 18.32 | .09 | (1.26 | ) | (1.17 | ) | (.17 | ) | — | (.07 | ) | (.24 | ) | 16.91 | (6.57 | ) | ||||||||||||||||||||||||
Class I (12/04)(e) |
| |||||||||||||||||||||||||||||||||||||||
2011(g) | 17.42 | .72 | .77 | 1.49 | (.72 | ) | — | — | (.72 | ) | 18.19 | 8.66 | ||||||||||||||||||||||||||||
2010 | 16.13 | 1.47 | 1.26 | 2.73 | (1.44 | ) | — | — | (1.44 | ) | 17.42 | 17.62 | ||||||||||||||||||||||||||||
2009 | 16.90 | 1.34 | (.62 | ) | .72 | (1.23 | ) | — | (.26 | ) | (1.49 | ) | 16.13 | 6.20 | ||||||||||||||||||||||||||
2008 | 19.53 | 1.31 | (2.42 | ) | (1.11 | ) | (1.39 | ) | — | (.13 | ) | (1.52 | ) | 16.90 | (6.18 | ) | ||||||||||||||||||||||||
2007 | 19.35 | 1.45 | .23 | 1.68 | (1.50 | ) | — | — | (1.50 | ) | 19.53 | 8.89 | ||||||||||||||||||||||||||||
2006 | 19.40 | 1.37 | .14 | 1.51 | (1.56 | ) | — | — | (1.56 | ) | 19.35 | 8.14 |
64 | Nuveen Investments |
Ratios/Supplemental Data | ||||||||||||||||||||||
Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(d) | |||||||||||||||||||||
Ending Net Assets (000) | Expenses | Net Invest- ment Income | Expenses | Net Invest- ment Income | Portfolio Turnover Rate | |||||||||||||||||
$ | 44,411 | 1.12 | %* | 7.71 | %* | 1.12 | %* | 7.71 | %* | 94 | % | |||||||||||
36,443 | 1.19 | 8.49 | 1.08 | 8.59 | 139 | |||||||||||||||||
41,921 | 1.23 | 8.77 | .85 | 9.15 | 124 | |||||||||||||||||
22,339 | 1.21 | 6.35 | .84 | 6.72 | 141 | |||||||||||||||||
9,100 | 1.83 | 6.85 | .83 | 7.85 | 160 | |||||||||||||||||
438 | 1.94 | 5.87 | .85 | 6.96 | 115 | |||||||||||||||||
1,627 | 1.87 | * | 6.98 | * | 1.87 | * | 6.98 | * | 94 | |||||||||||||
1,567 | 1.94 | 7.76 | 1.83 | 7.86 | 139 | |||||||||||||||||
1,745 | 1.95 | 8.36 | 1.60 | 8.72 | 124 | |||||||||||||||||
2,585 | 2.00 | 5.35 | 1.59 | 5.76 | 141 | |||||||||||||||||
1,855 | 2.50 | 5.86 | 1.58 | 6.78 | 160 | |||||||||||||||||
217 | 2.69 | 4.86 | 1.57 | 5.97 | 115 | |||||||||||||||||
43,008 | 1.87 | * | 6.98 | * | 1.87 | * | 6.98 | * | 94 | |||||||||||||
35,016 | 1.94 | 7.74 | 1.84 | 7.84 | 139 | |||||||||||||||||
32,131 | 1.97 | 8.08 | 1.60 | 8.45 | 124 | |||||||||||||||||
20,690 | 1.99 | 5.50 | 1.59 | 5.91 | 141 | |||||||||||||||||
8,620 | 2.54 | 6.06 | 1.58 | 7.02 | 160 | |||||||||||||||||
678 | 2.69 | 4.89 | 1.59 | 5.99 | 115 | |||||||||||||||||
89 | 1.36 | * | 7.48 | * | 1.37 | * | 7.48 | * | 94 | |||||||||||||
145 | 1.44 | 8.46 | 1.34 | 8.56 | 139 | |||||||||||||||||
132 | 1.46 | 8.75 | 1.10 | 9.12 | 124 | |||||||||||||||||
138 | 1.70 | * | 2.44 | * | 1.07 | * | 3.07 | * | 141 | |||||||||||||
77,461 | .86 | * | 7.98 | * | .87 | * | 7.98 | * | 94 | |||||||||||||
73,974 | .92 | 8.67 | .80 | 8.79 | 139 | |||||||||||||||||
108,222 | .97 | 9.09 | .60 | 9.45 | 124 | |||||||||||||||||
77,255 | .97 | 6.64 | .59 | 7.03 | 141 | |||||||||||||||||
10,534 | 1.43 | 6.51 | .58 | 7.35 | 160 | |||||||||||||||||
9,692 | 1.44 | 6.39 | .76 | 7.06 | 115 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Distributions from Capital Gains include short-term capital gains, if any. |
(c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
(d) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
(e) | Effective May 1, 2008, Class R Shares were renamed Class I Shares. |
(f) | For the period August 4, 2008 (commencement of operations) through September 30, 2008. |
(g) | For the six months ended March 31, 2011. |
* | Annualized. |
See accompanying notes to financial statements.
Nuveen Investments | 65 |
Financial Highlights (Unaudited) (continued)
Class (Commencement Date) | ||||||||||||||||||||||||||||||||||||
Investment Operations | Less Distributions | |||||||||||||||||||||||||||||||||||
SYMPHONY CREDIT OPPORTUNITIES | ||||||||||||||||||||||||||||||||||||
Year Ended September 30, | Beginning Net Asset Value | Net Invest- ment Income(a) | Net Realized/ Unrealized Gain (Loss) | Total | Net Invest- ment Income | Capital Gains(b) | Total | Ending Net Asset Value | Total Return(c) | |||||||||||||||||||||||||||
Class A (4/10) |
| |||||||||||||||||||||||||||||||||||
2011(f) | $ | 20.42 | $ | .65 | $ | .88 | $ | 1.53 | $ | (.66 | ) | $ | (.10 | ) | $ | (.76 | ) | $ | 21.19 | 7.60 | % | |||||||||||||||
2010(e) | 20.00 | .45 | .43 | .88 | (.46 | ) | — | (.46 | ) | 20.42 | 4.48 | |||||||||||||||||||||||||
Class C (4/10) |
| |||||||||||||||||||||||||||||||||||
2011(f) | 20.40 | .59 | .86 | 1.45 | (.58 | ) | (.10 | ) | (.68 | ) | 21.17 | 7.21 | ||||||||||||||||||||||||
2010(e) | 20.00 | .38 | .43 | .81 | (.41 | ) | — | (.41 | ) | 20.40 | 4.12 | |||||||||||||||||||||||||
Class R3 (4/10) |
| |||||||||||||||||||||||||||||||||||
2011(f) | 20.41 | .62 | .88 | 1.50 | (.63 | ) | (.10 | ) | (.73 | ) | 21.18 | 7.48 | ||||||||||||||||||||||||
2010(e) | 20.00 | .43 | .42 | .85 | (.44 | ) | — | (.44 | ) | 20.41 | 4.34 | |||||||||||||||||||||||||
Class I (4/10) |
| |||||||||||||||||||||||||||||||||||
2011(f) | 20.43 | .69 | .86 | 1.55 | (.68 | ) | (.10 | ) | (.78 | ) | 21.20 | 7.73 | ||||||||||||||||||||||||
2010(e) | 20.00 | .47 | .44 | .91 | (.48 | ) | — | (.48 | ) | 20.43 | 4.61 |
66 | Nuveen Investments |
Ratios/Supplemental Data | ||||||||||||||||||||||
Ratios to Average Net Assets Before Reimbursement | Ratios to Average Net Assets After Reimbursement(d) | |||||||||||||||||||||
Ending Net Assets (000) | Expenses | Net Invest- ment Income | Expenses | Net Invest- ment Income | Portfolio Turnover Rate | |||||||||||||||||
$ | 14,687 | 1.26 | %* | 6.06 | %* | 1.08 | %* | 6.24 | %* | 53 | % | |||||||||||
4,436 | 1.74 | * | 4.65 | * | 1.09 | * | 5.31 | * | 68 | |||||||||||||
8,651 | 1.97 | * | 5.50 | * | 1.83 | * | 5.66 | * | 53 | |||||||||||||
1,359 | 2.93 | * | 3.44 | * | 1.84 | * | 4.53 | * | 68 | |||||||||||||
1,327 | 1.55 | * | 5.73 | * | 1.33 | * | 5.95 | * | 53 | |||||||||||||
1,276 | 2.45 | * | 3.92 | * | 1.34 | * | 5.04 | * | 68 | |||||||||||||
58,019 | 1.01 | * | 6.39 | * | .83 | * | 6.56 | * | 53 | |||||||||||||
16,385 | 1.16 | * | 5.21 | * | .84 | * | 5.54 | * | 68 |
(a) | Per share Net Investment Income is calculated using the average daily shares method. |
(b) | Distributions from Capital Gain include short-term capital gains, if any. |
(c) | Total return is the combination of changes in net asset value without any sales charge, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. |
(d) | After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund’s net cash on deposit with the custodian bank, where applicable. |
(e) | For the period April 28, 2010 (commencement of operations) through September 30, 2010. |
(f) | For the six months ended March 31, 2011. |
* | Annualized. |
See accompanying notes to financial statements.
Nuveen Investments | 67 |
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
General Information
The Nuveen Investment Trust III (the “Trust”) is an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Trust is comprised of Nuveen Short Duration Bond Fund (“Short Duration”), Nuveen Multi-Strategy Core Bond Fund (“Multi-Strategy Core Bond”), Nuveen High Yield Bond Fund (“High Yield”) and Nuveen Symphony Credit Opportunities Fund (“Symphony Credit Opportunities”) (collectively, the “Funds”). The Trust was organized as a Massachusetts business trust in 1998. Symphony Credit Opportunities commenced operations on April 28, 2010.
Effective January 1, 2011, the Funds’ adviser, Nuveen Asset Management, a wholly-owned subsidiary of Nuveen Investments, Inc. (“Nuveen”), changed its name to Nuveen Fund Advisors, Inc. (the “Adviser”). Concurrently, the Adviser formed a wholly-owned subsidiary, Nuveen Asset Management, LLC (the “Sub-Adviser”), to house its portfolio management capabilities and to serve as Short Duration’s, Multi-Strategy Core Bond’s and High Yield’s sub-adviser, and their portfolio managers became employees of the Sub-Adviser. This allocation of responsibilities between the Adviser and the Sub-Adviser affects each of Short Duration, Multi-Strategy Core Bond and High Yield. The Adviser will compensate the Sub-Adviser for the portfolio management services it provides to Short Duration, Multi-Strategy Core Bond and High Yield from each of their management fees.
Short Duration’s investment objective is to provide high current income consistent with minimal fluctuations of principal. Under normal market conditions, the Fund invests at least 80% of its net assets in short duration securities using a risk-controlled, multi-strategy approach that invests across multiple sectors of the taxable fixed-income market. Typically, the Fund’s average duration will be between approximately one and two years but it will not exceed three years.
Multi-Strategy Core Bond’s investment objective is to provide total return by investing in fixed-income securities. Under normal market conditions, the Fund invests at least 80% of its net assets in fixed-income securities using a risk-controlled, multi-strategy approach that invests across multiple sectors of the taxable fixed-income market. Typically, the Fund’s average duration will be five years or less and is not expected to be more than six years.
Short Duration and Multi-Strategy Core Bond principally invest in corporate debt securities, including bonds, notes and debentures; U.S. government securities; mortgage-related securities issued by governments, their agencies or instrumentalities, or corporations; asset-backed securities; and non-U.S. debt securities. Short Duration and Multi-Strategy Core Bond normally invests at least 80% and 75%, respectively, of their net assets in securities rated investment grade (AAA/Aaa to BBB/Baa) at the time of purchase by at least one independent rating agency and unrated securities judged to be of comparable quality by the Sub-Adviser. Short Duration and Multi-Strategy Core Bond may invest up to 35% of their net assets in debt securities issued by non-U.S. companies. Although a substantial majority of the assets of Short Duration and Multi-Strategy Core Bond are invested in U.S. dollar-denominated securities, up to 20% of their net assets may have non-U.S. dollar currency exposure from non-U.S. dollar-denominated securities and currency derivatives, calculated on an absolute notional basis (i.e., adding together the absolute value of net long and net short exposures to individual non-U.S. dollar currencies). On a net basis (netting out long and short non-U.S. currency exposures in the aggregate), Short Duration’s and Multi-Strategy Core Bond’s non-U.S. dollar exposure will not exceed 5% of net assets. Short Duration and Multi-Strategy Core Bond also may invest up to 20% and 25%, respectively, of their net assets in securities rated below investment grade (BB/Ba or lower) at the time of purchase, which are commonly referred to as “high yield” or “junk” bonds. In addition, Short Duration and Multi-Strategy Core Bond may engage in repurchase, reverse repurchase and forward purchase agreements.
In an effort to enhance returns and manage risk, Short Duration and Multi-Strategy Core Bond also employ a variety of strategies, which may include the use of futures, options, swaps, credit derivatives and other derivatives to create debt or non-U.S. currency exposures designed to take advantage of the Sub-Adviser’s outlook for the global economic environment and the expected relative performance of different sectors of and securities in the fixed-income market.
High Yield’s investment objective is to maximize total return by investing in a diversified portfolio of high yield debt securities. Under normal market conditions, High Yield invests at least 80% of its net assets in U.S. and non-U.S. corporate high yield debt securities, including zero coupon, payment in-kind, corporate loans and convertible bonds. These securities generally are rated BB/Ba or below at the time of purchase by independent rating agencies or are unrated but judged to be of comparable quality by the Sub-Adviser. These below investment grade securities are commonly referred to as “high yield” or “junk” bonds. In addition to investing in U.S. and non-U.S. corporate high yield debt securities, the Fund may also invest in U.S. and non-U.S. corporate investment grade securities; U.S. government securities, including U.S. Treasury securities and securities issued by U.S. government agencies or instrumentalities; and cash equivalents and other short duration investments. In an effort to hedge risk, enhance returns, or as a substitute for a position in the underlying asset, the Fund also may invest in futures contracts, options, interest rate or total return swaps, credit derivatives or other derivative instruments. In doing so, the Fund may, in certain circumstances, invest a substantial portion of its assets in such derivative instruments. Substantially all of the Fund’s assets will be invested in U.S. dollar-denominated securities. In building the Fund’s investment portfolio from these individual securities, the Sub-Adviser seeks to diversify the portfolio’s holdings across multiple factors, including individual issuers and industries, to manage the inherent credit risk associated with a high yield debt strategy.
68 | Nuveen Investments |
Symphony Credit Opportunities’ investment objective is to seek current income and capital appreciation. Under normal market conditions, the Fund invests primarily in debt instruments (e.g., bonds, loans and convertible securities), a substantial portion of which may be rated below investment-grade or, if unrated, deemed by Symphony Asset Management LLC (“Symphony”), the Fund’s portfolio managers, to be of comparable quality. Although the Fund invests primarily in debt issued by U.S. companies, it may invest up to 25% of its net assets in U.S. dollar-denominated debt issued by non-U.S. companies that is traded over-the-counter or listed on an exchange. The Fund may use derivatives, such as swaps, futures contracts and options, to gain investment exposure. The Adviser has entered into a Sub-Advisory agreement with Symphony, a subsidiary of Nuveen. Symphony bases its investment process on fundamental, bottom-up credit analysis. Analysts assess sector dynamics, company business models and asset quality. Specific recommendations are based on an analysis of the relative value of the various types of debt within a company’s capital structure. Inherent in Symphony’s credit analysis process is the evaluation of potential upside and downside to any credit. As such, Symphony concentrates its efforts on sectors where there is sufficient transparency to assess the downside risk and where firms have assets to support meaningful recovery in case of default. In its focus on downside protection, Symphony favors opportunities where valuations can be quantified and risks assessed.
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Investment Valuation
Prices of fixed-income securities, forward foreign currency exchange contracts and swap contracts are provided by a pricing service approved by the Funds’ Board of Trustees. These securities are generally classified as Level 2 for fair value measurement purposes. When price quotes are not readily available, the pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer, or market activity provided by the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.
Like most fixed-income instruments, the senior and subordinated loans in which the Funds invest are not listed on an organized exchange. The secondary market for such investments may be less liquid relative to markets for other fixed-income securities. Consequently, the value of senior and subordinated loans, determined as described above, may differ significantly from the value that would have been determined had there been an active market for that loan. These securities are generally classified as Level 2.
If significant market events occur between the time of determination of the closing price of a foreign security on an exchange and the time that the Funds’ net asset value (NAV) is determined, or if under the Funds’ procedures, the closing price of a foreign security is not deemed to be reliable, the security would be valued at fair value as determined in accordance with procedures established in good faith by the Fund’s Board of Trustees. These securities are generally classified as Level 2 or Level 3.
The value of exchange-traded options generally are based on the mean of the closing bid and ask prices. Futures contracts are valued using the closing settlement price or, in the absence of such a price, the last traded price. Exchange-traded options and futures contracts are generally classified as Level 1. Options traded in the over-the counter market are valued using an evaluated mean price and are generally classified as Level 2.
Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Funds’ Board of Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security’s fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds’ Board of Trustees or its designee.
Nuveen Investments | 69 |
Notes to Financial Statements (Unaudited) (continued)
Refer to Footnote 2 – Fair Value Measurements for further details on the leveling of securities held by the Funds as of the end of the reporting period.
Investment Transactions
Investment transactions are recorded on a trade date basis. Trade date for senior and subordinated loans purchased in the “primary market” is considered the date on which the loan allocations are determined. Trade date for senior and subordinated loans purchased
in the “secondary market” is the date on which the transaction is entered into. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At March 31, 2011, Short Duration, Multi-Strategy Core Bond, High Yield and Symphony Credit Opportunities had outstanding when-issued/delayed delivery purchase commitments of $1,556,780, $9,623,785, $2,245,625 and $5,806,750, respectively.
Investment Income
Investment income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also reflects paydown gains and losses, if any. Fee income consists primarily of amendment fees. Amendment fees are earned as compensation for evaluating and accepting charges to an original senior loan agreement and are recognized when received.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required.
For all open tax years and all major taxing jurisdictions, management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Shareholders
The Funds declare dividends from their net investment income daily and pay shareholders monthly. Fund shares begin to accrue dividends on the business day after the day when the monies used to purchase Fund shares are collected by the Funds’ transfer agent.
Net realized capital gains from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
Flexible Sales Charge Program
Class A Shares are generally sold with an up-front sales charge and incur a .25% annual 12b-1 service fee. Class A Share purchases of $1 million or more are sold at net asset value without an up-front sales charge but may be subject to a contingent deferred sales charge (“CDSC”) if redeemed within twelve months of purchase. Class B Shares are sold without an up-front sales charge but incur a .75% annual 12b-1 distribution fee and a .25% annual 12b-1 service fee. An investor purchasing Class B Shares is subject to a CDSC of up to 5% depending upon the length of time the shares are held by the investor (CDSC is reduced to 0% at the end of six years). Class B Shares convert to Class A Shares eight years after purchase. Class C Shares are sold without an up-front sales charge but incur a .75% annual 12b-1 distribution fee and a .25% annual 12b-1 service fee. Class C Shares are subject to a CDSC of 1% if redeemed within one year of purchase. Class R3 Shares are sold without an up-front sales charge but incur a .25% annual 12b-1 distribution and a .25% annual 12b-1 service fee. Class I Shares are not subject to any sales charge or 12b-1 distribution or service fees.
Dollar Roll Transactions
Each Fund is authorized to enter into dollar roll transactions (“dollar rolls”) in which a Fund purchases or sells mortgage-backed securities (“MBS”) for delivery in the future and simultaneously contracts to sell or repurchase substantially similar (same type, coupon, and maturity) MBS on a different specified future date. Dollar rolls are identified in the Fund’s Portfolio of Investments as “MDR”, when applicable. During the roll period, the Fund foregoes principal and interest paid on the MBS. The Fund is compensated by fee income or the difference between the current sales price and the lower forward price for the future purchase. Such compensation is amortized over the life of the dollar rolls and recognized as a component of “Investment Income” on the Statement of Operations. Dollar rolls are valued daily. Multi-Strategy Core Bond entered into dollar roll transactions during the six months ended March 31, 2011.
Dollar rolls involve the risk that the market value of the MBS the Fund is obligated to repurchase under an agreement may decline below the repurchase price. These transactions also involve some risk to the Fund if the other party should default on its obligation and the Fund is delayed or prevented from completing the transaction. In the event that the buyer of securities under a dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the dollar roll may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.
70 | Nuveen Investments |
Foreign Currency Transactions
Each Fund is authorized to engage in foreign currency exchange transactions, including foreign currency forwards, futures, options and swap contracts. To the extent that the Funds invest in securities and/or contracts that are denominated in a currency other than U.S. dollars, the Funds will be subject to currency risk, which is the risk that an increase in the U.S. dollar relative to the foreign currency will reduce returns or portfolio value. Generally, when the U.S. dollar rises in value against a foreign currency, the Fund’s investments denominated in that currency will lose value because its currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value. Investments and other assets and liabilities denominated in foreign currencies are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate prevailing in the foreign currency exchange market at the time of valuation. Purchases and sales of investments and income denominated in foreign currencies are translated into U.S. dollars on the respective dates of such transactions.
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at 4:00 p.m. Eastern time. Investments, income and expenses are translated on the respective dates of such transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of the transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Funds and the amounts actually received.
The realized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments, forward foreign currency exchange contracts and swaps are recognized as a component of “Net realized gain (loss) from investments and foreign currency” on the Statement of Operations when applicable.
The unrealized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments are recognized as a component of “Change in unrealized appreciation (depreciation) of investments and foreign currency” on the Statement of Operations when applicable. The unrealized gains and losses resulting from changes in foreign exchange rates associated with forward foreign currency exchange contracts and swaps are recognized as a component of “Change in net unrealized appreciation (deprecation) of forward foreign currency exchange contracts and swaps, respectively” on the Statement of Operations when applicable.
Forward Foreign Currency Exchange Contracts
Each Fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives and is authorized to enter into forward foreign currency exchange contracts in an attempt to manage such risk under two circumstances: (i) when a Fund enters into a contract for the purchase or sale of a security denominated in a foreign currency to “lock in” the U.S. exchange rate of the transaction, with such period being a short-dated contract covering the period between transaction date and settlement date; or (ii) when the Adviser, believes that the currency of a particular foreign country may experience a substantial movement against the U.S. dollar or against another foreign currency. Forward foreign currency exchange contracts are valued daily at the forward rate and are recognized as a componet of “Unrealized appreciation or depreciation on forward foreign currency exchange contracts” on the Statement of Assets and Liabilities. The change in value of the contracts during the reporting period is recognized as a component of “Change in net unrealized appreciation (depreciation) of forward foreign currency exchange contracts” on the Statement of Operations. When the contract is closed or offset with the same counterparty, the Fund recognizes the difference between the value of the contract at the time it was entered and the value at the time it was closed or offset as a componet of “Net realized gain (loss) from forward foreign currency exchange contracts” on the Statement of Operations.
Forward foreign currency exchange contracts will generally not be entered into for terms greater than three months, but may have maturities of up to six months or more. The use of forward foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of a Fund’s investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency exchange contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency exchange contract would limit the risk of loss due to a decline in the value of a particular currency; however, it also would limit any potential gain that might result should the value of the currency increase instead of decrease. These contracts may involve market risk in excess of the unrealized gain or loss reflected on the Statement of Assets and Liabilities. High Yield and Symphony Credit Opportunities did not enter into forward foreign currency exchange contracts during the six months ended March 31, 2011.
During the six months ended March 31, 2011, Short Duration and Multi-Strategy Core Bond invested in forward foreign exchange contracts in a variety of currencies, ranging from one to three months to settlement. Some of these contracts were positioned to benefit if the foreign currency in the contract strengthened with respect to the U.S. dollar, while others were positioned to benefit if the foreign currency weakened, based on analysis of whether currency values were relatively high or low compared to future expectations.
The average number of forward foreign currency exchange contracts outstanding during the six months ended March 31, 2011, was as follows:
Short Duration | Multi- Strategy Core Bond | |||||||
Average number of forward foreign currency exchange contracts outstanding* | 17 | 20 |
* | The average number of outstanding contracts is calculated based on the outstanding contracts at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on forward foreign currency exchange contract activity.
Nuveen Investments | 71 |
Notes to Financial Statements (Unaudited) (continued)
Futures Contracts
Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and is authorized to invest in futures contracts in attempt to manage such risk. Upon entering into a futures contract, a Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified percentage of the contract amount. This is known as the “initial margin.” Cash held by the broker to cover initial margin requirements on open futures contracts, if any, is recognized as “Deposits with brokers for open futures contracts” on the Statement of Assets and Liabilities. Subsequent payments (“variation margin”) are made or received by a Fund each day, depending on the daily fluctuation of the value of the contract. Variation margin is recognized as a receivable or payable for “Variation margin on futures contracts” on the Statement of Assets and Liabilities, when applicable.
During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by “marking-to-market” on a daily basis to reflect the changes in market value of the contract and is recognized as “Change in net unrealized appreciation (depreciation) of futures contracts” on the Statement of Operations. When the contract is closed or expired, the Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and value of the contract when originally entered into, and is recognized as “Net realized gain (loss) from futures contracts” on the Statement of Operations.
Risks of investments in futures contracts include the possible adverse movement in the price of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts and/or that a change in the value of the contract may not correlate with a change in the value of the underlying securities or indices. High Yield and Symphony Credit Opportunities did not enter into futures contracts during the six months ended March 31, 2011.
During the six months ended March 31, 2011, Short Duration sold June 2011 futures contracts on the two year, five year and ten year U.S. Treasury notes, and the thirty year U.S. Treasury bond, to reduce portfolio duration. Multi-Strategy Core Bond also sold June 2011 futures on the ten year U.S. Treasury note and the thirty year U.S. Treasury bond to reduce portfolio duration.
The average number of futures contracts outstanding during the six months ended March 31, 2011, was as follows:
Short Duration | Multi- Strategy Core Bond | |||||||
Average number of futures contracts outstanding* | 378 | 158 |
* | The average number of outstanding contracts is calculated based on the outstanding contracts at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on futures contract activity.
Options Transactions
Each Fund is subject to foreign currency risk and interest rate risk in the normal course of pursuing its investment objectives and is authorized to purchase and write (sell) call and put options on securities, futures, swaps (“swaptions”) or currencies in an attempt to manage such risk. The purchase of options and/or swaptions involves the risk of loss of all or a part of the cash paid for the options (the premium). The market risk associated with purchasing options and/or swaptions is limited to the premium paid. The counterparty credit risk of purchasing options and/or swaptions, however, needs also to take into account the current value of the option, as this is the performance expected from the counterparty. When a Fund purchases an option and/or swaption, an amount equal to the premium paid (the premium plus commission) is recognized as a component of “Options and/or Swaptions purchased, at value” on the Statement of Assets and Liabilities. When a Fund writes an option and/or swaption, an amount equal to the net premium received (the premium less commission) is recognized as a component of “Options and/or Swaptions written, at value” on the Statement of Assets and Liabilities and is subsequently adjusted to reflect the current value of the written option and/or swaption until the option and/or swaption is exercised or expires or the Fund enters into a closing purchase transaction. The changes in the value of options and/or swaptions purchased during the fiscal period are recognized as a component of “Change in net unrealized appreciation (depreciation) of Options and/or Swaptions purchased” on the Statement of Operations. The changes in the value of options and/or swaptions written during the fiscal period are recognized as a component of “Change in net unrealized appreciation (depreciation) of Options and/or Swaptions written” on the Statement of Operations. When an option and/or swaption is exercised or expires or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on executing a closing purchase transaction, including commission, is recognized as a component of “Net realized gain (loss) from Options and/or Swaptions purchased and/or written” on the Statement of Operations. The Fund, as a writer of an option and/or swaption has no control over whether the underlying instrument may be sold (called) or purchased (put) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option and/or swaption. There is also the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. Short Duration, High Yield and Symphony Credit Opportunities did not enter into option or swaption transactions during the six months ended March 31, 2011.
During the six months ended March 31, 2011, Multi-Strategy Core Bond sold June 2011 call options on the ten year U.S. Treasury note future to reduce portfolio duration. Multi-Strategy Core Bond did not purchase call or put options or swaptions during the six months ended March 31, 2011.
The average number of outstanding option contracts written during the six months ended March 31, 2011, was as follows:
Multi- Strategy Core Bond | ||||
Average number of outstanding option contracts written* | 5 | ** |
* | Includes both calls and puts, where applicable. |
** | The average number of outstanding contracts is calculated based on the outstanding contracts at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. |
72 | Nuveen Investments |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on options activity.
Swap Contracts
Each Fund is authorized to enter into swap contracts consistent with their investment objectives and policies to reduce, increase or otherwise alter its risk profile or to alter its portfolio characteristics (i.e. duration, yield curve positioning and credit quality).
Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and policies in an attempt to obtain a desired return at a lower cost than if the Fund had invested directly in the asset that yielded the desired return. In connection with these contracts, securities in the Funds’ portfolios of investments may be identified as collateral in accordance with the terms of the respective swap contract. Interest rate swap contracts involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (i.e., an exchange of floating rate payments for fixed rate payments with respect to a specified notional amount of principal). Interest rate swap contracts are valued daily. The Funds accrue daily the periodic payments expected to be paid and received on each interest rate swap contract and recognize the daily change in the market value of the Funds’ contractual rights and obligations under the contracts. The net amount recorded on these transactions for each counterparty is recognized on the Statement of Assets and Liabilities as a component of “Unrealized appreciation or depreciation on interest rate swaps” with the change during the fiscal period recognized on the Statement of Operations as a component of “Change in net unrealized appreciation (depreciation) of swaps” on the Statement of Operations. Income received or paid by the Funds is recognized as a component of “Net realized gain (loss) from swaps” on the Statement of Operations, in addition to the net realized gains or losses recognized upon the termination of an interest rate swap contract and are equal to the difference between the Funds’ basis in the interest rate swap and the proceeds from (or cost of) the closing transaction. The amount of the payment obligation is based on the notional amount of the interest rate swap contract. Payments received or made at the beginning of the measurement period are recognized as a component of “Interest rate swap premiums paid and/or received” on the Statement of Assets and Liabilities. For tax purposes, periodic payments are treated as ordinary income or expense. High Yield and Symphony Credit Opportunities did not enter into interest rate swap contracts during the six months ended March 31, 2011.
During the six months ended, Short Duration and Multi-Strategy Core Bond invested in interest rate swap contracts in a variety of currencies and maturities, with some positions designed to benefit if rates rose and others designed to benefit if rates fell in the underlying country, based on analysis of whether rates were relatively high or low compared to future expectations. Short Duration was not invested in interest rate swaps contracts at the end of the period.
The average number of interest rate swap contracts outstanding during the six months ended March 31, 2011, was as follows:
Short Duration | Multi- Strategy Core Bond | |||||||
Average number of interest rate swap contracts outstanding* | 13 | 16 |
* | The average number of outstanding contracts is calculated based on the outstanding contracts at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. |
Each Fund is subject to credit risk in the normal course of pursuing its investment objectives. A Fund may enter into a credit default swap contract to seek to maintain a total return on a particular investment or portion of its portfolio, or to take an active long or short position with respect to the likelihood of a particular issuer’s default. Credit default swap contracts involve one party making a stream of payments to another party in exchange for the right to receive a specified return if/when there is a credit event by a third party. Generally, a credit event means bankruptcy, failure to pay, or restructuring. The specific credit events applicable for each credit default swap are stated in the terms of the particular swap agreement. As a purchaser of a credit default swap contract, the Fund pays to the counterparty a periodic interest fee based on the notional amount of the credit default swap. This interest fee is accrued daily and recognized with the daily change in the market value of the contract as a component of “Unrealized appreciation or depreciation on credit default swaps” on the Statement of Assets and Liabilities and is recorded as a realized loss upon payment. Upon occurrence of a specific credit event with respect to the underlying referenced entity, the Fund is obligated to deliver that security, or an equivalent amount of cash, to the counterparty in exchange for receipt of the notional amount from the counterparty. The difference between the value of the security delivered and the notional amount received is recorded as a realized gain. Payments received or made at the beginning of the measurement period are recognized as a component of “Credit default swap premiums paid and/or received” on the Statement of Assets and Liabilities. As a seller of a credit default swap contract, the Fund generally receives from the counterparty a periodic interest fee based on the notional amount of the credit default swap. This interest fee is accrued daily as a component of unrealized appreciation or depreciation and is recorded as a realized gain upon payment. Upon occurrence of a specific credit event with respect to the underlying referenced entity, the Fund will either receive that security, or an equivalent amount of cash, from the counterparty in exchange for payment of the notional amount to the counterparty, or pay a net settlement amount of the credit default swap contract less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The difference between the value of the security received and the notional amount paid is recorded as a realized loss. Changes in the value of a credit default swap during the fiscal period are recognized as a component of “Change in net unrealized appreciation (depreciation) of swaps”, and realized gains and losses are recognized as a component of “Net realized gain (loss) from swaps” on the Statement of Operations. The maximum potential amount of future payments the Fund could incur as a seller of protection in a credit default swap contract is limited to the notional amount of the contract. The maximum potential amount would be offset by the recovery value, if any, of the respective referenced entity. Symphony Credit Opportunities did not invest in credit default swaps during the six months ended March 31, 2011.
Nuveen Investments | 73 |
Notes to Financial Statements (Unaudited) (continued)
During the six months ended March 31, 2011, Short Duration, Multi-Strategy Core Bond and High Yield were invested in credit default swap index positions that earned spread income in exchange for taking the credit default risk of broad investment grade and high yield credit default swap indexes, and for Multi-Strategy Core Bond and High Yield, a swap tied to the default risk of a single issuer, Freescale Semiconductor.
The average notional amount of credit default swap contracts outstanding during the six months ended March 31, 2011, was as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | ||||||||||
Average notional amount of credit default swap contracts outstanding* | $ | 14,278,333 | $ | 5,246,667 | $ | 7,235,000 |
* | The average notional amount is calculated based on the outstanding notional at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year. |
Refer to Footnote 3 – Derivative Instruments and Hedging Activities for further details on swap contract activity.
Market and Counterparty Credit Risk
In the normal course of business each Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose each Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of each Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange’s clearinghouse, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
Each Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when each Fund has an unrealized loss, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
Zero Coupon Securities
Each Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Tax-exempt income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Multiclass Operations and Allocations
Income and expenses of the Funds that are not directly attributable to specific class of shares were prorated among the classes based on the relative net assets of each class. Expenses directly attributable to a class of shares, which presently only include 12b-1 distribution and service fees, are recorded to the specific class.
Realized and unrealized gains and losses of the Funds are prorated among the classes based on the relative net assets of each class.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is each Fund’s policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on each Fund’s cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which a Fund overdraws its account at the custodian bank.
Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that provide general indemnifications to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
74 | Nuveen Investments |
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
Fair value is defined as the price that the Funds would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
Level 1 – | Quoted prices in active markets for identical securities. | |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). | |
Level 3 – | Significant unobservable inputs (including management’s assumptions in determining the fair value of investments). |
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of each Fund’s fair value measurements as of March 31, 2011:
Short Duration | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Corporate Bonds | $ | — | $ | 66,968,440 | $ | — | $ | 66,968,440 | ||||||||
U.S. Government and Agency Obligations | — | 25,140,565 | — | 25,140,565 | ||||||||||||
Asset-Backed and Mortgage-Backed Securities | — | 85,624,426 | 3,882,396 | 89,506,822 | ||||||||||||
Capital Preferred Securities | — | 425,332 | — | 425,332 | ||||||||||||
Sovereign Debt | — | 1,346,436 | — | 1,346,436 | ||||||||||||
Short-Term Investments | — | 6,378,347 | — | 6,378,347 | ||||||||||||
Derivatives: | ||||||||||||||||
Forward Foreign Currency Exchange Contracts* | — | 202,344 | — | 202,344 | ||||||||||||
Credit Default Swaps* | — | 62,706 | — | 62,706 | ||||||||||||
Futures Contracts* | (53,657 | ) | — | — | (53,657 | ) | ||||||||||
Total | $ | (53,657 | ) | $ | 186,148,596 | $ | 3,882,396 | $ | 189,977,335 | |||||||
Multi-Strategy Core Bond | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Corporate Bonds | $ | — | $ | 39,957,930 | $ | 6,000 | $ | 39,963,930 | ||||||||
$25 Par (or similar) Preferred Securities | 184,310 | — | — | 184,310 | ||||||||||||
Municipal Bonds | — | 1,644,478 | — | 1,644,478 | ||||||||||||
U.S. Government and Agency Obligations | — | 4,199,806 | — | 4,199,806 | ||||||||||||
Asset-Backed and Mortgage-Backed Securities | — | 28,372,653 | 483,707 | 28,856,360 | ||||||||||||
Capital Preferred Securities | — | 3,038,193 | — | 3,038,193 | ||||||||||||
Sovereign Debt | — | 2,590,885 | — | 2,590,885 | ||||||||||||
Short-Term Investments | — | 15,248,002 | — | 15,248,002 | ||||||||||||
Derivatives: | ||||||||||||||||
Call Options Written | (4,250 | ) | — | — | (4,250 | ) | ||||||||||
Forward Foreign Currency Exchange Contracts* | — | 95,978 | — | 95,978 | ||||||||||||
Interest Rate Swaps* | — | 92,512 | — | 92,512 | ||||||||||||
Credit Default Swaps* | — | 25,876 | — | 25,876 | ||||||||||||
Futures Contracts* | 14,346 | — | — | 14,346 | ||||||||||||
Total | $ | 194,406 | $ | 95,266,313 | $ | 489,707 | $ | 95,950,426 |
* | Represents net unrealized appreciation (depreciation). |
Nuveen Investments | 75 |
Notes to Financial Statements (Unaudited) (continued)
High Yield | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Corporate Bonds | $ | — | $ | 151,781,069 | $ | 63,750 | $ | 151,844,819 | ||||||||
$25 Par (or similar) Preferred Securities | 2,619,460 | 1,919,054 | — | 4,538,514 | ||||||||||||
U.S. Government and Agency Obligations | — | 1,173,014 | — | 1,173,014 | ||||||||||||
Capital Preferred Securities | — | 3,932,500 | — | 3,932,500 | ||||||||||||
Short-Term Investments | — | 6,438,821 | — | 6,438,821 | ||||||||||||
Derivatives: | ||||||||||||||||
Credit Default Swaps* | — | 442,614 | — | 442,614 | ||||||||||||
Total | $ | 2,619,460 | $ | 165,687,072 | $ | 63,750 | $ | 168,370,282 | ||||||||
Symphony Credit Opportunities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments: | ||||||||||||||||
Convertible Bonds | $ | — | $ | 211,500 | $ | — | $ | 211,500 | ||||||||
Corporate Bonds | — | 55,175,113 | — | 55,175,113 | ||||||||||||
Variable Rate Senior Loan Interests | — | 22,949,153 | — | 22,949,153 | ||||||||||||
Short-Term Investments | — | 7,911,795 | — | 7,911,795 | ||||||||||||
Total | $ | — | $ | 86,247,561 | $ | — | $ | 86,247,561 |
* | Represents net unrealized appreciation (depreciation). |
The following is a reconciliation of each Fund’s Level 3 investments held at the beginning and end of the measurement period:
Short Duration | Level 3 Asset-Backed and Mortgage-Backed Securities | Level 3 Interest Rate Swaps* | Level 3 Total | |||||||||
Balance at the beginning of period | $ | — | $ | 149,496 | $ | 149,496 | ||||||
Gains (losses): | ||||||||||||
Net realized gains (losses) | — | 76,691 | 76,691 | |||||||||
Net change in unrealized appreciation (depreciation) | 15,117 | (149,496 | ) | (134,379 | ) | |||||||
Purchases at cost | 3,826,050 | 6,667,161 | 10,493,211 | |||||||||
Sales at proceeds | — | (6,743,852 | ) | (6,743,852 | ) | |||||||
Net discounts (premiums) | — | — | — | |||||||||
Transfers in to | 41,229 | — | 41,229 | |||||||||
Transfers out of | — | — | — | |||||||||
Balance at the end of period | $ | 3,882,396 | $ | — | $ | 3,882,396 | ||||||
Net change in unrealized appreciation (depreciation) during the period of Level 3 securities held as of March 31, 2011 | $ | 17,066 | $ | — | $ | 17,066 |
* | Represents net unrealized appreciation (depreciation). |
Multi-Strategy Core Bond | Level 3 Corporate Bonds | Level 3 Asset-Backed and Mortgage-Backed Securities | Level 3 Interest Rate Swaps* | Level 3 Total | ||||||||||||
Balance at the beginning of period | $ | 6,000 | $ | — | $ | 65,778 | $ | 71,778 | ||||||||
Gains (losses): | ||||||||||||||||
Net realized gains (losses) | — | — | 33,744 | 33,744 | ||||||||||||
Net change in unrealized appreciation (depreciation) | — | 3,883 | (65,778 | ) | (61,895 | ) | ||||||||||
Purchases at cost | — | 438,253 | 2,933,551 | 3,371,804 | ||||||||||||
Sales at proceeds | — | — | (2,967,295 | ) | (2,967,295 | ) | ||||||||||
Net discounts (premiums) | — | 5 | — | 5 | ||||||||||||
Transfers in to | — | 41,566 | — | 41,566 | ||||||||||||
Transfers out of | — | — | — | — | ||||||||||||
Balance at the end of period | $ | 6,000 | $ | 483,707 | $ | — | $ | 489,707 | ||||||||
Net change in unrealized appreciation (depreciation) during the period of Level 3 securities held as of March 31, 2011 | $ | — | $ | 5,849 | $ | — | $ | 5,849 |
* | Represents net unrealized appreciation (depreciation). |
76 | Nuveen Investments |
High-Yield | Level 3 Corporate Bonds | |||
Balance at the beginning of period | $ | 63,750 | ||
Gains (losses): | ||||
Net realized gains (losses) | — | |||
Net change in unrealized appreciation (depreciation) | — | |||
Purchases at cost | — | |||
Sales at proceeds | — | |||
Net discounts (premiums) | — | |||
Transfers in to | — | |||
Transfers out of | — | |||
Balance at the end of period | $ | 63,750 | ||
Net change in unrealized appreciation (depreciation) during the period of Level 3 securities held as of March 31, 2011 | $ | — |
The table below presents the transfers in and out of the three valuation levels for Short Duration as of the end of the reporting period when compared to the valuation levels at the end of the previous fiscal year. Changes in the leveling of investments are primarily due to changes in the leveling methodologies and changes in the observability of inputs.
Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
Transfers In | (Transfers Out) | Transfers In | (Transfers Out) | Transfers In | (Transfers Out) | |||||||||||||||||||
Short Duration | $ | — | $ | (21,210,222 | ) | $ | 21,210,222 | $ | (41,229 | ) | $ | 41,229 | $ | — |
During the six months ended March 31, 2011, Multi-Strategy Core Bond, High Yield and Symphony Credit Opportunities recognized no significant transfers to or from Level 1, Level 2 or Level 3.
3. Derivative Instruments and Hedging Activities
The Funds record derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds’ investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. For additional information on the derivative instruments in which each Fund was invested during and at the end of the reporting period, refer to the Portfolios of Investments, Financial Statements and Footnote 1 – General Information and Significant Accounting Policies.
The following tables present the fair value of all derivative instruments held by the Funds as of March 31, 2011, the location of these instruments on the Statement of Assets and Liabilities, and the primary underlying risk exposure. Symphony Credit Opportunities did not invest in derivative instruments during the six months ended March 31, 2011.
Short Duration
Location on the Statement of Assets and Liabilities | ||||||||||||||
Underlying Risk Exposure | Derivative Instrument | Asset Derivatives | Liability Derivatives | |||||||||||
Location | Value | Location | Value | |||||||||||
Foreign Currency Exchange Rate | Forward Foreign Currency Exchange Contracts | Unrealized appreciation on forward foreign currency exchange contracts | $ | 429,278 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 226,934 | |||||||
Interest Rate | Futures Contracts | Deposits with brokers for open futures contracts and Receivable for variation margin on futures contracts* | — | Deposits with brokers for open futures contracts and Payable for variation margin on futures contracts* | 53,657 | |||||||||
Credit | Swaps | Unrealized appreciation on credit default swaps** | 66,450 | Unrealized depreciation on credit default swaps** | 3,744 | |||||||||
Total | $ | 495,728 | $ | 284,335 |
* | Value represents cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments and not the deposits with brokers, if any, or the receivable or payable for variation margin on futures contracts presented on the Statement of Assets and Liabilities. |
** | Value represents cumulative gross appreciation (depreciation) of swap contracts as reported in the Portfolio of Investments. Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities but is not reflected in the cumulative gross appreciation (depreciation) presented above. |
Nuveen Investments | 77 |
Notes to Financial Statements (Unaudited) (continued)
Multi-Strategy Core Bond
Location on the Statement of Assets and Liabilities | ||||||||||||||
Underlying Risk Exposure | Derivative Instrument | Asset Derivatives | Liability Derivatives | |||||||||||
Location | Value | Location | Value | |||||||||||
Foreign Currency Exchange Rate | Forward Foreign Currency Exchange Contracts | Unrealized appreciation on forward foreign currency exchange contracts | $ | 218,417 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 122,439 | |||||||
Interest Rate | Futures Contracts | Deposits with brokers for open futures contracts and Receivable for variation margin on futures contracts* | 18,227 | Deposits with brokers for open futures contracts and Payable for variation margin on futures contracts* | 3,881 | |||||||||
Interest Rate | Swaps | Unrealized appreciation on interest rate swaps** | 250,718 | Unrealized depreciation on interest rate swaps** | 158,206 | |||||||||
Credit | Swaps | Unrealized appreciation on credit default swaps** | 26,848 | Unrealized depreciation on credit default swaps** | 972 | |||||||||
Interest Rate | Options | — | — | Call options written, at value | 4,250 | |||||||||
Total | $ | 514,210 | $ | 289,748 |
* | Value represents cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments and not the deposits with brokers, if any, or the receivable or payable for variation margin on futures contracts presented on the Statement of Assets and Liabilities. |
** | Value represents cumulative gross appreciation (depreciation) of swap contracts as reported in the Portfolio of Investments. Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities but is not reflected in the cumulative gross appreciation (depreciation) presented above. |
High Yield
Location on the Statement of Assets and Liabilities | ||||||||||||||
Underlying Risk Exposure | Derivative Instrument | Asset Derivatives | Liability Derivatives | |||||||||||
Location | Value | Location | Value | |||||||||||
Credit | Swaps | Unrealized appreciation on credit default swaps* | $ | 442,614 | Unrealized depreciation on credit default swaps* | $ | — |
* | Value represents cumulative gross appreciation (depreciation) of swap contracts as reported in the Portfolio of Investments. Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities but is not reflected in the cumulative gross appreciation (depreciation) presented above. |
The following tables present the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended March 31, 2011, on derivative instruments, as well as the primary risk exposure associated with each.
Net Realized Gain (Loss) from Forward Foreign Currency Exchange Contracts | Short Duration | Multi-Strategy Core Bond | ||||||||
Risk Exposure | ||||||||||
Foreign Currency Exchange Rate | $ | (34,656 | ) | $ | 108,129 | |||||
Net Realized Gain (Loss) from Futures Contracts | Short Duration | Multi-Strategy Core Bond | ||||||||
Risk Exposure | ||||||||||
Interest Rate | $ | 778,650 | $ | (77,744 | ) | |||||
Net Realized Gain (Loss) from Options Purchased | Short Duration | Multi-Strategy Core Bond | ||||||||
Risk Exposure | ||||||||||
Interest Rate | $ | — | $ | (17,029 | ) |
78 | Nuveen Investments |
Net Realized Gain (Loss) from Swaps | Short Duration | Multi-Strategy Core Bond | High Yield | |||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | 959,621 | $ | 476,609 | $ | — | ||||||
Credit | 297,673 | (79,929 | ) | 1,587,537 | ||||||||
Total | $ | 1,257,294 | $ | 396,680 | $ | 1,587,537 | ||||||
Change in Net Unrealized Appreciation (Depreciation) of Forward Foreign Currency Exchange Contracts | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Foreign Currency Exchange Rate | $ | 283,767 | $ | 141,607 | ||||||||
Change in Net Unrealized Appreciation (Depreciation) of Futures Contracts | Short Duration | Multi-Strategy Core Bond | ||||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | 174,684 | $ | 19,594 | ||||||||
Change in Net Unrealized Appreciation (Depreciation) of Options Written | Multi-Strategy Core Bond | |||||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | 3,581 | ||||||||||
Change in Net Unrealized Appreciation (Depreciation) of Swaps | Short Duration | Multi-Strategy Core Bond | High Yield | |||||||||
Risk Exposure | ||||||||||||
Interest Rate | $ | (524,435 | ) | $ | (111,590 | ) | $ | — | ||||
Credit | (29,743 | ) | 128,454 | (10,728 | ) | |||||||
Total | $ | (554,178 | ) | $ | 16,864 | $ | (10,728 | ) |
4. Fund Shares
Transactions in Fund shares were as follows:
Short Duration | ||||||||||||||||
Six Months Ended 3/31/11 | Year Ended 9/30/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 2,667,199 | $ | 52,953,722 | 4,171,651 | $ | 82,578,526 | ||||||||||
Class C | 1,286,088 | 25,585,114 | 1,815,056 | 35,926,464 | ||||||||||||
Class R3 | 2,042 | 40,474 | 14,251 | 281,343 | ||||||||||||
Class I | 697,363 | 13,820,824 | 3,456,474 | 68,271,076 | ||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||
Class A | 41,770 | 829,139 | 94,547 | 1,865,811 | ||||||||||||
Class C | 19,271 | 382,890 | 43,306 | 855,717 | ||||||||||||
Class R3 | 26 | 524 | 158 | 3,110 | ||||||||||||
Class I | 13,214 | 261,794 | 25,536 | 502,844 | ||||||||||||
4,726,973 | 93,874,481 | 9,620,979 | 190,284,891 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (2,903,937 | ) | (57,636,366 | ) | (2,812,349 | ) | (55,670,099 | ) | ||||||||
Class C | (711,547 | ) | (14,142,663 | ) | (604,920 | ) | (11,963,925 | ) | ||||||||
Class R3 | (19,003 | ) | (376,681 | ) | (3,432 | ) | (67,463 | ) | ||||||||
Class I | (982,985 | ) | (19,468,384 | ) | (1,693,670 | ) | (33,419,411 | ) | ||||||||
(4,617,472 | ) | (91,624,094 | ) | (5,114,371 | ) | (101,120,898 | ) | |||||||||
Net increase (decrease) | 109,501 | $ | 2,250,387 | 4,506,608 | $ | 89,163,993 |
Nuveen Investments | 79 |
Notes to Financial Statements (Unaudited) (continued)
Multi-Strategy Core Bond | ||||||||||||||||
Six Months Ended 3/31/11 | Year Ended 9/30/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 428,335 | $ | 8,830,847 | 1,435,414 | $ | 29,723,141 | ||||||||||
Class A – automatic conversion of Class B Shares | 1,258 | 25,719 | — | — | ||||||||||||
Class B | 11,401 | 234,758 | 21,385 | 442,283 | ||||||||||||
Class C | 218,311 | 4,523,797 | 590,827 | 12,263,228 | ||||||||||||
Class R3 | 1,424 | 29,002 | 2,193 | 44,829 | ||||||||||||
Class I | 200,892 | 4,163,961 | 891,699 | 18,529,263 | ||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||
Class A | 41,323 | 847,251 | 37,884 | 786,067 | ||||||||||||
Class B | 3,377 | 69,549 | 3,879 | 80,506 | ||||||||||||
Class C | 27,063 | 555,456 | 20,952 | 435,334 | ||||||||||||
Class R3 | 65 | 1,322 | 60 | 1,245 | ||||||||||||
Class I | 35,391 | 724,829 | 23,389 | 486,103 | ||||||||||||
968,840 | 20,006,491 | 3,027,682 | 62,791,999 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (538,662 | ) | (11,164,631 | ) | (631,767 | ) | (13,176,273 | ) | ||||||||
Class B | (30,697 | ) | (631,519 | ) | (31,544 | ) | (656,452 | ) | ||||||||
Class B – automatic conversion to Class A Shares | (1,252 | ) | (25,719 | ) | — | — | ||||||||||
Class C | (176,313 | ) | (3,640,844 | ) | (176,186 | ) | (3,658,225 | ) | ||||||||
Class R3 | (5,508 | ) | (115,717 | ) | — | — | ||||||||||
Class I | (467,475 | ) | (9,524,006 | ) | (292,027 | ) | (6,090,305 | ) | ||||||||
(1,219,907 | ) | (25,102,436 | ) | (1,131,524 | ) | (23,581,255 | ) | |||||||||
Net increase (decrease) | (251,067 | ) | $ | (5,095,945 | ) | 1,896,158 | $ | 39,210,744 |
High Yield | ||||||||||||||||
Six Months Ended 3/31/11 | Year Ended 9/30/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 1,627,248 | $ | 29,399,889 | 1,155,059 | $ | 19,425,612 | ||||||||||
Class A – automatic conversion of Class B Shares | — | — | 2,810 | 47,151 | ||||||||||||
Class B | 18,911 | 340,602 | 6,866 | 115,429 | ||||||||||||
Class C | 637,807 | 11,501,920 | 656,846 | 10,992,463 | ||||||||||||
Class R3 | 1,931 | 35,033 | 130 | 2,180 | ||||||||||||
Class I | 1,348,772 | 24,267,812 | 2,193,228 | 36,793,503 | ||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||
Class A | 47,600 | 858,359 | 106,410 | 1,787,848 | ||||||||||||
Class B | 1,868 | 33,671 | 4,229 | 70,993 | ||||||||||||
Class C | 37,149 | 669,256 | 73,066 | 1,225,468 | ||||||||||||
Class R3 | — | — | — | — | ||||||||||||
Class I | 122,363 | 2,204,441 | 224,941 | 3,774,997 | ||||||||||||
3,843,649 | 69,310,983 | 4,423,585 | 74,235,644 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (1,325,284 | ) | (23,569,941 | ) | (1,770,829 | ) | (29,510,158 | ) | ||||||||
Class B | (21,287 | ) | (379,598 | ) | (26,507 | ) | (444,151 | ) | ||||||||
Class B – automatic conversion to Class A Shares | — | — | (2,813 | ) | (47,151 | ) | ||||||||||
Class C | (319,335 | ) | (5,740,078 | ) | (711,779 | ) | (11,901,334 | ) | ||||||||
Class R3 | (5,361 | ) | (94,462 | ) | (1 | ) | (23 | ) | ||||||||
Class I | (1,458,057 | ) | (26,191,536 | ) | (4,881,073 | ) | (82,061,298 | ) | ||||||||
(3,129,324 | ) | (55,975,615 | ) | (7,393,002 | ) | (123,964,115 | ) | |||||||||
Net increase (decrease) | 714,325 | $ | 13,335,368 | (2,969,417 | ) | $ | (49,728,471 | ) |
80 | Nuveen Investments |
Symphony Credit Opportunities | ||||||||||||||||
Six Months Ended 3/31/11 | For the Period 4/28/10 (commencement of operations) through 9/30/10 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold: | ||||||||||||||||
Class A | 478,699 | $ | 10,067,150 | 216,370 | $ | 4,311,772 | ||||||||||
Class C | 344,938 | 7,252,718 | 66,582 | 1,331,755 | ||||||||||||
Class R3 | 141 | 3,012 | 62,500 | 1,250,000 | ||||||||||||
Class I | 1,913,128 | 40,020,139 | 797,250 | 15,802,658 | ||||||||||||
Shares issued to shareholders due to reinvestment of distributions: | ||||||||||||||||
Class A | 10,836 | 227,467 | 1,501 | 30,224 | ||||||||||||
Class C | 1,762 | 37,201 | 11 | 237 | ||||||||||||
Class R3 | — | * | 8 | — | — | |||||||||||
Class I | 42,243 | 885,954 | 8,333 | 167,856 | ||||||||||||
2,791,747 | 58,493,649 | 1,152,547 | 22,894,502 | |||||||||||||
Shares redeemed: | ||||||||||||||||
Class A | (13,683 | ) | (286,406 | ) | (641 | ) | (12,940 | ) | ||||||||
Class C | (4,596 | ) | (97,796 | ) | (14 | ) | (283 | ) | ||||||||
Class R3 | — | — | — | — | ||||||||||||
Class I | (20,378 | ) | (427,419 | ) | (3,606 | ) | (72,636 | ) | ||||||||
(38,657 | ) | (811,621 | ) | (4,261 | ) | (85,859 | ) | |||||||||
Net increase (decrease) | 2,753,090 | $ | 57,682,028 | 1,148,286 | $ | 22,808,643 |
* | Rounds to less than one share. |
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments, derivative and dollar roll transactions) for the six months ended March 31, 2011, were as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Purchases: | ||||||||||||||||
Investment securities | $ | 104,766,936 | $ | 73,362,995 | $ | 153,725,295 | $ | 78,706,070 | ||||||||
U.S. Government and agency obligations | 37,179,525 | 10,478,206 | 507,246 | — | ||||||||||||
Sales and maturities: | ||||||||||||||||
Investment securities | 37,083,344 | 57,988,098 | 139,322,066 | 24,189,425 | ||||||||||||
U.S. Government and agency obligations | 92,396,393 | 34,987,023 | 2,509,961 | — |
Transactions in call options written for Multi-Strategy Core Bond during the six months ended March 31, 2011, were as follows:
Multi-Strategy Core Bond | ||||||||
Number of Contracts | Premiums Received | |||||||
Options outstanding, beginning of period | — | $ | — | |||||
Options written | (16 | ) | 7,831 | |||||
Options terminated in closing purchase transactions | — | — | ||||||
Options expired | — | — | ||||||
Options outstanding, end of period | (16 | ) | $ | 7,831 |
6. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds.
Nuveen Investments | 81 |
Notes to Financial Statements (Unaudited) (continued)
At March 31, 2011, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives), as determined on a federal income tax basis, were as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Cost of investments | $ | 188,499,892 | $ | 94,877,273 | $ | 164,465,746 | $ | 84,318,255 | ||||||||
Gross unrealized: | ||||||||||||||||
Appreciation | $ | 2,219,437 | $ | 1,774,325 | $ | 5,507,166 | $ | 2,170,565 | ||||||||
Depreciation | (953,387 | ) | (925,634 | ) | (2,045,244 | ) | (241,259 | ) | ||||||||
Net unrealized appreciation (depreciation) of investments | $ | 1,266,050 | $ | 848,691 | $ | 3,461,922 | $ | 1,929,306 |
Permanent differences, primarily due to federal taxes paid, nondeductible stock issuance costs, return of capital distributions, treatment of notional principal contracts and foreign currency reclassifications resulted in reclassifications among the Funds’ components of net assets at September 30, 2010, the Funds’ last tax year-end, as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Capital paid-in | $ | (385,165 | ) | $ | (9,234 | ) | $ | — | $ | (5,478 | ) | |||||
Undistributed (Over-distribution of) net investment income | 1,710,956 | 124,147 | 645,226 | 8,360 | ||||||||||||
Accumulated net realized gain (loss) | (1,325,791 | ) | (114,913 | ) | (645,226 | ) | (2,882 | ) |
The tax components of undistributed net ordinary income and net long-term capital gains at September 30, 2010, the Funds’ last tax year end, were as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Undistributed net ordinary income* | $ | — | $ | 2,233,047 | $ | 173,838 | $ | 121,938 | ||||||||
Undistributed net long-term capital gains | — | — | — | — |
* | Undistributed net ordinary income (on a tax basis) has not been reduced for the dividend declared during the period September 1, 2010 through September 30, 2010 and paid on October 1, 2010. Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. |
The tax character of distributions paid during the Funds’ last tax year ended September 30, 2010, was designated for purposes of the dividends paid deduction as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities** | |||||||||||||
Distributions from net ordinary income* | $ | 6,138,330 | $ | 3,489,912 | $ | 13,025,703 | $ | 282,480 | ||||||||
Distributions from net long-term capital gains | — | — | — | — | ||||||||||||
Return of capital | 385,165 | — | — | — |
* | Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. |
** | For the period April 28, 2010 (commencement of operations) through September 30, 2010. |
At September 30, 2010, the Funds’ last tax year end, the following Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:
Short Duration | High Yield | |||||||
Expiration: | ||||||||
September 30, 2014 | $ | 54,933 | $ | — | ||||
September 30, 2015 | 141,618 | 119,975 | ||||||
September 30, 2016 | — | 139,565 | ||||||
September 30, 2017 | 48,855 | 6,367,477 | ||||||
September 30, 2018 | 348,745 | — | ||||||
Total | $ | 594,151 | $ | 6,627,017 |
During the Funds’ last tax year ended September 30, 2010, the following Fund utilized its capital loss carryforwards as follows:
High Yield | ||||
Capital loss carryforward utilized | $ | 99,076 |
82 | Nuveen Investments |
The Funds have elected to defer net realized losses from investments incurred from November 1, 2009 through September 30, 2010, the Funds’ last tax year end, (“post-October losses”) in accordance with federal income tax regulations. Post-October losses are treated as having arisen on the first day of the current fiscal year. The following Funds have elected to defer post-October losses as follows:
Short Duration | Multi- Strategy Core Bond | |||||||
Post-October capital losses | $ | 1,356,942 | $ | 275,324 |
7. Management Fees and Other Transactions with Affiliates
Each Fund’s management fee consists of two components – a fund-level Fee, based only on the amount of assets within each individual Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables each Fund’s shareholders to benefit from growth in the assets within their respective Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:
Average Daily Net Assets | Short Duration Fund-Level Fee Rate | Multi-Strategy Core Bond Fund-Level Fee Rate | High Yield Fund-Level Fee Rate | Symphony Credit Opportunities Fund-Level Fee Rate | ||||||||||||
For the first $125 million | .2000 | % | .3000 | % | .4000 | % | .4500 | % | ||||||||
For the next $125 million | .1875 | .2875 | .3875 | .4375 | ||||||||||||
For the next $250 million | .1750 | .2750 | .3750 | .4250 | ||||||||||||
For the next $500 million | .1625 | .2625 | .3625 | .4125 | ||||||||||||
For the next $1 billion | .1500 | .2500 | .3500 | .4000 | ||||||||||||
For net assets over $2 billion | .1250 | .2250 | .3250 | .3750 |
The annual complex-level fee for each Fund, payable monthly, is calculated according to the following schedule:
Complex-Level Asset Breakpoint Level* | Effective Rate at Breakpoint Level | |||
$55 billion | .2000 | % | ||
$56 billion | .1996 | |||
$57 billion | .1989 | |||
$60 billion | .1961 | |||
$63 billion | .1931 | |||
$66 billion | .1900 | |||
$71 billion | .1851 | |||
$76 billion | .1806 | |||
$80 billion | .1773 | |||
$91 billion | .1691 | |||
$125 billion | .1599 | |||
$200 billion | .1505 | |||
$250 billion | .1469 | |||
$300 billion | .1445 |
* | The complex-level fee is calculated based upon the aggregate daily “eligible assets” of all Nuveen funds. Eligible assets do not include assets attributable to investments in other Nuveen Funds or assets in excess of $2 billion added to the Nuveen fund complex in connection with the Adviser’s 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 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 trust’s 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 March 31, 2011, the complex-level fee rate for these Funds was .1800%. |
The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities it provides for the Funds. The Adviser has entered into Sub-Advisory Agreements with the Sub-Adviser and Symphony under which the Sub-Adviser manages the investment portfolios of the Funds. The Sub-Adviser and Symphony are compensated for their services to the Funds from the management fee paid to the Adviser.
The Adviser has agreed to waive fees and reimburse expenses (“Expense Cap”) so that total annual fund operating expenses (excluding 12b-1 distribution and service fees, interest expenses, taxes, fees incurred in acquiring and disposing of portfolio securities and extraordinary expenses) do not exceed the average daily net assets of any class of Fund shares in the amounts and for the time periods stated in the following table.
Fund | Expense Cap | Expense Cap Expiration Date | ||||||
Short Duration | .600 | % | January 31, 2012 | |||||
Multi-Strategy Core Bond | .700 | January 31, 2012 | ||||||
High Yield | .950 | January 31, 2012 | ||||||
Symphony Credit Opportunities | .850 | January 31, 2013 |
The Adviser may also voluntarily reimburse additional expenses from time to time in any of the Funds. Voluntary reimbursements may be terminated at any time at the Adviser’s discretion.
Nuveen Investments | 83 |
Notes to Financial Statements (Unaudited) (continued)
The Trust pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Trust from the Adviser or its affiliates. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen advised funds.
During the six months ended March 31, 2011, Nuveen Investments, LLC (the “Distributor”), a wholly-owned subsidiary of Nuveen, collected sales charges on purchases of Class A Shares, the majority of which were paid out as concessions to financial intermediaries as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Sales charges collected | $ | 42,254 | $ | 66,094 | $ | 84,375 | $ | 28,813 | ||||||||
Paid to financial intermediaries | 36,848 | 59,064 | 74,585 | 25,571 |
The Distributor also received 12b-1 service fees on Class A Shares, substantially all of which were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
During the six months ended March 31, 2011, the Distributor compensated financial intermediaries directly with commission advances at the time of purchase as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony | |||||||||||||
Commission advances | $ | 60,687 | $ | 34,264 | $ | 23,597 | $ | 41,043 |
To compensate for commissions advanced to financial intermediaries, all 12b-1 service fees collected on Class B Shares during the first year following a purchase, all 12b-1 distribution fees collected on Class B Shares, and all 12b-1 service and distribution fees collected on Class C Shares during the first year following a purchase are retained by the Distributor. During the six months ended March 31, 2011, the Distributor retained such 12b-1 fees as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
12b-1 fees retained | $ | 119,711 | $ | 48,062 | $ | 43,409 | $ | 15,471 |
The remaining 12b-1 fees charged to the Funds were paid to compensate financial intermediaries for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the six months ended March 31, 2011, as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
CDSC retained | $ | 19,991 | $ | 11,993 | $ | 12,615 | $ | 492 |
At March 31, 2011, Nuveen owned shares of the Funds as follows:
Short Duration | Multi- Strategy Core Bond | High Yield | Symphony Credit Opportunities | |||||||||||||
Class A | — | — | — | 62,500 | ||||||||||||
Class C | — | — | — | 62,500 | ||||||||||||
Class R3 | 2,525 | 2,367 | 2,847 | 62,500 | ||||||||||||
Class I | — | — | — | 514,657 |
8. New Accounting Pronouncement
Financial Accounting Standards Board (“FASB”) Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements.
On April 15, 2011, the FASB issued Accounting Standards Update No. 2011-03, (the “ASU”). The guidance in the ASU is intended to improve the accounting for repurchase and other similar agreements. Specifically, the ASU modifies the criteria for determining when these agreements would be accounted for as a financing transaction (secured borrowings/lending agreements) as opposed to sale (purchase) transactions with commitments to repurchase (resell). At this time, management is evaluating the implications of this guidance and the impact it will have to the financial statement amounts or footnote disclosures, if any.
9. Subsequent Events
On April 30, 2011, the Distributor changed its name from Nuveen Investments, LLC to Nuveen Securities, LLC.
84 | Nuveen Investments |
Board Approval of Sub-Advisory Arrangements (Unaudited)
At a meeting held on May 25-26, 2010 (the “May Meeting”), the Boards of Trustees (each, a “Board” and each Trustee, a “Board Member”) of the Funds other than the Nuveen Symphony Credit Opportunities Fund (the “NAM LLC Sub-Advised Funds”), including a majority of the Board Members who are not parties to the advisory agreements or “interested persons” of any parties (the “Independent Board Members”), considered and approved the advisory agreements (each, an “Advisory Agreement”) between each NAM LLC Sub-Advised Fund and Nuveen Asset Management (the “Adviser”). The Nuveen Symphony Credit Opportunities Fund was a new fund and, therefore, its advisory agreements were not up for renewal at the May Meeting. Since the May Meeting, Nuveen has engaged in an internal restructuring (the “Restructuring”) pursuant to which the portfolio management services provided by the Adviser to the NAM LLC Sub-Advised Funds were transferred to Nuveen Asset Management, LLC (“NAM LLC”), a newly-organized wholly-owned subsidiary of the Adviser and the Adviser changed its name to Nuveen Fund Advisors, Inc. (“NFA”). The Adviser, under its new name NFA, continues to serve as investment adviser to the NAM LLC Sub-Advised Funds and, in that capacity, will continue to provide various oversight, administrative, compliance and other services. To effectuate the foregoing, NFA entered into sub-advisory agreements with NAM LLC on behalf of the NAM LLC Sub-Advised Funds (each, a “Sub-Advisory Agreement”). Under each Sub-Advisory Agreement, NAM LLC, subject to the oversight of NFA and the Board, will furnish an investment program, make investment decisions for, and place all orders for the purchase and sale of securities for the portion of the respective NAM LLC Sub-Advised Fund’s investment portfolio allocated to it by NFA. There have been no changes to the advisory fees paid by the NAM LLC Sub-Advised Funds; rather, NFA will pay a portion of the investment advisory fee it receives to NAM LLC for its sub-advisory services. The Independent Board Members reviewed the allocation of fees between NFA and NAM LLC. NFA and NAM LLC do not anticipate any reduction in the nature or level of services provided to the NAM LLC Sub-Advised Funds following the Restructuring. The personnel of NFA who engaged in portfolio management activities prior to the spinoff of NAM LLC are not expected to materially change as a result of the spinoff. In light of the foregoing, at a meeting held on November 16-18, 2010, the Board Members, including a majority of the Independent Board Members, approved the Sub-Advisory Agreements on behalf of the NAM LLC Sub-Advised Funds. Given that the Restructuring was not expected to reduce the level or nature of services provided and the advisory fees paid by the NAM LLC Sub-Advised Funds were the same, the factors considered and determinations made at the May Meeting in approving the Advisory Agreements were equally applicable to the approval of the Sub-Advisory Agreements. For a discussion of these considerations, please see the shareholder report of the NAM LLC Sub-Advised Funds that was first issued after the May Meeting for the period including May 2010.
Nuveen Investments | 85 |
Glossary of Terms Used in this Report
Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or offer price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
Average Duration: Duration is a measure of the expected period over which a bond’s principal and interest will be paid, and consequently is a measure of the sensitivity of a bond’s (or bond fund’s) value to changes when market interest rates change. Generally, the longer a bond or Fund’s duration, the more the price of the bond or Fund will change as interest rates change.
Citigroup 1-3 Year Treasury Index: An unmanaged index comprised of U.S. Treasury notes and bonds with maturities of one year or greater, but less than three years (minimum amount outstanding is $1 billion per issue).
Citigroup Broad Investment Grade Bond Index: An unmanaged index generally considered representative of the U.S. investment grade bond market.
Citigroup High Yield BB/B Index: An unmanaged index that comprises all high-yield issues rated BB or B by Standard & Poor’s for which Citigroup calculates a monthly return.
Lipper High Current Yield Funds Category Average: Represents the average annualized total return for all reporting funds in the Lipper High Current Yield Fund category.
Lipper Intermediate Investment Grade Debt Funds Category Average: Represents the average annualized total return for all reporting funds in the Lipper Intermediate Investment Grade Debt Fund category.
Lipper Short Investment Grade Debt Funds Category Average: Represents the average annualized total return for all reporting funds in the Lipper Short Investment Grade Debt Fund category.
Merrill Lynch – Credit Suisse Index Blend: An index comprised 60% of the Merrill Lynch U.S. High Yield Master II Index and 40% Credit Suisse Leveraged Loan Index. The Merrill Lynch U.S. High Yield Master II Index is a market value-weighted index of all domestic and yankee high-yield bonds having maturities of one year or more and a credit rating lower than BBB-/Baa3, but are not in default. The Credit Suisse Leveraged Loan Index is a representative, unmanaged index of tradeable, senior, U.S. dollar-denominated leveraged loans.
Merrill Lynch U.S. High Yield Master II Index: A market value-weighted index of all domestic and yankee high-yield bonds having maturities of one year or more and a credit rating lower than BBB-/Baa3, but are not in default.
Net Asset Value (NAV): A Fund’s NAV is the dollar value of one share in the Fund. It is calculated by subtracting the liabilities of the Fund from its total assets and then dividing the remainder by the number of shares outstanding. Fund NAVs are calculated at the end of each business day.
Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. Tax-exempt income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically.
86 | Nuveen Investments |
Fund Manager
Nuveen Fund Advisors, Inc.
333 West Wacker Drive
Chicago, IL 60606
Sub-Adviser
Nuveen Asset Management, LLC
333 West Wacker Drive
Chicago, IL 60606
Symphony Asset Management LLC
555 California Street
Rene Suite 2975
San Francisco, CA 94104
Legal Counsel
Chapman and Cutler LLP
Chicago, IL
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
Chicago, IL
Custodian
State Street Bank & Trust Company
Boston, MA
Transfer Agent and Shareholder Services
Boston Financial
Data Services, Inc.
Nuveen Investor Services
P.O. Box 8530
Boston, MA 02266-8530
(800) 257-8787
Quarterly Portfolio of Investments and Proxy Voting information: You may obtain (i) each Fund’s quarterly portfolio of investments, (ii) information regarding how the Funds voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that the Funds used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen Investments at (800) 257-8787 or on Nuveen’s website at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities and Exchange Commission (SEC). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC’s Public Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC’s Public Reference Section at 100 F Street NE, Washington, D.C. 20549.
The Financial Industry Regulatory Authority (FINRA) provides a Public Disclosure Program which supplies certain information regarding the disciplinary history of FINRA members and their associated persons in response to either telephone inquiries at (800) 289-9999 or written inquiries at www.finra.org. FINRA also provides an investor brochure that includes information describing the Public Disclosure Program.
Nuveen Investments | 87 |
Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. We market our growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen Asset Management, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, Nuveen Investments managed approximately $206 billion of assets as of March 31, 2011.
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To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
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MSA-INV3-0311D
PART C
OTHER INFORMATION
Item 15. Indemnification.
The Registrant’s Amended and Restated Articles of Incorporation provide that each present or former director, officer, agent and employee of the Registrant or any predecessor or constituent corporation, and each person who, at the request of the Registrant, serves or served another business enterprise in any such capacity, and the heirs and personal representatives of each of the foregoing shall be indemnified by the Registrant to the fullest extent permitted by law against all expenses, including without limitation amounts of judgments, fines, amounts paid in settlement, attorneys’ and accountants’ fees, and costs of litigation, which shall necessarily or reasonably be incurred by him or her in connection with any action, suit or proceeding to which he or she was, is or shall be a party, or with which he or she may be threatened, by reason of his or her being or having been a director, officer, agent or employee of the Registrant or such predecessor or constituent corporation or such business enterprise, whether or not he or she continues to be such at the time of incurring such expenses. Such indemnification may include without limitation the purchase of insurance and advancement of any expenses, and the Registrant shall be empowered to enter into agreements to limit the liability of directors and officers of the Registrant. No indemnification shall be made in violation of the General Corporation Law of the State of Maryland or the Investment Company Act of 1940 (the “1940 Act”). The Registrant’s Amended and Restated Articles of Incorporation further provide that no director or officer of the Registrant shall be liable to the Registrant or its stockholders for money damages, except (i) to the extent that it is proved that such director or officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received, or (ii) to the extent that a judgment or other final adjudication adverse to such director or officer is entered in a proceeding based on a finding in the proceeding that such director’s or officer’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. The foregoing shall not be construed to protect or purport to protect any director or officer of the Registrant against any liability to the Registrant or its stockholders to which such director or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such office. The Registrant undertakes that no indemnification or advance will be made unless it is consistent with Sections 17(h) or 17(i) of the Investment Company Act of 1940, as now enacted or hereafter amended, and Securities and Exchange Commission rules, regulations, and releases (including, without limitation, Investment Company Act of 1940 Release No. 11330, September 2, 1980).
The trustees and officers of the Registrant are covered by Investment Trust Errors and Omission policies in the aggregate amount of $70,000,000 (with a $2,500,000 deductible for operational failures (after the deductible is satisfied, the insurer would cover 80% of any operational failure claims and the Fund would be liable for 20% of any such claims) and $1,000,000 for all other claims) against liability and expenses of claims of wrongful acts arising out of their position with the Registrant, except for matters which involved willful acts, bad faith, gross negligence and willful disregard of duty (i.e., where the insured did not act in good faith for a purpose he or she reasonably believed to be in the best interest of Registrant or where he or she shall have had reasonable cause to believe this conduct was unlawful).
Insofar as the indemnification for liabilities arising under the Securities Act of 1933, as amended, (the “1933 Act”) may be permitted to the officers, directors or controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by an officer or director
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or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such officer, director or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.
Item 16. Exhibits
(1)(a) | Registrant’s Amended and Restated Articles of Incorporation.(1) | |
(1)(b) | Registrant’s Articles Supplementary, designating new series and new share classes. (2) | |
(1)(c) | Registrant’s Articles Supplementary, designating new series and new share classes. (3) | |
(1)(d) | Registrant’s Articles Supplementary, designating new series. (4) | |
(1)(e) | Registrant’s Articles Supplementary designating new series. (5) | |
(1)(f) | Registrant’s Articles Supplementary designating new series. (6) | |
(1)(g) | Registrant’s Articles Supplementary decreasing authorizations of specified classes and series and decreasing total authorized shares. (7) | |
(1)(h) | Registrant’s Articles Supplementary designating new series. (8) | |
(1)(i) | Registrant’s Articles Supplementary designating new series. (10) | |
(1)(j) | Registrant’s Articles Supplementary designating new series. (11) | |
(1)(k) | Registrant’s Articles Supplementary designating new series. (12) | |
(1)(l) | Registrant’s Articles Supplementary designating new share classes. (13) | |
(1)(m) | Registrant’s Articles of Amendment, filed January 9, 2009. (14) | |
(1)(n) | Registrant’s Articles of Amendment, filed June 4, 2009. (15) | |
(1)(o) | Registrant’s Articles Supplementary designating new series and new share classes, filed June 23, 2009. (15) | |
(1)(p) | Registrant’s Articles Supplementary designating new series and new share class, filed September 17, 2009. (16) | |
(1)(q) | Registrant’s Articles of Amendment, filed January 22, 2010. (17) | |
(1)(r) | Registrant’s Articles Supplementary providing name changes and names of new classes and series, filed October 27, 2010. (19) | |
(1)(s) | Registrant’s Articles of Amendment providing name change, filed March 29, 2011. (22) |
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(1)(t) | Registrant’s Articles Supplementary designating new series, filed July 7, 2011 is filed herewith. | |
(2) | Registrant’s By-laws, as amended, is filed herewith. | |
(3) | Not Applicable. | |
(4) | Form of Agreement and Plan of Reorganization is filed herewith as Appendix I to Part A of this Registration Statement. | |
(5) | Not Applicable. | |
(6)(a) | Management Agreement between the Registrant and Nuveen Fund Advisors, Inc., dated January 1, 2011. (21) | |
(6)(b) | Investment Sub-Advisory Agreement by and between Nuveen Fund Advisors, Inc. and Nuveen Asset Management, LLC. (21) | |
(7) | Distribution Agreement between Registrant and Nuveen Asset Management, LLC, dated January 1, 2011. (21) | |
(8) | Not Applicable. | |
(9)(a) | Custody Agreement between Registrant and U.S. Bank National Association, dated January 1, 2006. (9) | |
(9)(b) | Amendment to Custody Agreement between Registrant and U.S. Bank National Association, dated July 1, 2007. (11) | |
(9)(c) | Exhibit C effective September 16, 2009, to Custody Agreement, dated July 1, 2006. (16) | |
(9)(d) | Exhibit D effective December 5, 2006, to Custody Agreement, dated July 1, 2006. (12) | |
(9)(e) | Amendment to Custodian Agreement between Registrant and State Street Bank and Trust Company with respect to compensation, dated June 19, 2008. (14) | |
(10)(a) | Amended and Restated Distribution and Service Plan, effective January 17, 2011. (21) | |
(10)(b) | Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3, effective July 1, 2010. (18) | |
(11) | Opinion and consent of Dorsey & Whitney LLP is filed herewith. | |
(12) | Opinion and consent of Vedder Price P.C. supporting the tax matters and consequences to shareholders discussed in the Proxy Statement/Prospectus is filed herewith. | |
(13)(a) | Transfer Agent and Shareholder Servicing Agreement among Registrant, U.S. Bancorp Fund Services, LLC, and FAF Advisors, Inc., dated September 19, 2006. (11) |
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(13)(b) | Exhibit A to Transfer Agent and Shareholder Servicing Agreement, effective July 1, 2010. (18) | |
(13)(c) | Amendment to Transfer Agent and Shareholding Servicing Agreement, dated January 1, 2011. (21) | |
(13)(d) | Amended and Restated Securities Lending Agreement between Registrant and U.S. Bank National Association, dated December 30, 2010. (20) | |
(13)(e) | Fund Accounting Servicing Agreement between Registrant and U.S. Bancorp Fund Services, LLC, dated January 1, 2011. (21) | |
(14)(a) | Consent of Independent Auditor is filed herewith. | |
(14)(b) | Consent of Independent Auditor is filed herewith. | |
(15) | Not Applicable. | |
(16) | Powers of Attorney are filed herewith. | |
(17) | Form of Proxy is filed herewith. |
(1) | Incorporated by reference to the post-effective amendment no. 21 filed on Form N-1A for Registrant. | |
(2) | Incorporated by reference to the post-effective amendment no. 36 filed on Form N-1A for Registrant. | |
(3) | Incorporated by reference to the post-effective amendment no. 54 filed on Form N-1A for Registrant. | |
(4) | Incorporated by reference to the post-effective amendment no. 61 filed on Form N-1A for Registrant. | |
(5) | Incorporated by reference to the post-effective amendment no. 65 filed on Form N-1A for Registrant. | |
(6) | Incorporated by reference to the post-effective amendment no. 66 filed on Form N-1A for Registrant. | |
(7) | Incorporated by reference to the post-effective amendment no. 70 filed on Form N-1A for Registrant. | |
(8) | Incorporated by reference to the post-effective amendment no. 72 filed on Form N-1A for Registrant. | |
(9) | Incorporated by reference to the post-effective amendment no. 80 filed on Form N-1A for Registrant. | |
(10) | Incorporated by reference to the post-effective amendment no. 84 filed on Form N-1A for Registrant. |
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(11) | Incorporated by reference to the post-effective amendment no. 87 filed on Form N-1A for Registrant. | |
(12) | Incorporated by reference to the post-effective amendment no. 90 filed on Form N-1A for Registrant. | |
(13) | Incorporated by reference to the post-effective amendment no. 93 filed on Form N-1A for Registrant. | |
(14) | Incorporated by reference to the post-effective amendment no. 95 filed on Form N-1A for Registrant. | |
(15) | Incorporated by reference to the post-effective amendment no. 98 filed on Form N-1A for Registrant. | |
(16) | Incorporated by reference to the post-effective amendment no. 101 filed on Form N-1A for Registrant. | |
(17) | Incorporated by reference to the post-effective amendment no. 102 filed on Form N-1A for Registrant. | |
(18) | Incorporated by reference to the post-effective amendment no. 103 filed on Form N-1A for Registrant. | |
(19) | Incorporated by reference to the post-effective amendment no. 105 filed on Form N-1A for Registrant. | |
(20) | Incorporated by reference to the post-effective amendment no. 107 filed on Form N-1A for Registrant. | |
(21) | Incorporated by reference to the post-effective amendment no. 109 filed on Form N-1A for Registrant. | |
(22) | Incorporated by reference to the post-effective amendment no. 113 filed on Form N-1A for Registrant. |
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the 1933 Act, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
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SIGNATURES
As required by the Securities Act of 1933, this registration statement has been signed on behalf of the registrant, in the City of Chicago, the State of Illinois, on the 19th day of July, 2011.
NUVEEN INVESTMENT FUNDS, INC. | ||
By: | /s/ Kathleen L. Prudhomme | |
Kathleen L. Prudhomme | ||
Vice President and Assistant Secretary |
As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:
Signature | Capacity | Date | ||||
/s/ Stephen D. Foy | Vice President and Controller | July 19, 2011 | ||||
Stephen D. Foy | (principal financial and accounting) officer) | |||||
/s/ Gifford R. Zimmerman | Chief Administrative Officer | July 19, 2011 | ||||
Gifford R. Zimmerman | (principal executive officer) | |||||
Chairman of the Board and Director | ) | |||||
Robert P. Bremner* | ) | |||||
) | ||||||
Director | ) | |||||
John P. Amboian* | ) | |||||
) | ||||||
Director | ) | |||||
Jack B. Evans* | ) | |||||
) | ||||||
Director | ) | |||||
William C. Hunter* | ) | By: /s/ Kathleen L. Prudhomme | ||||
) | Kathleen L. Prudhomme Attorney-in-Fact July 19, 2011 | |||||
Director | ) | |||||
David J. Kundert* | ) | |||||
) | ||||||
Director | ) | |||||
William J. Schneider* | ) | |||||
) | ||||||
Director | ) | |||||
Judith M. Stockdale* | ) | |||||
) | ||||||
Director | ) | |||||
Carole E. Stone* | ) | |||||
) |
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Signature | Capacity | Date | ||||
Director | ) | |||||
Virginia L. Stringer* | ) | |||||
) | ||||||
Director | ) | |||||
Terence J. Toth* | ) |
* An original power of attorney authorizing, among others, Kevin J. McCarthy and Gifford R. Zimmerman, to execute this registration statement, and amendments thereto, for each of the directors of the Registrant on whose behalf this registration statement is filed, has been executed and is filed herewith as exhibit 16.
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EXHIBIT INDEX
Exhibit No. | Name of Exhibit | |
1(t) | Articles Supplementary | |
2 | By-Laws | |
11 | Opinion and Consent of Counsel | |
12 | Opinion and Consent of Tax Counsel Supporting Tax Matters | |
14(a) | Consent of Independent Auditor | |
14(b) | Consent of Independent Auditor | |
16 | Powers of Attorney | |
17 | Form of Proxy |
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