UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09037
Nuveen Investment Trust III
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
--------------
Date of fiscal year end: September 30
------------
Date of reporting period: March 31, 2006
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure
review, inspection, and policy making roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss.3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
NUVEEN INVESTMENTS MUTUAL FUNDS
Semiannual Report Attractive Monthly Income and
dated March 31, 2006 Portfolio Diversification Potential
[GRAPHIC]
Nuveen Investments
Taxable Bond Funds
Nuveen Short Duration Bond Fund
Nuveen Core Bond Fund
Nuveen High Yield Bond Fund
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-------------------------------------------------
Must be preceded by or NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
accompanied by a prospecuts.
[PHOTO]
Timothy R. Schwertfeger
Dear Shareholder,
I am pleased to report that over the 6-month period covered by this report your
Fund continued to provide you with attractive monthly income. For more details
about the performance and management strategy of your Fund, please read the
Portfolio Manager's Comments and Fund Spotlight sections of this report.
In addition to providing regular income, a bond investment like your Fund also
may help you achieve and benefit from greater portfolio diversification - a
potential way to reduce some of the risk that comes with investing. Since one
part of your portfolio may be going up when another is going down, portfolio
diversification may help smooth your investment returns over time. Your
financial advisor can explain these potential advantages in more detail. I urge
you to contact him or her soon for more information on this important
investment strategy.
As you look through this report, be sure to review the inside front cover. This
contains information on how you can receive future Fund reports and other Fund
information faster by using e-mails and the internet. You may also help your
Fund reduce expenses. Sign up is quick and easy - just follow the step-by-step
instructions.
At Nuveen Investments, our mission continues to be to assist you and your
financial advisor by offering investment services and products that can help
you to secure your financial objectives. We are grateful that you have chosen
us as a partner as you pursue your financial goals, and we look forward to
continuing to earn your trust in the months and years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
May 15, 2006
"In addition to
providing regular
income, a bond
investment like your
Fund also may help
you achieve and
benefit from greater portfolio diversification
- a potential way to
reduce some of the
risk that comes
with investing."
Semiannual Report Page 1
Portfolio Manager's Comments
Nuveen Short Duration Bond Fund, Nuveen Core Bond Fund and Nuveen High Yield
Bond Fund
The Nuveen Short Duration, Core, and High Yield Bond Funds feature portfolio
management by Nuveen Asset Management. We recently spoke with Andrew
Stenwall, Managing Director, Taxable Fixed Income, and the Funds' portfolio
manager, about the performance and management of the Funds during the
six-month reporting period ended March 31, 2006.
- --------------------------------------------------------------------------------
How did the Funds perform during the six-month reporting period?
The nearby chart provides total-return performance information for the three
Funds for the six-month, one-year and since-inception periods ended March 31,
2006. Each Fund's total return performance is compared with its corresponding
benchmark and Lipper peer fund category.
The Short Duration Bond Fund's Class A return on net asset value modestly
outperformed its benchmark over these six months, while the Core Bond Fund's
Class A NAV return essentially matched its benchmark's return. Both Funds'
returns slightly beat the average results of their Lipper peer groups. As
short-term interest rates continued to rise over the period, we were able to
roll maturing short-term debt into higher-yielding securities, which produced
more income for the Funds.
The High Yield Bond Fund enjoyed strong relative performance during the
six-month period, with its Class A return on net asset value outperforming its
benchmark and Lipper peer group average. Yield spreads - the gap between yields
offered by lower-rated securities and U.S. Treasury notes of comparable
duration - tightened modestly during the period, which helped the performance
of many lower-rated securities. In addition, the generally higher coupons
offered by high-yield bonds helped augment income. The High Yield Fund
benefited most from some of its lowest-rated holdings, especially those
securities with credit ratings of CCC and below. Many of these securities had a
rebound in prices toward the end of 2005, which helped their returns over the
six-month period.
What strategies were used to manage the Funds during the period, and how did
these strategies influence performance?
We manage the Short Duration Bond Fund and the Cord Bond Fund with similar
basic strategies. For each Fund, we focus on pursuing a variety of portfolio
management ideas that we believe may add value for our shareholders. These
strategies include overweighting or underweighting certain sectors, seeking or
avoiding specific holdings, and judicious use of derivative securities to
exploit opportunities we perceive in the market.
In the High Yield Bond Fund, we pursue a more bottom-up, security-specific
strategy in an attempt to find bonds that we believe will perform well under
current and anticipated market conditions. This Fund has more ability than the
other two Funds to take more concentrated positions in attractive sectors or
industries.
In addition, the holdings in each portfolio vary based on each Fund's
investment objective. The High Yield Bond Fund, for example, includes a higher
percentage of lower-rated bonds, while the Short Duration Bond Fund tends to
own a greater concentration of bonds with shorter effective maturities that
have relatively less interest-rate sensitivity. The Core Bond Fund focuses on a
broader range of the market than the other two Funds, which are relatively more
specialized.
For all three Funds, investment decisions are based, in part, on our analysis
of economic and market conditions. For example, during this reporting period,
we continued to believe that credit spreads in many sectors were too tight and
we wanted to be prepared if they started to widen in the future. If
- --------------------------------------------------------------------------------
The views expressed reflect those of the portfolio manager and are subject to
change at any time, based on market and other conditions.
Semiannual Report Page 2
Class A Shares--
Total Returns as of 3/31/06
- --------------------------------------------------------------------------------
Average Annual
-----------------
Since
Cumulative inception
6-month 1-year (12/20/04)
----------------------------
Nuveen Short Duration
Bond Fund
A Shares at NAV 1.23% 2.33% 1.48%
A Shares at Offer -0.78% 0.30% -0.11%
Lipper Short Investment
Grade Debt Funds
Index/1/ 1.14% 2.55% 1.86%
Citigroup 1-3 Year
Treasury Index/2/ 1.06% 2.30% 1.62%
-----------------------------------------------------
Nuveen Core Bond
Fund
A Shares at NAV -0.04% 2.05% 1.04%
A Shares at Offer -3.79% -1.78% -1.92%
Lipper Intermediate
Investment Grade
Debt Funds Index/3/ -0.10% 2.21% 1.38%
Citigroup Broad
Investment Grade
Bond Index/4/ -0.03% 2.40% 1.50%
-----------------------------------------------------
Nuveen High Yield Bond
Fund
A Shares at NAV 4.03% 7.26% 4.36%
A Shares at Offer -0.93% 2.17% 0.48%
Lipper High Current
Yield Funds Index/5/ 3.58% 7.14% 4.48%
Citigroup High Yield BB/
B Index/6/ 3.37% 6.86% 4.41%
-----------------------------------------------------
Returns quoted represent past performance, which is no guarantee of future
results. Returns at NAV would be lower if the sales charge were included.
Returns less than one year are cumulative. 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. Maximum sales charges for Class A shares of each Fund are
2.0% for Nuveen Short Duration Bond Fund, 3.75% for Nuveen Core Bond Fund, and
4.75% for Nuveen High Yield Bond Fund. 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.
credit spreads were to widen in the corporate sector, history suggests that
longer-term corporate securities are likely to underperform. For this reason,
we began during this period to underweight investment-grade corporate bonds
relative to their composition in the various benchmark indexes. In order to
offset somewhat the negative effect these actions may have if we're wrong about
the direction or timing of corporate spread movements, we also looked to
include very short duration, higher yielding securities in each of the
portfolios in order to augment yield and income.
- --------------------------------------------------------------------------------
1The Lipper Short Investment Grade Debt Funds Index represents the cumulative
or average annualized total returns for the 30 largest funds in the Lipper
Short Investment Grade Debt Funds Category for the period ended March 31,
2006. The since inception data for the Lipper index represents returns for the
period 12/31/04 - 3/31/06, as returns for the index are calculated on a
calendar-month basis. 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.
2The 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). An index is not
available for direct investment.
3The Lipper Intermediate Investment Grade Debt Funds Index represents the
cumulative or average annualized total returns for the 30 largest funds in the
Lipper Intermediate Investment Grade Debt Funds Category for the period ended
March 31, 2006. The since inception data for the Lipper index represents
returns for the period 12/31/04 - 3/31/06, as returns for the index are
calculated on a calendar-month basis. 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.
4The Citigroup Broad Investment Grade Bond Index (the "BIG" Index) is an
unmanaged index generally considered representative of the U.S. investment
grade bond market. An index is not available for direct investment.
5The Lipper High Current Yield Funds Index represents the cumulative or average
annualized total returns for the 30 largest funds in the Lipper High Current
Yield Funds Category for the period ended March 31, 2006. The since inception
data for the Lipper index represents returns for the period 12/31/04 -
3/31/06, as returns for the index are calculated on a calendar-month basis.
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.
6The Citigroup High Yield BB/B Index is a market capitalization-weighted index
that comprises all high-yield issues rated BB or B by Standard & Poors for
which Citigroup calculates a monthly return. An index is not available for
direct investment.
Semiannual Report Page 3
In the Core Bond Fund, we were slightly underweighted relative to our benchmark
in mortgage-backed securities (MBS) for most of the period. We believed that
increasing volatility (usually a bad thing for MBS) would put pressure on this
sector. For most of the period, this was not a successful strategy. However, as
volatility increased in March 2006, we overweighted the sector and made some
adjustments in the specific bonds we were holding in an attempt to take
advantage of the higher volatility and rising interest rates. These actions
were successful, causing our MBS performance to be essentially flat to the
benchmark for the entire period.
Additionally, in the Short Duration and Core Bond Funds we had positions in
currencies and foreign interest rates that generally augmented performance over
the course of the period.
Semiannual Report Page 4
Fund Spotlight as of 3/31/06 Nuveen Short Duration Bond Fund
================================================================================
Quick Facts
A Shares C Shares R Shares
--------------------------------------------------
NAV $19.28 $19.29 $19.25
--------------------------------------------------
Latest Monthly Dividend $0.0710 $0.0585 $0.0750
--------------------------------------------------
Inception Date 12/20/04 12/20/04 12/20/04
--------------------------------------------------
Returns quoted represent past performance which is no guarantee of future
results. Returns without sales charges would be lower if the sales charge were
included. 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 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.
Fund returns assume reinvestment of dividends and capital gains. Class A shares
have a 2.00% maximum sales charge. Class C shares have a 1% contingent deferred
sales charge (CDSC), also known as a back-end sales charge, for redemptions
within less than one year, which is not reflected in the one-year total return.
Class R shares have no sales charge and may be purchased under limited
circumstances or by specified classes of investors. Returns reflect an expense
limitation by the Fund's investment adviser.
Average Annual Total Returns as of 3/31/06
A Shares NAV Offer
------------------------------------------
1-Year 2.33% 0.30%
------------------------------------------
Since Inception 1.48% -0.11%
------------------------------------------
C Shares NAV
------------------------------------------
1-Year 1.54%
------------------------------------------
Since Inception 0.72%
------------------------------------------
R Shares NAV
------------------------------------------
1-Year 2.45%
------------------------------------------
Since Inception 1.61%
------------------------------------------
Yields
A Shares NAV Offer
------------------------------------------
Dividend Yield/2/ 4.42% 4.33%
------------------------------------------
SEC 30-Day Yield/3/ 3.54% 3.47%
------------------------------------------
C Shares NAV
------------------------------------------
Dividend Yield/2/ 3.64%
------------------------------------------
SEC 30-Day Yield 2.78%
------------------------------------------
R Shares NAV
------------------------------------------
Dividend Yield/2/ 4.68%
------------------------------------------
SEC 30-Day Yield 3.75%
------------------------------------------
Credit Quality/1/
[CHART]
AAA/U.S. Guaranteed 32.9%
AA 4.2%
A 24.8%
BBB 27.3%
BB or Lower 8.2%
N/R 2.6%
Portfolio Allocation/1/
[CHART]
Corporate Bonds 63.8%
U.S. Government and Agency Obligations 29.2%
Asset-Backed Securities 3.9%
Sovereign Debt 0.5%
Variable Rate Senior Loan Interests 2.6%
Net Assets ($000) $9,627
------------------------
- --------------------------------------------------------------------------------
1As a percentage of total holdings as of March 31, 2006. Holdings are subject
to change.
2Dividend Yield is the most recent dividend per share (annualized) divided by
the appropriate price per share. The SEC 30-Day Yield is a standardized
measure of the current market yield on the Fund's portfolio and is based on
the maximum offer price per share. The Dividend Yield also differs 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.
3The 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.
Semiannual Report Page 5
Fund Spotlight as of 3/31/06 Nuveen Short Duration Bond Fund
================================================================================
Industries/1/
U.S. Treasury Bonds/Notes 29.2%
--------------------------------------------
Electric Utilities 11.0%
--------------------------------------------
Health Care Providers & Services 5.2%
--------------------------------------------
Automobiles 3.7%
--------------------------------------------
Media 3.2%
--------------------------------------------
Capital Markets 3.2%
--------------------------------------------
Commercial Banks 3.2%
--------------------------------------------
Food Products 3.1%
--------------------------------------------
Machinery 2.6%
--------------------------------------------
Multi-Utilities 2.3%
--------------------------------------------
Road & Rail 2.1%
--------------------------------------------
Oil, Gas & Consumable Fuels 2.1%
--------------------------------------------
Diversified Telecommunication Services 2.1%
--------------------------------------------
Pharmaceuticals 2.0%
--------------------------------------------
Chemicals 1.4%
--------------------------------------------
Household Durables 1.4%
--------------------------------------------
Beverages 1.3%
--------------------------------------------
Wireless Telecommunication Services 1.3%
--------------------------------------------
Other 19.6%
--------------------------------------------
1As a percentage of total holdings as of March 31, 2006. Holdings are subject
to change.
- --------------------------------------------------------------------------------
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including 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 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 R Shares A Shares C Shares R Shares
- ------------------------------------------------------------------------------------------------
Beginning Account Value (10/01/05) $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
- ------------------------------------------------------------------------------------------------
Ending Account Value (3/31/06) $1,012.30 $1,008.30 $1,012.80 $1,020.64 $1,016.90 $1,021.89
- ------------------------------------------------------------------------------------------------
Expenses Incurred During Period $ 4.31 $ 8.06 $ 3.06 $ 4.33 $ 8.10 $ 3.07
- ------------------------------------------------------------------------------------------------
For each class of the Fund, expenses are equal to the Fund's annualized expense
ratio of .86%, 1.61% and .61% for Classes A, C and R, respectively, multiplied
by the average account value over the period, multiplied by 182/365 (to reflect
the one-half year period).
Semiannual Report Page 6
Fund Spotlight as of 3/31/06 Nuveen Core Bond Fund
================================================================================
Quick Facts
A Shares B Shares C Shares R Shares
-----------------------------------------------------------
NAV $19.20 $19.21 $19.21 $19.17
-----------------------------------------------------------
Latest Monthly Dividend $0.0760 $0.0635 $0.0635 $0.0800
-----------------------------------------------------------
Inception Date 12/20/04 12/20/04 12/20/04 12/20/04
-----------------------------------------------------------
Returns quoted represent past performance which is no guarantee of future
results. Returns without sales charges would be lower if the sales charge were
included. 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 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.
Fund returns assume reinvestment of dividends and capital gains. Class A shares
have a 3.75% maximum sales charge. Class B shares have a contingent deferred
sales charge (CDSC), also known as a back-end sales charge, that begins at 5%
for redemptions during the first year after purchase and declines periodically
to 0% over the following five years. 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 R shares have no sales charge and may be purchased under
limited circumstances or by specified classes of investors. Returns reflect an
expense limitation by the Fund's investment adviser.
Average Annual Total Returns as of 3/31/06
A Shares NAV Offer
------------------------------------------
1-Year 2.05% -1.78%
------------------------------------------
Since Inception 1.04% -1.92%
------------------------------------------
B Shares w/o CDSC w/CDSC
------------------------------------------
1-Year 1.27% -2.63%
------------------------------------------
Since Inception 0.29% -2.71%
------------------------------------------
C Shares NAV
------------------------------------------
1-Year 1.27%
------------------------------------------
Since Inception 0.29%
------------------------------------------
R Shares NAV
------------------------------------------
1-Year 2.17%
------------------------------------------
Since Inception 1.17%
------------------------------------------
Yields
A Shares NAV Offer
------------------------------------------
Dividend Yield/2/ 4.75% 4.57%
------------------------------------------
SEC 30-Day Yield/3/ 3.50% 3.37%
------------------------------------------
B Shares NAV
------------------------------------------
Dividend Yield/2/ 3.97%
------------------------------------------
SEC 30-Day Yield 2.76%
------------------------------------------
C Shares NAV
------------------------------------------
Dividend Yield/2/ 3.97%
------------------------------------------
SEC 30-Day Yield 2.76%
------------------------------------------
R Shares NAV
------------------------------------------
Dividend Yield/2/ 5.01%
------------------------------------------
SEC 30-Day Yield 3.77%
------------------------------------------
Credit Quality/1/
[CHART]
AAA/U.S. Guaranteed 56.3%
AA 3.3%
A 7.6%
BBB 7.6%
BB or Lower 13.2%
N/R 12.0%
Portfolio Allocation/1/
[CHART]
Corporate Bonds 29.3%
U.S. Government and Agency Obligations 23.6%
Asset-Backed and Mortgage-Backed Securities 43.2%
Capital Preferred Securities 0.3%
Sovereign Debt 1.2%
Variable Rate Senior Loan Interests 2.4%
Net Assets ($000) $9,587
------------------------
- --------------------------------------------------------------------------------
1As a percentage of total holdings as of March 31, 2006. Holdings are subject
to change.
2Dividend Yield is the most recent dividend per share (annualized) divided by
the appropriate price per share. The SEC 30-Day Yield is a standardized
measure of the current market yield on the Fund's portfolio and is based on
the maximum offer price per share. The Dividend Yield also differs 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.
3The 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.
Semiannual Report Page 7
Fund Spotlight as of 3/31/06 Nuveen Core Bond Fund
================================================================================
Industries/1/
Residentials 39.8%
--------------------------------------------
U.S. Treasury Bonds/Notes 23.6%
--------------------------------------------
Health Care Providers & Services 3.2%
--------------------------------------------
Diversified Financial Services 3.0%
--------------------------------------------
Chemicals 2.7%
--------------------------------------------
Diversified Telecommunication Services 2.5%
--------------------------------------------
Oil, Gas & Consumable Fuels 2.4%
--------------------------------------------
Autos 2.2%
--------------------------------------------
Metals & Mining 1.5%
--------------------------------------------
Other 19.1%
--------------------------------------------
1As a percentage of total holdings as of March 31, 2006. Holdings are subject
to change.
- --------------------------------------------------------------------------------
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including 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 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 R Shares A Shares B Shares C Shares R Shares
- ----------------------------------------------------------------------------------------------------------------------
Beginning Account Value (10/01/05) $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 (3/31/06) $ 999.60 $ 995.70 $ 995.70 $1,000.00 $1,020.09 $1,016.36 $1,016.36 $1,021.34
- ----------------------------------------------------------------------------------------------------------------------
Expenses Incurred During Period $ 4.84 $ 8.56 $ 8.56 $ 3.59 $ 4.89 $ 8.65 $ 8.65 $ 3.63
- ----------------------------------------------------------------------------------------------------------------------
For each class of the Fund, expenses are equal to the Fund's annualized expense
ratio of .97%, 1.72%, 1.72% and .72% for Classes A, B, C and R, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
Semiannual Report Page 8
- --------------------------------------------------------------------------------
Fund Spotlight as of 3/31/06 Nuveen High Yield Bond Fund
================================================================================
Quick Facts
A Shares B Shares C Shares R Shares
-----------------------------------------------------------
NAV $19.38 $19.38 $19.38 $19.38
-----------------------------------------------------------
Latest Monthly Dividend $0.1240 $0.1115 $0.1115 $0.1280
-----------------------------------------------------------
Inception Date 12/20/04 12/20/04 12/20/04 12/20/04
-----------------------------------------------------------
Returns quoted represent past performance which is no guarantee of future
results. Returns without sales charges would be lower if the sales charge were
included. 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 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.
Fund returns assume reinvestment of dividends and capital gains. Class A shares
have a 4.75% maximum sales charge. Class B shares have a contingent deferred
sales charge (CDSC), also known as a back-end sales charge, that begins at 5%
for redemptions during the first year after purchase and declines periodically
to 0% over the following five years. 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 R shares have no sales charge and may be purchased under
limited circumstances or by specified classes of investors. Returns reflect an
expense limitation by the Fund's investment adviser.
Average Annual Total Returns as of 3/31/06
A Shares NAV Offer
--------------------------------------------------------
1-Year 7.26% 2.17%
--------------------------------------------------------
Since Inception 4.36% 0.48%
--------------------------------------------------------
B Shares w/o CDSC w/CDSC
--------------------------------------------------------
1-Year 6.49% 2.51%
--------------------------------------------------------
Since Inception 3.58% 0.59%
--------------------------------------------------------
C Shares NAV
--------------------------------------------------------
1-Year 6.49%
--------------------------------------------------------
Since Inception 3.58%
--------------------------------------------------------
R Shares NAV
--------------------------------------------------------
1-Year 7.60%
--------------------------------------------------------
Since Inception 4.67%
--------------------------------------------------------
Yields
A Shares NAV Offer
--------------------------------------------------------
Dividend Yield/2/ 7.68% 7.32%
--------------------------------------------------------
SEC 30-Day Yield/3/ 7.72% 7.35%
--------------------------------------------------------
B Shares NAV
--------------------------------------------------------
Dividend Yield/2/ 6.90%
--------------------------------------------------------
SEC 30-Day Yield 6.96%
--------------------------------------------------------
C Shares NAV
--------------------------------------------------------
Dividend Yield/2/ 6.90%
--------------------------------------------------------
SEC 30-Day Yield 6.96%
--------------------------------------------------------
R Shares NAV
--------------------------------------------------------
Dividend Yield/2/ 7.93%
--------------------------------------------------------
SEC 30-Day Yield 8.05%
--------------------------------------------------------
Credit Quality/1/
[CHART]
AAA/U.S. Guaranteed 3.2%
BBB 1.2%
BB or Lower 90.0%
N/R 5.6%
Portfolio Allocation/1/
[CHART]
Corporate Bonds 91.2%
U.S. Government and Agency Obligations 3.2%
Variable Rate Senior Loan Interests 5.6%
Net Assets ($000) $9,688
-----------------------------------------------
- --------------------------------------------------------------------------------
1As a percentage of total holdings as of March 31, 2006. Holdings are subject
to change.
2Dividend Yield is the most recent dividend per share (annualized) divided by
the appropriate price per share. The SEC 30-Day Yield is a standardized
measure of the current market yield on the Fund's portfolio and is based on
the maximum offer price per share. The Dividend Yield also differs 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.
3The 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.
Semiannual Report l Page 9
Fund Spotlight as of 3/31/06 Nuveen High Yield Bond Fund
================================================================================
Industries/1/
Chemicals 12.0%
----------------------------------------
Machinery 7.2%
----------------------------------------
Health Care Providers and Services 6.7%
----------------------------------------
Metals & Mining 6.2%
----------------------------------------
Household Durables 5.2%
----------------------------------------
Building Products 4.4%
----------------------------------------
Oil, Gas & Consumable Fuels 4.4%
----------------------------------------
Hotels, Restaurants & Leisure 3.9%
----------------------------------------
Textiles Apparel and Luxury Goods 3.5%
----------------------------------------
Containers & Packaging 3.3%
----------------------------------------
Specialty Retail 3.3%
----------------------------------------
U.S. Treasury Note 3.2%
----------------------------------------
Consumer Finance 2.8%
----------------------------------------
Food Products 2.8%
----------------------------------------
Energy Equipment & Services 2.8%
----------------------------------------
Multi-Utilities 2.7%
----------------------------------------
Media 2.6%
----------------------------------------
Electric Utilities 2.5%
----------------------------------------
Aerospace & Defense 2.5%
----------------------------------------
Other 18.0%
----------------------------------------
1As a percentage of total holdings as of March 31, 2006. Holdings are subject
to change.
- --------------------------------------------------------------------------------
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including 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 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 R Shares A Shares B Shares C Shares R Shares
- ----------------------------------------------------------------------------------------------------------------------
Beginning Account Value (10/01/05) $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 (3/31/06) $1,040.30 $1,036.10 $1,036.10 $1,041.80 $1,019.40 $1,015.66 $1,015.66 $1,020.64
- ----------------------------------------------------------------------------------------------------------------------
Expenses Incurred During Period $ 5.65 $ 9.44 $ 9.44 $ 4.38 $ 5.59 $ 9.35 $ 9.35 $ 4.33
- ----------------------------------------------------------------------------------------------------------------------
For each class of the Fund, expenses are equal to the Fund's annualized expense
ratio of 1.11%, 1.86%, 1.86% and .86% for Classes A, B, C and R, respectively,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
Semiannual Report Page 10
Portfolio of Investments (Unaudited)
NUVEEN SHORT DURATION BOND FUND
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- --------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 63.2%
Aerospace & Defense - 1.1%
$ 100 Raytheon Company 6.750% 8/15/07 BBB $ 101,598
- --------------------------------------------------------------------------------------------------------------------
Automobiles - 1.0%
100 DaimlerChrysler NA Holding Corporation 4.750% 1/15/08 A3 98,640
- --------------------------------------------------------------------------------------------------------------------
Beverages - 1.3%
25 Constellation Brands, Inc. 8.625% 8/01/06 BB 25,375
100 Miller Brewing Company, 144A 4.250% 8/15/08 BBB+ 97,612
- --------------------------------------------------------------------------------------------------------------------
125 Total Beverages 122,987
- --------------------------------------------------------------------------------------------------------------------
Building Products - 0.3%
25 Building Materials Corporation of America, Series B 8.000% 10/15/07 B+ 25,656
- --------------------------------------------------------------------------------------------------------------------
Capital Markets - 3.2%
100 ABN AMRO Bank NV Chicago 7.125% 6/18/07 A+ 102,147
100 Goldman Sachs Group, Inc. 4.125% 1/15/08 Aa3 98,076
100 Lehamn Brothers Holdings Inc. 8.250% 6/15/07 A+ 103,190
- --------------------------------------------------------------------------------------------------------------------
300 Total Capital Markets 303,413
- --------------------------------------------------------------------------------------------------------------------
Chemicals - 1.4%
25 Airgas, Inc. 9.125% 10/01/11 Ba2 26,594
25 IMC Global Inc. 11.250% 6/01/11 BB 26,719
25 Lyondell Chemical Company 10.875% 5/01/09 B 25,500
50 PolyOne Corporation 10.625% 5/15/10 B+ 54,375
- --------------------------------------------------------------------------------------------------------------------
125 Total Chemicals 133,188
- --------------------------------------------------------------------------------------------------------------------
Commercial Banks - 3.1%
100 JP Morgan Chase & Company 4.000% 2/01/08 Aa3 97,835
100 US Bank National Association 6.300% 7/15/08 Aa2 102,501
100 Wachovia Corporation 6.250% 8/04/08 A1 101,857
- --------------------------------------------------------------------------------------------------------------------
300 Total Commercial Banks 302,193
- --------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.5%
50 Allied Waste North America, Series B 8.875% 4/01/08 BB- 52,750
- --------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.3%
25 Seagate Technology HDD Holdings, Series 144A 8.000% 5/15/09 BB+ 26,094
- --------------------------------------------------------------------------------------------------------------------
Consumer Finance - 1.0%
100 Capital One Financial Corporation 7.250% 5/01/06 Baa1 100,165
- --------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.5%
25 Longview Fibre Company 10.000% 1/15/09 B+ 26,375
25 Smurfit-Stone Container Corporation, 144A 9.750% 2/01/11 B2 25,813
- --------------------------------------------------------------------------------------------------------------------
50 Total Containers & Packaging 52,188
- --------------------------------------------------------------------------------------------------------------------
Distributors - 0.6%
50 Earle M. Jorgensen Company 9.750% 6/01/12 B1 54,250
- --------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 1.0%
100 Credit Suisse First Boston 5.750% 4/15/07 Aa3 100,482
- --------------------------------------------------------------------------------------------------------------------
- ----
11
Portfolio of Investments (Unaudited)
NUVEEN SHORT DURATION BOND FUND (continued)
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- -------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 2.1%
$ 100 CenturyTel Inc. 4.628% 5/15/07 BBB+ $ 98,936
100 Sprint Capital Corporation, Unsecured Note 6.125% 11/15/08 A- 101,834
- -------------------------------------------------------------------------------------------------------------------
200 Total Diversified Telecommunication Services 200,770
- -------------------------------------------------------------------------------------------------------------------
Electric Utilities - 10.9%
100 Cinergy Corporation 6.530% 12/16/08 BBB 102,539
50 Commonwealth Edison Company, Series 99 3.700% 2/01/08 A- 48,515
100 Constellation Energy Group 6.350% 4/01/07 Baa1 100,891
100 Florida Power Corporation 6.810% 7/01/07 A3 101,572
100 FPL Group Capital Inc. 4.086% 2/16/07 A2 98,962
100 Niagara Mohawk Power Corporation, Series 1998G 7.750% 10/01/08 A- 105,167
100 Ohio Edison Company 4.000% 5/01/08 Baa2 97,114
100 PPL Electric Utilities Corporation 5.875% 8/15/07 A- 100,580
100 PSE&G Power LLC 6.875% 4/15/06 Baa1 100,035
100 Public Service Electric & Gas Company, Series 2003C 4.000% 11/01/08 A- 96,442
100 Puget Sound Energy Inc. 3.363% 6/01/08 BBB 95,840
- -------------------------------------------------------------------------------------------------------------------
1,050 Total Electric Utilities 1,047,657
- -------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.2%
25 Northwest Pipeline Corporation 6.625% 12/01/07 Ba2 25,375
- -------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 1.0%
100 General Mills, Inc., Notes 5.125% 2/15/07 BBB+ 99,860
- -------------------------------------------------------------------------------------------------------------------
Food Products - 3.1%
100 Campbell Soup Company 5.875% 10/01/08 A 101,312
100 Kellogg Company 2.875% 6/01/08 BBB+ 94,992
100 Kraft Foods Inc. 5.250% 6/01/07 A3 99,820
- -------------------------------------------------------------------------------------------------------------------
300 Total Food Products 296,124
- -------------------------------------------------------------------------------------------------------------------
Gas Utilities - 1.1%
100 Noram Energy Corporation 6.500% 2/01/08 BBB 101,527
- -------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 1.1%
100 Baxter International Inc. 7.250% 2/15/08 A- 102,873
- -------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 2.5%
50 HCA Inc. 8.850% 1/01/07 BB+ 51,335
100 UnitedHealth Group Inc. 3.750% 2/10/09 A 95,910
100 WellPoint Inc. 3.750% 12/14/07 BBB+ 97,422
- -------------------------------------------------------------------------------------------------------------------
250 Total Health Care Providers & Services 244,667
- -------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 1.1%
100 Tricon Global Restaurants Inc. 7.650% 5/15/08 BBB 104,297
- -------------------------------------------------------------------------------------------------------------------
Household Durables - 1.4%
25 Beazer Homes USA, Inc. 8.625% 5/15/11 Ba1 26,250
50 D.R. Horton, Inc. 7.500% 12/01/07 Baa3 51,611
25 KB Home 9.500% 2/15/11 Ba2 26,281
25 Toll Corporation 8.250% 2/01/11 BB+ 26,031
- -------------------------------------------------------------------------------------------------------------------
125 Total Household Durables 130,173
- -------------------------------------------------------------------------------------------------------------------
- ----
12
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- --------------------------------------------------------------------------------------------------------------------
Independent Power Producers & Energy Traders - 1.0%
$ 100 Duke Energy Corporation 4.200% 10/01/08 Baa1 $ 97,079
- --------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 1.1%
100 Tyco International Group SA 6.125% 11/01/08 BBB+ 101,415
- --------------------------------------------------------------------------------------------------------------------
Insurance - 1.0%
100 Prudential Financial Inc. 3.750% 5/01/08 A 96,892
- --------------------------------------------------------------------------------------------------------------------
IT Services - 1.0%
100 First Data Corporation 3.375% 8/01/08 A+ 95,622
- --------------------------------------------------------------------------------------------------------------------
Machinery - 2.6%
100 Caterpillar Financial Services Corporation, Series MTNF 3.800% 2/08/08 A 97,362
25 Dresser, Inc. 9.375% 4/15/11 B2 26,250
100 John Deere Capital Corporation, Series 2005D 4.500% 8/25/08 A- 98,228
25 Terex Corporation, Senior Subordinated Notes 10.375% 4/01/11 B 26,500
- --------------------------------------------------------------------------------------------------------------------
250 Total Machinery 248,340
- --------------------------------------------------------------------------------------------------------------------
Media - 3.2%
100 AOL Time Warner Inc. 6.150% 5/01/07 BBB+ 100,775
100 Comcast Cable Communications Inc. 8.375% 5/01/07 BBB+ 103,104
100 Gannett Company Inc. 5.500% 4/01/07 A 99,769
- --------------------------------------------------------------------------------------------------------------------
300 Total Media 303,648
- --------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.8%
25 Steel Dynamics, Inc. 9.500% 3/15/09 BB 26,219
50 United States Steel Corporation 10.750% 8/01/08 Ba1 55,250
- --------------------------------------------------------------------------------------------------------------------
75 Total Metals & Mining 81,469
- --------------------------------------------------------------------------------------------------------------------
Multiline Retail - 1.1%
100 Federated Department Stores, Inc. 6.625% 9/01/08 Baa1 102,793
- --------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 2.3%
100 MidAmerican Energy Holdings Company 3.500% 5/15/08 BBB+ 96,116
100 Sempra Energy 4.621% 5/17/07 BBB+ 99,137
25 Utilicorp United Inc., Aquila, Inc. 6.700% 10/15/06 B2 25,125
- --------------------------------------------------------------------------------------------------------------------
225 Total Multi-Utilities 220,378
- --------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 2.1%
100 Kinder Morgan Energy Partners, L.P. 5.350% 8/15/07 BBB+ 99,607
100 Pioneer Natural Resources Company 6.500% 1/15/08 BB+ 101,583
- --------------------------------------------------------------------------------------------------------------------
200 Total Oil, Gas & Consumable Fuels 201,190
- --------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 1.0%
100 Weyerhaeuser Company 5.950% 11/01/08 BBB 100,978
- --------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 2.0%
100 Bristol-Myers Squibb Company 4.000% 8/15/08 A+ 97,259
100 Wyeth 4.375% 3/01/08 A 98,203
- --------------------------------------------------------------------------------------------------------------------
200 Total Pharmaceuticals 195,462
- --------------------------------------------------------------------------------------------------------------------
Road & Rail - 2.1%
100 CSX Corporation 7.450% 5/01/07 BBB 102,002
100 Union Pacific Corporation 6.625% 2/01/08 BBB 102,118
- --------------------------------------------------------------------------------------------------------------------
200 Total Road & Rail 204,120
- --------------------------------------------------------------------------------------------------------------------
- ----
13
Portfolio of Investments (Unaudited)
NUVEEN SHORT DURATION BOND FUND (continued)
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- -------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 1.0%
$ 100 Countrywide Home Loan Inc. 5.500% 2/01/07 A $ 100,103
- -------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 1.1%
100 Airtouch Communications Inc. 6.650% 5/01/08 A+ 102,431
- -------------------------------------------------------------------------------------------------------------------------
$ 6,050 Total Corporate Bonds (cost $6,127,744) 6,078,847
- -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 28.9%
U.S. Treasury Bonds/Notes - 28.9%
$ 1,625 United States of America Treasury Bonds/Notes 3.375% 2/28/07 AAA 1,603,927
125 United States of America Treasury Bonds/Notes 4.625% 2/29/08 AAA 124,536
175 United States of America Treasury Bonds/Notes 4.500% 2/15/09 AAA 173,537
1,000 United States of America Treasury Bonds/Notes 0.000% 11/15/08 AAA 882,600
- -------------------------------------------------------------------------------------------------------------------------
$ 2,925 Total U.S. Government and Agency Obligations (cost 2,784,600
$2,791,742)
- -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 3.9%
Autos - 2.7%
$ 18 BMW Vehicle Owner Trust, Class A4, Series 2003A 2.530% 2/25/08 AAA 17,453
100 Capital Auto Receivables Asset Trust, Series 2005-1 4.889% 4/15/08 AAA 100,097
34 Capital One Auto Finance Trust, Series 2005-BSS 3.820% 9/15/08 AAA 33,378
10 Daimler Chrysler Auto Trust, Class A3, Series 2003B 2.250% 8/08/07 AAA 9,546
75 Daimler Chrysler Auto Trust, Class A3, Series 2005B 4.040% 9/08/09 AAA 74,036
8 Harley-Davidson Motorcycle Trust, Contract Backed Notes, 1.400% 10/15/08 AAA 7,878
Series 2004-1-A1
10 Toyota Auto Receivables Owner Trust, Class A3, Series 2003B 4.783% 8/15/07 AAA 10,233
- -------------------------------------------------------------------------------------------------------------------------
255 Total Autos 252,621
- -------------------------------------------------------------------------------------------------------------------------
Cards - 1.0%
50 Chase Credit Card Master Trust, Class A, Series 2004-1 4.700% 5/15/09 AAA 50,028
50 MBNA Credit Card Master Note Trust, Class A1, Series 2002 4.950% 6/15/09 AAA 49,986
- -------------------------------------------------------------------------------------------------------------------------
100 Total Cards 100,014
- -------------------------------------------------------------------------------------------------------------------------
Home Equity - 0.2%
18 Master CI-9 NIM Notes, Series 2005 4.940% 3/26/35 A+ 18,040
- -------------------------------------------------------------------------------------------------------------------------
$ 373 Total Asset-Backed Securities (cost $372,719) 370,675
- -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
SOVEREIGN DEBT - 0.5%
South Africa - 0.5%
$ 50 Republic of South Africa 8.375% 10/17/06 BBB+ 50,812
- -------------------------------------------------------------------------------------------------------------------------
Total Sovereign Debt (cost $51,234) 50,812
-----------------------------------------------------------------------------------------------------------
Weighted
Principal Average
Amount (000) Description Coupon Maturity (2) Ratings (1) Value
- -------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS - 2.6% (3)
Health Care Providers & Services - 2.6%
$ 250 HealthSouth Corporation Term Loan 8.150% 3/10/13 B2 252,187
- -------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $250,000) 252,187
-----------------------------------------------------------------------------------------------------------
Total Investments (cost $9,593,439) - 99.1% 9,537,121
-----------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 89,730
-----------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 9,626,851
-----------------------------------------------------------------------------------------------------------
- ----
14
Forward Foreign Currency Exchange Contracts outstanding at March 31,
2006:
Unrealized
Appreciation
Amount In Exchange For Amount Settlement (Depreciation)
Currency Contracts to Deliver (Local Currency) Currency (Local Currency) Date (U.S. Dollars)
- -------------------------------------------------------------------------------------------------------------
Canadian Dollar 45,000 South African Rand 241,805 4/06/06 $ 665
Czech Koruna 581,950 U.S. Dollar 25,000 6/20/06 60
Danish Krone 155,013 U.S. Dollar 25,000 6/27/06 (300)
Euro 25,000 Slovakian Koruna 940,576 5/22/06 78
Euro 12,500 South African Rand 91,010 5/22/06 (483)
Euro 50,000 Mexican Peso 650,510 6/19/06 (1,463)
Euro 62,500 Norwegian Krone 498,281 6/19/06 309
Euro 51,472 U.S. Dollar 62,500 6/20/06 (184)
Euro 20,672 U.S. Dollar 25,000 6/27/06 (186)
Mexican Peso 266,094 U.S. Dollar 25,000 4/19/06 582
New Taiwan Dollar 811,500 U.S. Dollar 25,000 6/27/06 (217)
New Zealand Dollar 61,666 U.S. Dollar 37,500 6/20/06 (251)
Norwegian Krone 164,368 U.S. Dollar 25,000 6/27/06 (221)
Polish Zloty 39,629 U.S. Dollar 12,500 6/02/06 235
Pound Sterling 25,000 Australian Dollar 58,965 4/19/06 (1,245)
Slovakian Koruna 773,250 U.S. Dollar 25,000 6/27/06 (83)
South Korean Won 24,320,000 U.S. Dollar 25,000 6/20/06 (78)
Swedish Krona 190,338 U.S. Dollar 25,000 6/20/06 408
Swiss Franc 30,000 Norwegian Krone 156,651 4/28/06 865
Swiss Franc 32,008 U.S. Dollar 25,000 6/20/06 238
U.S. Dollar 25,000 Australian Dollar 35,356 6/27/06 277
U.S. Dollar 12,500 Brazilian Real 29,556 4/17/06 1,106
U.S. Dollar 12,500 Brazilian Real 29,728 4/19/06 1,179
U.S. Dollar 50,000 Chilean Peso 26,562,500 6/27/06 434
U.S. Dollar 25,000 Hungarian Forint 5,529,750 6/27/06 303
U.S. Dollar 25,000 Israeli Shekel 117,000 6/27/06 68
U.S. Dollar 25,000 Mexican Peso 268,538 6/20/06 (471)
U.S. Dollar 25,000 New Turkish Lira 33,600 6/20/06 (435)
U.S. Dollar 62,500 New Zealand Dollar 98,360 6/20/06 (2,285)
U.S. Dollar 12,500 Slovakian Koruna 387,500 6/02/06 58
U.S. Dollar 25,000 South African Rand 158,478 6/27/06 568
- -------------------------------------------------------------------------------------------------------------
$ (469)
- -------------------------------------------------------------------------------------------------------------
Foreign Currency Interest Rate Swaps outstanding at March 31, 2006:
Unrealized
Notional Appreciation
Local Amount Effective Termination (Depreciation)
Currency (Local Currency) Date (4) Date (U.S. Dollars)
- -----------------------------------------------------------------------------------------------------------------
Agreement with Goldman Sachs dated Euro 3,250,000 1/12/07 4/12/07 $ 4,445
January 11, 2006, to pay quarterly the
notional amount multiplied by 3.050%
(annualized) and receive quarterly the
notional amount multiplied by the
three-month EUR-LIBOR (Euro-London
Inter-Bank Offered Rates).
Agreement with Goldman Sachs dated Australian Dollar 5,250,000 1/12/07 4/12/07 (4,240)
January 11, 2006, to pay quarterly the
notional amount multiplied by the
three-month AUD-LIBOR (Australian
Dollar-London Inter-Bank Offered Rates)
and receive quarterly the notional
amount multiplied by 5.570%
(annualized).
Agreement with JPMorgan dated May 18, Mexican Peso 750,000 5/19/05 5/13/10 4,767
2005, to pay every 28 days the notional
amount multiplied by the 28-day
MXN-TIIE (Mexican Interbank Money
Market Rate) and receive every 28 days
the notional amount multiplied by
10.370% (annualized).
- -----------------------------------------------------------------------------------------------------------------
$ 4,972
- -----------------------------------------------------------------------------------------------------------------
- ----
15
Portfolio of Investments (Unaudited)
NUVEEN SHORT DURATION BOND FUND (continued)
March 31, 2006
Futures Contracts Outstanding at March 31, 2006:
Unrealized
Original Value at Appreciation
Contract Number of Contract Value March 31, 2006 (Depreciation)
Type Position Contracts Expiration (U.S. Dollars) (U.S. Dollars) (U.S. Dollars)
- ----------------------------------------------------------------------------------------------------------------
Australian 3-Year Treasury Bonds Long 10 6/06 $ 728,755 $ 728,443 $ (312)
Australian 10-Year Treasury Bonds Long 4 6/06 300,085 299,165 (920)
British LIBOR Long 8 3/07 1,654,900 1,653,309 (1,591)
Canadian 10-Year Government Bonds Short (4) 6/06 (385,947) (382,652) 3,295
Euribor Long 4 12/06 1,171,711 1,169,738 (1,973)
Euribor Short (6) 3/07 (1,756,320) (1,753,152) 3,168
Euribor Short (2) 6/06 (587,962) (587,293) 669
Euribor Short (2) 9/07 (584,689) (583,808) 881
German 2-Year Fed Rep Bonds Short (8) 6/06 (1,017,891) (1,012,718) 5,173
German 10-Year Fed Rep Bonds Long 2 6/06 289,170 283,985 (5,185)
U.S. 2-Year Treasury Notes Long 10 6/06 2,041,655 2,038,594 (3,061)
U.S. 10-Year Treasury Notes Short (5) 6/06 (536,024) (531,953) 4,071
- ----------------------------------------------------------------------------------------------------------------
$ 4,215
- ----------------------------------------------------------------------------------------------------------------
(1) Ratings: Using the higher of Standard & Poor's or Moody's
rating. Ratings below BBB by Standard & Poor's Group or Baa by
Moody's Investor Service, Inc. are considered to be below
investment grade.
(2) Senior Loans in the Fund's portfolio 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 in the Fund's portfolio may occur.
As a result, the actual remaining maturity of Senior Loans held
in the Fund's portfolio may be substantially less than the
stated maturities shown.
(3) Senior Loans in which the Fund invests 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.
(4) Effective date represents the date on which both the Fund and
counterparty commence interest payment accruals on each forward
swap contract.
144A Securities are exempt from registration under Rule 144A of the
Securities Act of 1933, as amended. These securities may only
be resold in transactions exempt from registration which are
normally those transactions with qualified institutional buyers.
See accompanying notes to financial statements.
- ----
16
Portfolio of Investments (Unaudited)
NUVEEN CORE BOND FUND
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- --------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 32.1%
Aerospace & Defense - 1.1%
$ 25 Alliant Techsystems Inc. 6.750% 4/01/16 B+ $ 25,375
12 Boeing Capital Corporation 5.800% 1/15/13 A 12,237
4 Honeywell International Inc. 7.500% 3/01/10 A 4,297
50 Sequa Corporation 8.875% 4/01/08 BB- 52,375
8 United Technologies Corporation 7.500% 9/15/29 A 9,678
- --------------------------------------------------------------------------------------------------------------------
99 Total Aerospace & Defense 103,962
- --------------------------------------------------------------------------------------------------------------------
Beverages - 0.4%
7 Anheuser-Busch Companies, Inc. 5.050% 10/15/16 A+ 6,710
7 Coca-Cola Enterprises Inc. 6.750% 9/15/28 A 7,521
25 Constellation Brands, Inc. 8.625% 8/01/06 BB 25,375
- --------------------------------------------------------------------------------------------------------------------
39 Total Beverages 39,606
- --------------------------------------------------------------------------------------------------------------------
Building Products - 0.7%
25 Building Materials Corporation of America, Series B 8.000% 10/15/07 B+ 25,656
35 Jacuzzi Brands, Inc. 9.625% 7/01/10 B 37,713
4 Masco Corporation 5.875% 7/15/12 BBB+ 3,991
- --------------------------------------------------------------------------------------------------------------------
64 Total Building Products 67,360
- --------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.8%
20 Lehman Brothers Holdings Inc. 7.875% 11/01/09 A+ 21,450
1 Merril Lynch & Company 3.700% 4/21/08 Aa3 972
5 Merrill Lynch & Co., Inc., Note 6.375% 10/15/08 Aa3 5,135
11 Merrill Lynch & Company 5.000% 1/15/15 Aa3 10,513
10 Morgan Stanley Dean Witter & Company 8.000% 6/15/10 Aa3 10,900
32 Morgan Stanley 4.750% 4/01/14 A1 29,904
- --------------------------------------------------------------------------------------------------------------------
79 Total Capital Markets 78,874
- --------------------------------------------------------------------------------------------------------------------
Chemicals - 3.0%
100 Airgas, Inc. 9.125% 10/01/11 Ba2 106,375
6 Dow Chemical Company 7.375% 11/01/29 A- 6,945
12 E.I. Du Pont de Nemours and Company 6.875% 10/15/09 A 12,563
25 IMC Global Inc. 11.250% 6/01/11 BB 26,719
25 Lyondell Chemical Company 10.875% 5/01/09 B 25,500
100 MacDermid Inc. 9.125% 7/15/11 BB- 106,000
2 Praxair, Inc. 6.375% 4/01/12 A- 2,092
- --------------------------------------------------------------------------------------------------------------------
270 Total Chemicals 286,194
- --------------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.0%
3 Bank of America Corporation 5.375% 6/15/14 Aa2 2,965
3 Bank One NA Illinois 3.700% 1/15/08 Aa2 2,922
6 Charter One Bank FSB 6.375% 5/15/12 Aa3 6,299
26 Credit Sussie First Boston 6.500% 1/15/12 Aa3 27,185
25 National City Bank 6.200% 12/15/11 A1 25,884
3 National Westminster Bank PLC 7.375% 10/01/09 Aa2 3,199
10 PNC Funding Corporation 5.750% 8/01/06 A2 10,016
- ----
17
Portfolio of Investments (Unaudited)
NUVEEN CORE BOND FUND (continued)
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- --------------------------------------------------------------------------------------------------------------------
Commercial Banks (continued)
$ 3 PNC Funding Corporation 7.500% 11/01/09 A3 $ 3,205
6 SunTrust Banks Inc. 6.375% 4/01/11 Aa3 6,238
7 Wells Fargo & Company 5.375% 2/07/35 Aa1 6,518
- --------------------------------------------------------------------------------------------------------------------
92 Total Commercial Banks 94,431
- --------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.2%
10 PHH Corporation 6.000% 3/01/08 BBB 10,074
2 PHH Corporation 7.125% 3/01/13 BBB 2,038
4 Waste Management, Inc. 7.750% 5/15/32 BBB 4,706
- --------------------------------------------------------------------------------------------------------------------
16 Total Commercial Services & Supplies 16,818
- --------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.2%
6 British Telecommunications PLC 8.875% 12/15/30 A- 7,698
5 Cisco Systems, Inc. 5.500% 2/22/16 A+ 4,934
1 Motorola, Inc. 7.625% 11/15/10 BBB+ 1,092
3 Motorola, Inc. 7.500% 5/15/25 BBB+ 3,445
- --------------------------------------------------------------------------------------------------------------------
15 Total Communications Equipment 17,169
- --------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.3%
25 Seagate Technology HDD Holdings, Series 144A 8.000% 5/15/09 BB+ 26,094
- --------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.7%
25 General Motors Acceptance Corporation, Notes 8.000% 11/01/31 Ba1 23,689
3 Household Finance Corporation 7.000% 5/15/12 Aa3 3,211
4 Key Bank NA 7.000% 2/01/11 A2 4,259
19 MBNA Corporation 6.125% 3/01/13 Aa2 19,658
12 SLM Corporation 5.375% 1/15/13 A 11,854
- --------------------------------------------------------------------------------------------------------------------
63 Total Consumer Finance 62,671
- --------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.5%
25 Longview Fibre Company 10.000% 1/15/09 B+ 26,375
25 Smurfit-Stone Container Corporation, 144A 9.750% 2/01/11 B2 25,813
- --------------------------------------------------------------------------------------------------------------------
50 Total Containers & Packaging 52,188
- --------------------------------------------------------------------------------------------------------------------
Distributors - 0.5%
40 Earle M. Jorgensen Company 9.750% 6/01/12 B1 43,400
- --------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 3.3%
33 Associates Corporation of North America 6.250% 11/01/08 Aa1 33,772
13 CIT Group Inc. 5.500% 11/30/07 A 13,039
6 CIT Group Inc. 7.750% 4/02/12 A 6,621
17 Citigroup Inc. 3.625% 2/09/09 Aa1 16,271
5 Citigroup Inc. 6.000% 10/31/33 Aa2 4,956
4 Citigroup Inc. 5.850% 12/11/34 Aa1 3,942
22 Fleet National Bank 5.750% 1/15/09 Aa2 22,246
57 General Electric Capital Corporation 8.125% 5/15/12 AAA 64,609
41 Household Financial Corporation 8.000% 7/15/10 Aa3 44,778
2 HSBC Bank USA 3.875% 9/15/09 Aa2 1,907
- ----
18
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- --------------------------------------------------------------------------------------------------------------------
Diversified Financial Services (continued)
$ 28 JPMorgan Chase & Co. 3.500% 3/15/09 Aa3 $ 26,660
14 Mellon Funding Corporation 3.250% 4/01/09 A+ 13,302
16 Nationsbank Corporation 7.800% 9/15/16 Aa3 18,590
18 Sanwa Finance Aruba AEC 8.350% 7/15/09 A2 19,498
9 US Bank NA Minnesota 6.375% 8/01/11 Aa2 9,391
14 Wachovia Corporation 5.250% 8/01/14 A1 13,608
- --------------------------------------------------------------------------------------------------------------------
299 Total Diversified Financial Services 313,190
- --------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 2.8%
5 Alltel Corporation 7.875% 7/01/32 A2 5,876
21 BellSouth Corporation 6.550% 6/15/34 A 21,032
12 Deutsche Telekom International Finance BV 8.000% 6/15/10 A- 13,080
4 Deutsche Telekom International Finance BV 8.250% 6/15/30 A- 4,799
18 France Telecom 7.750% 3/01/11 A- 19,678
25 GTE Corporation 7.510% 4/01/09 A 26,297
100 Qwest Capital Funding Inc. 7.750% 8/15/06 B 101,125
14 Sprint Capital Corporation 8.375% 3/15/12 A- 15,837
40 Sprint Capital Corporation 6.900% 5/01/19 A- 42,826
4 Sprint Capital Corporation 8.750% 3/15/32 A- 5,016
10 Verizon New York Inc., Series B 7.375% 4/01/32 A 10,172
- --------------------------------------------------------------------------------------------------------------------
253 Total Diversified Telecommunication Services 265,738
- --------------------------------------------------------------------------------------------------------------------
Electric Utilities - 1.1%
14 Duke Capital LLC 5.668% 8/15/14 BBB- 13,856
5 FirstEnergy Corporation 7.375% 11/15/31 BBB- 5,571
12 National Rural Utilities Cooperative Finance Corporation 3.875% 2/15/08 A+ 11,704
8 National Rural Utilities Cooperative Finance Corporation 5.750% 8/28/09 A 8,093
11 Pacific Gas and Electric Company 6.050% 3/01/34 Baa1 10,800
10 Progress Energy, Inc. 7.000% 10/30/31 Baa2 10,780
5 PSE&G Power LLC 8.625% 4/15/31 Baa1 6,374
11 Reliant Energy, Centerpoint Energy Inc. 7.750% 2/15/11 BBB 11,925
20 TXU Energy Company 7.000% 3/15/13 Baa2 20,860
9 Virginia Electric and Power Company 4.750% 3/01/13 Baa1 8,489
- --------------------------------------------------------------------------------------------------------------------
105 Total Electric Utilities 108,452
- --------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1%
10 Northwest Pipeline Corporation 6.625% 12/01/07 Ba2 10,150
- --------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 1.5%
100 Delhaize America Inc. 7.375% 4/15/06 BB+ 100,170
19 General Mills, Inc. 2.625% 10/24/06 BBB+ 18,692
2 Kroger Co. 7.500% 4/01/31 Baa2 2,204
19 Meyer Fred Inc., Kroger Inc. 7.450% 3/01/08 Baa2 19,644
- --------------------------------------------------------------------------------------------------------------------
140 Total Food & Staples Retailing 140,710
- --------------------------------------------------------------------------------------------------------------------
Food Products - 1.5%
100 American Seafoods Group LLC 10.125% 4/15/10 B- 105,063
3 Archer-Daniels - Midland Company 7.000% 2/01/31 A 3,353
- ----
19
Portfolio of Investments (Unaudited)
NUVEEN CORE BOND FUND (continued)
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- --------------------------------------------------------------------------------------------------------------------
Food Products (continued)
$ 2 Kellogg Company 7.450% 4/01/31 BBB+ $ 2,351
11 Kraft Foods Inc. 6.250% 6/01/12 A3 11,346
16 Nabisco Inc. 7.550% 6/15/15 A- 18,186
3 Unilever Capital Corporation 5.900% 11/15/32 A+ 2,950
- --------------------------------------------------------------------------------------------------------------------
135 Total Food Products 143,249
- --------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.0%
2 Consolidated Natural Gas Company 5.000% 12/01/14 Baa1 1,878
- --------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 0.8%
10 HCA, Inc. 6.375% 1/15/15 BB+ 9,783
18 Medco Health Solutions, Inc. 7.250% 8/15/13 BBB 19,409
50 UnitedHealth Group Incorporated 5.375% 3/15/16 A 48,979
- --------------------------------------------------------------------------------------------------------------------
78 Total Health Care Providers & Services 78,171
- --------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.2%
2 Harrah's Operating Company, Inc. 8.000% 2/01/11 BBB- 2,172
20 MGM Grand Inc. 6.000% 10/01/09 BB 19,800
- --------------------------------------------------------------------------------------------------------------------
22 Total Hotels, Restaurants & Leisure 21,972
- --------------------------------------------------------------------------------------------------------------------
Household Durables - 1.3%
25 Beazer Homes USA, Inc. 8.625% 5/15/11 Ba1 26,250
25 K. Hovnanian Enterprises Inc. 7.500% 5/15/16 Ba1 24,772
25 KB Home 9.500% 2/15/11 Ba2 26,281
12 Pulte Homes, Inc. 4.875% 7/15/09 BBB- 11,689
6 Pulte Homes, Inc. 6.375% 5/15/33 BBB- 5,466
25 Toll Corporation 8.250% 2/01/11 BB+ 26,031
- --------------------------------------------------------------------------------------------------------------------
118 Total Household Durables 120,489
- --------------------------------------------------------------------------------------------------------------------
Household Products - 0.2%
2 Kimberly-Clark Corporation 5.000% 8/15/13 Aa2 1,966
20 Procter and Gamble Company 4.850% 12/15/15 AA- 19,130
- --------------------------------------------------------------------------------------------------------------------
22 Total Household Products 21,096
- --------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.3%
7 General Electric Company 5.000% 2/01/13 AAA 6,819
20 Raychem Corporation, Tyco International Limited 7.200% 10/15/08 BBB+ 20,656
- --------------------------------------------------------------------------------------------------------------------
27 Total Industrial Conglomerates 27,475
- --------------------------------------------------------------------------------------------------------------------
Machinery - 0.8%
5 Caterpillar Inc. 7.300% 5/01/31 A 5,966
15 Deere & Company 6.950% 4/25/14 A- 16,354
25 Dresser, Inc. 9.375% 4/15/11 B2 26,250
25 Terex Corporation, Senior Subordinated Notes 10.375% 4/01/11 B 26,500
- --------------------------------------------------------------------------------------------------------------------
70 Total Machinery 75,070
- --------------------------------------------------------------------------------------------------------------------
Media - 1.0%
18 Cox Communications, Inc. 7.750% 11/01/10 BBB- 19,268
22 TCI Communications, Inc. 8.750% 8/01/15 BBB+ 25,785
11 Time Warner Inc. 9.125% 1/15/13 BBB+ 12,752
- ----
20
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- -------------------------------------------------------------------------------------------------------------------
Media (continued)
$ 14 Time Warner Inc. 9.150% 2/01/23 BBB+ $ 16,872
18 Viacom Inc., Senior Notes 7.700% 7/30/10 BBB 19,270
2 Walt Disney Company 7.000% 3/01/32 A- 2,220
- -------------------------------------------------------------------------------------------------------------------
85 Total Media 96,167
- -------------------------------------------------------------------------------------------------------------------
Metals & Mining - 1.6%
8 Alcan Inc. 7.250% 3/15/31 BBB+ 8,933
15 Alcoa Inc. 4.250% 8/15/07 A2 14,778
2 Alcoa Inc. 7.375% 8/01/10 A2 2,145
100 Freeport-McMoran Copper & Gold, Inc. 7.500% 11/15/06 B+ 100,625
25 Steel Dynamics, Inc. 9.500% 3/15/09 BB 26,219
- -------------------------------------------------------------------------------------------------------------------
150 Total Metals & Mining 152,700
- -------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.8%
4 Federated Department Stores, Inc. 6.625% 4/01/11 Baa1 4,158
8 Federated Department Stores, Inc. 6.900% 4/01/29 Baa1 8,335
30 J.C. Penney Corporation Inc. 7.125% 11/15/23 Baa3 32,385
13 Target Corporation 7.500% 8/15/10 A+ 14,076
17 Wal-Mart Stores, Inc. 6.875% 8/10/09 AA 17,837
2 Wal-Mart Stores, Inc. 7.550% 2/15/30 AA 2,405
- -------------------------------------------------------------------------------------------------------------------
74 Total Multiline Retail 79,196
- -------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.3%
25 Utilicorp United Inc., Aquila, Inc. 6.700% 10/15/06 B2 25,125
- -------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 2.6%
10 Amerada Hess Corporation 7.125% 3/15/33 BBB- 10,945
5 Burlington Resources Finance Company 7.200% 8/15/31 A3 5,831
25 Chesapeake Energy Corporation 6.250% 1/15/18 BB 24,563
10 Devon Energy Corporation 7.950% 4/15/32 BBB 12,284
10 Duke Energy Field Services Corporation 7.875% 8/16/10 BBB 10,865
21 Enterprise Products Operating L.P. 4.625% 10/15/09 Baa3 20,310
3 Halliburton Company 5.500% 10/15/10 Baa1 3,010
10 Kinder Morgan Energy Partners, L.P. 7.300% 8/15/33 BBB+ 10,914
10 Occidental Petroleum Corporation 6.750% 1/15/12 A- 10,712
9 Pacific Energy Partners LP, Series WI 6.250% 9/15/15 Ba2 8,820
10 PC Financial Partnership 5.000% 11/15/14 BBB 9,517
11 Phillips Petroleum Company 8.750% 5/25/10 A1 12,356
50 Premcor Refining Group Inc. 7.500% 6/15/15 BBB- 52,818
25 Tesoro Corporation, 144A 6.625% 11/01/15 BB+ 24,875
10 Tosco Corporation 8.125% 2/15/30 A1 12,714
10 Valero Energy Corporation 7.500% 4/15/32 BBB- 11,533
10 XTO Energy, Inc. 6.250% 4/15/13 BBB- 10,359
- -------------------------------------------------------------------------------------------------------------------
239 Total Oil, Gas & Consumable Fuels 252,426
- -------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.4%
8 Westvaco Corporation 8.200% 1/15/30 BBB 8,783
17 Weyerhaeuser Company 5.950% 11/01/08 BBB 17,166
- ----
21
Portfolio of Investments (Unaudited)
NUVEEN CORE BOND FUND (continued)
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- -------------------------------------------------------------------------------------------------------------------
Paper & Forest Products (continued)
$ 10 Weyerhaeuser Company 6.950% 10/01/27 BBB $ 10,089
- -------------------------------------------------------------------------------------------------------------------
35 Total Paper & Forest Products 36,038
- -------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.2%
3 Schering-Plough Corporation 6.750% 12/01/33 A- 3,226
20 Wyeth 5.500% 3/15/13 A 19,801
- -------------------------------------------------------------------------------------------------------------------
23 Total Pharmaceuticals 23,027
- -------------------------------------------------------------------------------------------------------------------
Real Estate - 0.5%
17 EOP Operating LP 7.750% 11/15/07 BBB 17,580
2 EOP Operating LP 5.875% 1/15/13 BBB 1,992
12 ERP Operating LP 6.625% 3/15/12 A- 12,637
19 Simon Property Group, L.P. 6.375% 11/15/07 A- 19,282
- -------------------------------------------------------------------------------------------------------------------
50 Total Real Estate 51,491
- -------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.5%
18 Burlington Northern Santa Fe Corporation 6.750% 7/15/11 BBB+ 19,002
13 Canadian National Railway Company 6.250% 8/01/34 A- 13,701
17 Norfolk Southern Corporation 7.700% 5/15/17 BBB+ 19,731
- -------------------------------------------------------------------------------------------------------------------
48 Total Road & Rail 52,434
- -------------------------------------------------------------------------------------------------------------------
Software - 0.1%
14 Computer Associates International, Inc. 4.750% 12/01/09 BBB- 13,639
- -------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.0%
1 Home Depot, Inc. 3.750% 9/15/09 AA 953
1 Lowes Companies, Inc. 6.500% 3/15/29 A+ 1,078
- -------------------------------------------------------------------------------------------------------------------
2 Total Specialty Retail 2,031
- -------------------------------------------------------------------------------------------------------------------
Tobacco - 0.1%
2 Philip Morris Companies, Inc. 7.750% 1/15/27 BBB 2,295
6 Phillip Morris Companies, Inc. 7.200% 2/01/07 BBB 6,062
- -------------------------------------------------------------------------------------------------------------------
8 Total Tobacco 8,357
- -------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.7%
22 AT&T/Cingular Wireless Services 8.125% 5/01/12 A 24,732
25 Rogers Wireless Communications Inc. 6.375% 3/01/14 BB 25,063
10 Telefonica Europe BV 7.750% 9/15/10 BBB+ 10,770
4 Vodafone Group PLC 7.875% 2/15/30 A+ 4,620
- -------------------------------------------------------------------------------------------------------------------
61 Total Wireless Telecommunication Services 65,185
- -------------------------------------------------------------------------------------------------------------------
$ 2,947 Total Corporate Bonds (cost $3,158,591) 3,074,223
- -------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 25.8%
U.S. Treasury Bonds/Notes - 25.8%
$ 325 United States of America Treasury Bonds/Notes 7.500% 11/15/24 AAA 419,225
115 United States of America Treasury Bonds/Notes 5.250% 2/15/29 AAA 118,118
300 United States of America Treasury Bonds/Notes 3.375% 2/28/07 AAA 296,110
425 United States of America Treasury Bonds/Notes 4.500% 2/15/09 AAA 421,447
1,100 United States of America Treasury Bonds/Notes 0.000% 2/15/11 AAA 873,667
410 United States of America Treasury Bonds/Notes 0.000% 11/15/14 AAA 268,805
- ----
22
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds/Notes (continued)
$ 95 United States of America Treasury Bonds/Notes 0.000% 2/15/15 AAA $ 61,579
35 United States of America Treasury Bonds/Notes 0.000% 5/15/30 AAA 10,612
- -------------------------------------------------------------------------------------------------------------------
$ 2,805 Total U.S. Government and Agency Obligations (cost 2,469,563
$2,506,827)
- -------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 47.1%
Autos - 2.4%
$ 100 Capital Auto Receivables Asset Trust, Series 2005-1 4.889% 4/15/08 AAA 100,097
34 Capital One Auto Finance Trust, Series 2005-BSS 3.820% 9/15/08 AAA 33,378
10 Daimler Chrysler Auto Trust, Class A3, Series 2003B 2.250% 8/08/07 AAA 9,546
75 Daimler Chrysler Auto Trust, Class A3, Series 2005B 4.040% 9/08/09 AAA 74,036
7 Harley-Davidson Motorcycle Trust, Contract Backed Notes, 1.400% 10/15/08 AAA 7,419
Series 2004-1-A1
10 Toyota Auto Receivables Owner Trust, Class A3, Series 2003B 4.783% 8/15/07 AAA 10,233
- -------------------------------------------------------------------------------------------------------------------
236 Total Autos 234,709
- -------------------------------------------------------------------------------------------------------------------
Cards - 1.0%
50 Chase Credit Card Master Trust, Class A, Series 2004-1 4.700% 5/15/09 AAA 50,028
50 MBNA Credit Card Master Note Trust, Class A1, Series 2002 4.950% 6/15/09 AAA 49,986
- -------------------------------------------------------------------------------------------------------------------
100 Total Cards 100,014
- -------------------------------------------------------------------------------------------------------------------
Home Equity - 0.2%
18 Master CI-9 NIM Notes, Series 2005 4.940% 3/26/35 A+ 18,040
- -------------------------------------------------------------------------------------------------------------------
Residentials - 43.5%
72 Fannie Mae, Mortgage Pool 255814 5.500% 8/24/35 AAA 70,305
967 Fannie Mae, Mortgage Pool 255937 5.000% 11/24/20 NA 943,831
981 Fannie Mae, Mortgage Pool 735060 6.000% 11/24/34 AAA 981,648
476 Fannie Mae, Mortgage Pool 824163 5.500% 4/24/35 AAA 464,714
461 Fannie Mae, Mortgage Pool 828348 4.500% 7/24/35 AAA 425,730
800 Fannie Mae, Mortgage Pool (TBA) 6.000% 4/24/36 AAA 800,000
500 Fannie Mae, Mortgage Pool (TBA) 5.500% 4/24/36 AAA 488,125
- -------------------------------------------------------------------------------------------------------------------
4,257 Total Residentials 4,174,353
- -------------------------------------------------------------------------------------------------------------------
$ 4,611 Total Asset-Backed and Mortgage-Backed Securities (cost 4,527,116
$4,612,909)
- -------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 0.3%
Capital Markets - 0.3%
$ 8 First Union Institutional Capital Securities I 8.040% 12/01/26 A1 8,421
22 Goldman Sachs Group, Inc. 6.345% 2/15/34 A1 21,887
- -------------------------------------------------------------------------------------------------------------------
30 Total Capital Markets 30,308
- -------------------------------------------------------------------------------------------------------------------
$ 30 Total Capital Preferred Securities (cost $31,715) 30,308
- -------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
SOVEREIGN DEBT - 1.4%
Colombia - 0.1%
$ 10 Republic of Colombia 8.250% 12/22/14 BB 11,300
- -------------------------------------------------------------------------------------------------------------------
Mexico - 0.8%
65 United Mexican States 6.625% 3/03/15 Baa1 67,990
- -------------------------------------------------------------------------------------------------------------------
South Africa - 0.5%
50 Republic of South Africa 8.375% 10/17/06 BBB+ 50,813
- -------------------------------------------------------------------------------------------------------------------
$ 125 Total Sovereign Debt (cost $132,963) 130,103
- -------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ----
23
Portfolio of Investments (Unaudited)
NUVEEN CORE BOND FUND (continued)
March 31, 2006
Weighted
Principal Average
Amount (000) Description Coupon Maturity (2) Ratings (1) Value
- -----------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS - 2.6% (3)
Health Care Providers & Services - 2.6%
$ 250 HealthSouth Corporation Term Loan 8.150% 3/10/13 B2 $ 252,187
- -----------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $250,000) 252,187
---------------------------------------------------------------------------------------------------------
Total Investments (cost $10,693,005) - 109.3% 10,483,500
---------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS SOLD SHORT - (5.0)%
$(475) Ginnie Mae, Mortgage - Backed Securities, Conventional 6.000% 4/15/36 AAA (480,492)
Mortgage Loans (TBA)
- -----------------------------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations Sold Short (480,492)
(proceeds $480,195)
---------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (4.3)% (415,660)
---------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 9,587,348
---------------------------------------------------------------------------------------------------------
Forward Foreign Currency Exchange Contracts outstanding at March 31,
2006:
Unrealized
Appreciation
Amount In Exchange For Amount Settlement (Depreciation)
Currency Contracts to Deliver (Local Currency) Currency (Local Currency) Date (U.S. Dollars)
- -------------------------------------------------------------------------------------------------------------
Canadian Dollar 45,000 South African Rand 241,805 4/06/06 $ 665
Czech Koruna 581,950 U.S. Dollar 25,000 6/20/06 60
Danish Krone 155,013 U.S. Dollar 25,000 6/27/06 (300)
Euro 25,000 Slovakian Koruna 940,576 5/22/06 78
Euro 12,500 South African Rand 91,010 5/22/06 (483)
Euro 50,000 Mexican Peso 650,510 6/19/06 (1,463)
Euro 62,500 Norwegian Krone 498,281 6/19/06 309
Euro 51,472 U.S. Dollar 62,500 6/20/06 (184)
Euro 20,672 U.S. Dollar 25,000 6/27/06 (186)
Mexican Peso 266,094 U.S. Dollar 25,000 4/19/06 582
New Taiwan Dollar 811,500 U.S. Dollar 25,000 6/27/06 (217)
New Zealand Dollar 61,666 U.S. Dollar 37,500 6/20/06 (251)
Norwegian Krone 164,368 U.S. Dollar 25,000 6/27/06 (221)
Polish Zloty 39,629 U.S. Dollar 12,500 6/02/06 235
Pound Sterling 25,000 Australian Dollar 58,965 4/19/06 (1,245)
Slovakian Koruna 773,250 U.S. Dollar 25,000 6/27/06 (83)
South Korean Won 24,320,000 U.S. Dollar 25,000 6/20/06 (78)
Swedish Krona 190,338 U.S. Dollar 25,000 6/20/06 408
Swiss Franc 30,000 Norwegian Krone 156,651 4/28/06 865
Swiss Franc 32,008 U.S. Dollar 25,000 6/20/06 238
U.S. Dollar 25,000 Australian Dollar 35,356 6/27/06 277
U.S. Dollar 12,500 Brazilian Real 29,556 4/17/06 1,106
U.S. Dollar 12,500 Brazilian Real 29,728 4/19/06 1,179
U.S. Dollar 50,000 Chilean Peso 26,562,500 6/27/06 434
U.S. Dollar 25,000 Hungarian Forint 5,529,750 6/27/06 303
U.S. Dollar 25,000 Israeli Shekel 117,000 6/27/06 68
U.S. Dollar 25,000 Mexican Peso 268,538 6/20/06 (471)
U.S. Dollar 25,000 New Turkish Lira 33,600 6/20/06 (435)
U.S. Dollar 62,500 New Zealand Dollar 98,360 6/20/06 (2,285)
U.S. Dollar 12,500 Slovakian Koruna 387,500 6/02/06 58
U.S. Dollar 25,000 South African Rand 158,478 6/27/06 568
- -------------------------------------------------------------------------------------------------------------
$ (469)
- -------------------------------------------------------------------------------------------------------------
- ----
24
Foreign Currency Interest Rate Swaps outstanding at March 31, 2006:
Unrealized
Notional Appreciation
Local Amount Effective Termination (Depreciation)
Currency (Local Currency) Date (4) Date (U.S. Dollars)
- -----------------------------------------------------------------------------------------------------------------
Agreement with Goldman Sachs dated Euro 3,250,000 1/12/07 4/12/07 $ 4,445
January 11, 2006, to pay quarterly the
notional amount multiplied by 3.050%
(annualized) and receive quarterly the
notional amount multiplied by the
three-month EUR-LIBOR (Euro-London
Inter-Bank Offered Rates).
Agreement with Goldman Sachs dated Australian Dollar 5,250,000 1/12/07 4/12/07 (4,240)
January 11, 2006, to pay quarterly the
notional amount multiplied by the
three-month AUD-LIBOR (Australian
Dollar-London Inter-Bank Offered Rates)
and receive quarterly the notional
amount multiplied by 5.570%
(annualized).
Agreement with JPMorgan dated May 18, Mexican Peso 750,000 5/19/05 5/13/10 4,767
2005, to pay every 28 days the notional
amount multiplied by the 28-day
MXN-TIIE (Mexican Interbank Money
Market Rate) and receive every 28 days
the notional amount multiplied by
10.370% (annualized).
- -----------------------------------------------------------------------------------------------------------------
$ 4,972
- -----------------------------------------------------------------------------------------------------------------
Futures Contracts Outstanding at March 31, 2006:
Unrealized
Original Value at Appreciation
Contract Number of Contract Value March 31, 2006 (Depreciation)
Type Position Contracts Expiration (U.S. Dollars) (U.S. Dollars) (U.S. Dollars)
- ----------------------------------------------------------------------------------------------------------------
Australian 3-Year Treasury Bonds Long 10 6/06 $ 728,755 $ 728,443 $ (312)
Australian 10-Year Treasury Bonds Long 4 6/06 300,085 299,165 (920)
British LIBOR Long 8 3/07 1,654,900 1,653,309 (1,591)
Canadian 10-Year Government Bonds Short (4) 6/06 (385,947) (382,652) 3,295
Euribor Long 4 12/06 1,171,725 1,169,738 (1,987)
Euribor Short (6) 3/07 (1,756,358) (1,753,152) 3,206
Euribor Short (2) 6/06 (587,962) (587,293) 669
Euribor Short (2) 9/07 (584,689) (583,808) 881
German 2-Year Fed Rep Bonds Short (8) 6/06 (1,017,891) (1,012,718) 5,173
German 10-Year Fed Rep Bonds Long 2 6/06 289,170 283,985 (5,185)
U.S. 2-Year Treasury Notes Long 5 6/06 1,020,421 1,019,297 (1,124)
U.S. 5-Year Treasury Notes Long 4 6/06 419,075 417,750 (1,325)
U.S. 10-Year Treasury Notes Short (5) 6/06 (536,024) (531,953) 4,071
- ----------------------------------------------------------------------------------------------------------------
$ 4,851
- ----------------------------------------------------------------------------------------------------------------
(1) Ratings: Using the higher of Standard & Poor's or Moody's
rating. Ratings below BBB by Standard & Poor's Group or Baa by
Moody's Investor Service, Inc. are considered to be below
investment grade.
(2) Senior Loans in the Fund's portfolio 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 in the Fund's portfolio may occur.
As a result, the actual remaining maturity of Senior Loans held
in the Fund's portfolio may be substantially less than the
stated maturities shown.
(3) Senior Loans in which the Fund invests 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.
(4) Effective date represents the date on which both the Fund and
counterparty commence interest payment accruals on each forward
swap contract.
144A Securities are exempt from registration under Rule 144A of the
Securities Act of 1933, as amended. These securities may only
be resold in transactions exempt from registration which are
normally those transactions with qualified institutional buyers.
(TBA) To be announced. Securities are also subject to sale/buy back
arrangements.
See accompanying notes to financial statements.
- ----
25
Portfolio of Investments (Unaudited)
NUVEEN HIGH YIELD BOND FUND
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- --------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 85.1%
Aerospace & Defense - 2.3%
$ 125 Bombardier Inc., Series 144A 6.750% 5/01/12 BB $ 120,000
100 DI Finance/DynCorp International, Series B 9.500% 2/15/13 B- 104,500
- --------------------------------------------------------------------------------------------------------------------
225 Total Aerospace & Defense 224,500
- --------------------------------------------------------------------------------------------------------------------
Automobiles - 1.5%
165 Ford Motor Credit Company 7.000% 10/01/13 Ba2 147,784
- --------------------------------------------------------------------------------------------------------------------
Beverages - 1.0%
100 Constellation Brands, Inc. 8.625% 8/01/06 BB 101,500
- --------------------------------------------------------------------------------------------------------------------
Building Products - 4.1%
100 Building Materials Corporation of America, Series B 8.000% 10/15/07 B+ 102,625
200 Jacuzzi Brands, Inc. 9.625% 7/01/10 B 215,500
100 Norcraft Holdings LP 9.750% 9/01/12 B- 79,500
- --------------------------------------------------------------------------------------------------------------------
400 Total Building Products 397,625
- --------------------------------------------------------------------------------------------------------------------
Chemicals - 11.2%
325 Airgas, Inc. 9.125% 10/01/11 Ba2 345,719
100 Equistar Chemicals LP/Equistar Funding Corporation 10.625% 5/01/11 BB- 108,750
100 IMC Global Inc. 11.250% 6/01/11 BB 106,875
50 IMC Global Inc. 10.875% 8/01/13 BB 57,500
100 Lyondell Chemical Company 10.875% 5/01/09 B 102,000
100 MacDermid Inc. 9.125% 7/15/11 BB- 106,000
100 Methanex Corporation 8.750% 8/15/12 BBB- 109,750
45 PolyOne Corporation 10.625% 5/15/10 B+ 48,938
100 Rockwood Specialties Group Inc., Series WI 7.500% 11/15/14 B- 101,000
- --------------------------------------------------------------------------------------------------------------------
1,020 Total Chemicals 1,086,532
- --------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 1.1%
100 Allied Waste North America, Series B 8.875% 4/01/08 BB- 105,500
- --------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 1.1%
100 Seagate Technology HDD Holdings, Series 144A 8.000% 5/15/09 BB+ 104,375
- --------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.5%
40 Texas Industries Inc. 7.250% 7/15/13 BB- 41,400
- --------------------------------------------------------------------------------------------------------------------
Consumer Finance - 2.7%
85 Ford Motor Credit Company 5.625% 10/01/08 Ba2 77,776
150 General Motors Acceptance Corporation, Notes 8.000% 11/01/31 Ba1 142,136
40 General Motors Acceptance Corporation 6.875% 8/28/12 Ba1 36,947
- --------------------------------------------------------------------------------------------------------------------
275 Total Consumer Finance 256,859
- --------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 3.1%
100 Graphic Packaging International Inc. 9.500% 8/15/13 B- 94,000
100 Longview Fibre Company 10.000% 1/15/09 B+ 105,500
100 Smurfit-Stone Container Corporation, 144A 9.750% 2/01/11 B2 103,250
- --------------------------------------------------------------------------------------------------------------------
300 Total Containers & Packaging 302,750
- --------------------------------------------------------------------------------------------------------------------
Distributors - 1.0%
100 Ryerson Tull Inc. 8.250% 12/15/11 B 100,000
- --------------------------------------------------------------------------------------------------------------------
- ----
26
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- -----------------------------------------------------------------------------------------------------------------------
Diversified Consumer Services - 1.1%
$ 100 Carriage Services Inc. 7.875% 1/15/15 B2 $ 102,250
- -----------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 2.0%
100 INTELSAT Limited 5.250% 11/01/08 B 95,000
100 Qwest Capital Funding Inc. 7.750% 8/15/06 B 101,125
- -----------------------------------------------------------------------------------------------------------------------
200 Total Diversified Telecommunication Services 196,125
- -----------------------------------------------------------------------------------------------------------------------
Electric Utilities - 2.3%
110 Edison Mission Energy 9.875% 4/15/11 B+ 124,850
100 Mirant North America LLC., 144A 7.375% 12/31/13 B1 102,500
- -----------------------------------------------------------------------------------------------------------------------
210 Total Electric Utilities 227,350
- -----------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.9%
85 Solectron Corporation, 144A 8.000% 3/15/16 B- 85,638
- -----------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 2.6%
90 Targa Resources Inc., Series 144A 8.500% 11/01/13 B2 94,050
150 Williams Companies Inc. 7.500% 1/15/31 B+ 156,375
- -----------------------------------------------------------------------------------------------------------------------
240 Total Energy Equipment & Services 250,425
- -----------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 1.0%
100 Delhaize America Inc. 7.375% 4/15/06 BB+ 100,170
- -----------------------------------------------------------------------------------------------------------------------
Food Products - 2.6%
100 American Seafoods Group LLC 10.125% 4/15/10 B- 105,063
100 Pinnacle Foods Holding Corporation 8.250% 12/01/13 B- 99,500
50 Swift & Company 12.500% 1/01/10 B 50,625
- -----------------------------------------------------------------------------------------------------------------------
250 Total Food Products 255,188
- -----------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 1.0%
100 HCA, Inc. 7.500% 11/06/33 BB+ 98,417
- -----------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 3.6%
85 Boyd Gaming Corporation 7.125% 2/01/16 B+ 86,594
40 Chukchansi Economic Development Authority, 144A 8.000% 11/15/13 BB- 41,200
125 MGM Grand Inc. 6.000% 10/01/09 BB 123,750
100 MGM Mirage Inc. 6.625% 7/15/15 BB 98,875
- -----------------------------------------------------------------------------------------------------------------------
350 Total Hotels, Restaurants & Leisure 350,419
- -----------------------------------------------------------------------------------------------------------------------
Household Durables - 4.9%
50 Beazer Homes USA, Inc. 8.625% 5/15/11 Ba1 52,500
50 K. Hovnanian Enterprises Inc. 7.500% 5/15/16 Ba1 49,543
50 KB Home 9.500% 2/15/11 Ba2 52,563
50 KB Home 6.375% 8/15/11 BB+ 49,312
100 Standard Pacific Corporation 6.250% 4/01/14 BB 89,250
100 Technical Olympic USA Inc. 7.500% 1/15/15 B2 86,750
90 Toll Corporation 8.250% 2/01/11 BB+ 93,713
- -----------------------------------------------------------------------------------------------------------------------
490 Total Household Durables 473,631
- -----------------------------------------------------------------------------------------------------------------------
Independent Power Producers & Energy Traders - 0.9%
85 NRG Energy Inc. 7.375% 2/01/16 B1 87,019
- -----------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.6%
50 Covalence Specialty Materials Corporation, 144A 10.250% 3/01/16 B3 52,750
- -----------------------------------------------------------------------------------------------------------------------
- ----
27
Portfolio of Investments (Unaudited)
NUVEEN HIGH YIELD BOND FUND (continued)
March 31, 2006
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- --------------------------------------------------------------------------------------------------------------------
Machinery - 6.7%
$ 150 Case New Holland Inc., Series WI 9.250% 8/01/11 BB- $ 160,875
100 Columbus McKinnon Corporation 8.875% 11/01/13 B- 105,500
100 Dresser, Inc. 9.375% 4/15/11 B2 105,000
100 FastenTech Inc. 11.500% 5/01/11 B- 100,500
65 JLG Industries Inc. 8.375% 6/15/12 B+ 68,575
100 Terex Corporation, Senior Subordinated Notes 10.375% 4/01/11 B 106,000
- --------------------------------------------------------------------------------------------------------------------
615 Total Machinery 646,450
- --------------------------------------------------------------------------------------------------------------------
Media - 2.4%
100 Block Communications Inc. 8.250% 12/15/15 B1 98,500
75 Dex Media Inc. 9.000% 11/15/13 B 63,750
50 Paxson Communications Corporation, 144A 11.210% 1/15/13 B3 49,750
25 Young Broadcasting Inc., Senior Subordinated Note 10.000% 3/01/11 Caa2 23,188
- --------------------------------------------------------------------------------------------------------------------
250 Total Media 235,188
- --------------------------------------------------------------------------------------------------------------------
Metals & Mining - 5.8%
85 Chaparral Steel Company 10.000% 7/15/13 B1 95,200
100 Freeport - McMoran Copper & Gold, Inc. 7.500% 11/15/06 B+ 100,625
100 Nalco Finance Holdings Inc. 9.000% 2/01/14 B- 76,000
100 Russel Metals Inc. 6.375% 3/01/14 BB 99,250
100 Steel Dynamics, Inc. 9.500% 3/15/09 BB 104,875
100 Wise Metals Group 10.250% 5/15/12 CCC+ 87,500
- --------------------------------------------------------------------------------------------------------------------
585 Total Metals & Mining 563,450
- --------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 2.5%
85 Dynegy Holdings Inc., 144A (WI/DD, Settling 4/12/06) 8.375% 5/01/16 B2 85,000
150 Utilicorp Canada Finance Corporation 7.750% 6/15/11 B2 155,625
- --------------------------------------------------------------------------------------------------------------------
235 Total Multi-Utilities 240,625
- --------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 4.1%
100 Chesapeake Energy Corporation 6.250% 1/15/18 BB 98,250
100 El Paso Corporation, Series WI 7.750% 6/15/10 B- 103,625
170 El Paso Natural Gas Company 8.375% 6/15/32 B1 193,071
- --------------------------------------------------------------------------------------------------------------------
370 Total Oil, Gas & Consumable Fuels 394,946
- --------------------------------------------------------------------------------------------------------------------
Personal Products - 1.1%
100 Playtex Products Inc., Series 144A 9.375% 6/01/11 CCC+ 105,000
- --------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.9%
90 Angiotech Pharmaceuticals Inc., 144A 7.750% 4/01/14 B 91,350
- --------------------------------------------------------------------------------------------------------------------
Specialty Retail - 3.1%
100 General Nutrition Centers Inc. 8.500% 12/01/10 CCC+ 95,250
100 General Nutrition Centers Inc. 8.625% 1/15/11 B- 101,750
100 Leslie's Poolmart Inc. 7.750% 2/01/13 B2 101,000
- --------------------------------------------------------------------------------------------------------------------
300 Total Specialty Retail 298,000
- --------------------------------------------------------------------------------------------------------------------
Textiles Apparel & Luxury Goods - 3.3%
50 Levi Strauss & Company 12.250% 12/15/12 B- 57,063
100 Levi Strauss & Company 9.280% 4/01/12 B- 104,000
- ----
28
Principal
Amount (000) Description Coupon Maturity Ratings (1) Value
- -------------------------------------------------------------------------------------------------------------------------
Textiles Apparel & Luxury Goods (continued)
$ 150 Samsonite Corporation 8.875% 6/01/11 B- $ 159,371
- -------------------------------------------------------------------------------------------------------------------------
300 Total Textiles Apparel & Luxury Goods 320,434
- -------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors - 2.1%
200 United Rentals North America Inc. 7.750% 11/15/13 B 201,000
- -------------------------------------------------------------------------------------------------------------------------
$ 8,130 Total Corporate Bonds (cost $8,328,223) 8,244,650
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 3.0%
U.S. Treasury Note - 3.0%
$ 300 United States of America Treasury Note 0.000% 11/15/06 AAA 291,177
- -------------------------------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations (cost $292,066) 291,177
------------------------------------------------------------------------------------------------------------
Weighted
Principal Average
Amount (000) Description Coupon Maturity (2) Ratings (1) Value
- -------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS - 5.2% (3)
Health Care Providers & Services - 5.2%
$ 500 HealthSouth Corporation Term Loan 8.150% 3/10/13 B2 504,375
- -------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $500,000) 504,375
------------------------------------------------------------------------------------------------------------
Total Investments (cost $9,120,289) - 93.3% 9,040,202
------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 6.7% 647,305
------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 9,687,507
------------------------------------------------------------------------------------------------------------
- ----
29
Portfolio of Investments (Unaudited)
NUVEEN HIGH YIELD BOND FUND (continued)
March 31, 2006
Total Return Swap outstanding at March 31, 2006:
Unrealized
Expiration Notional Appreciation
Counterparty Receive Total Return Pay Date Amount (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------
Bear Stearns Lehman Brothers U.S. High Yield Index 1-month USD-LIBOR-BBA 11/01/06 $3,000,000 $8,998
International, Ltd. (British Bankers' Association)
less 50 basis points
- ------------------------------------------------------------------------------------------------------------------------------
Futures Contracts Outstanding at March 31, 2006:
Unrealized
Original Value at Appreciation
Contract Number of Contract Value March 31, 2006 (Depreciation)
Type Position Contracts Expiration (U.S. Dollars) (U.S. Dollars) (U.S. Dollars)
- ---------------------------------------------------------------------------------------------------------
U.S. 5-Year Treasury Notes Short (3) 6/06 $(315,343) $(313,313) $2,030
U.S. 2-Year Treasury Notes Short (3) 6/06 (612,741) (611,578) 1,163
U.S. 10-Year Treasury Notes Short (1) 6/06 (112,169) (109,156) 3,013
- ---------------------------------------------------------------------------------------------------------
$6,206
- ---------------------------------------------------------------------------------------------------------
(1) Ratings: Using the higher of Standard & Poor's or Moody's
rating. Ratings below BBB by Standard & Poor's Group or Baa by
Moody's Investor Service, Inc. are considered to be below
investment grade.
(2) Senior Loans in the Fund's portfolio 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 in the Fund's portfolio may occur.
As a result, the actual remaining maturity of Senior Loans held
in the Fund's portfolio may be substantially less than the
stated maturities shown.
(3) Senior Loans in which the Fund invests 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 Investment purchased on a when-issued or delayed delivery basis.
144A Securities are exempt from registration under Rule 144A of the
Securities Act of 1933, as amended. These securities 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
Statement of Assets and Liabilities (Unaudited)
March 31, 2006
Short Duration Core High Yield
- ---------------------------------------------------------------------------------------------------------------------------------
Assets
Investments, at value (cost $9,593,439, $10,693,005 and $9,120,289, respectively) $ 9,537,121 $10,483,500 $ 9,040,202
Cash denominated in foreign currencies (cost $124, $122 and $0, respectively) 124 123 --
Cash 4,237 322,495 580,322
Deposits with brokers for open futures contracts 47,053 51,045 21,905
Unrealized appreciation on forward foreign currency exchange contracts 7,433 7,433 --
Unrealized appreciation on foreign currency interest rate swaps 9,212 9,212 --
Unrealized appreciation on total return swap -- -- 8,998
Receivables:
Reimbursement from Adviser 8,583 9,776 --
Interest 114,348 102,032 211,502
Investments sold 321,710 640,281 152,640
Other assets 61 67 61
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 10,049,882 11,625,964 10,015,630
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
Securities sold short, at value (proceeds $480,195) -- 480,492 --
Payables:
Investments purchased 353,004 1,483,392 244,405
Unrealized depreciation on forward foreign currency exchange contracts 7,902 7,902 --
Unrealized depreciation on foreign currency interest rate swaps 4,240 4,240 --
Variation margin on futures contracts 965 1,090 297
Accrued expenses:
Management fees -- -- 1,336
12b-1 distribution and service fees 3 5 5
Other 19,420 21,500 18,084
Dividends payable 37,497 39,995 63,996
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 423,031 2,038,616 328,123
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets $ 9,626,851 $ 9,587,348 $ 9,687,507
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Shares
Net assets $ 2,410 $ 2,400 $ 2,422
Shares outstanding 125 125 125
Net asset value per share $ 19.28 $ 19.20 $ 19.38
Offering price per share (net asset value per share plus maximum sales charge of
2.00%, 3.75% and 4.75%, respectively, of offering price) $ 19.67 $ 19.95 $ 20.35
- ---------------------------------------------------------------------------------------------------------------------------------
Class B Shares
Net assets N/A $ 2,401 $ 2,423
Shares outstanding N/A 125 125
Net asset value and offering price per share N/A $ 19.21 $ 19.38
- ---------------------------------------------------------------------------------------------------------------------------------
Class C Shares
Net assets $ 2,411 $ 2,401 $ 2,423
Shares outstanding 125 125 125
Net asset value and offering price per share $ 19.29 $ 19.21 $ 19.38
- ---------------------------------------------------------------------------------------------------------------------------------
Class R Shares
Net assets $ 9,622,030 $ 9,580,146 $ 9,680,239
Shares outstanding 499,750 499,625 499,625
Net asset value and offering price per share $ 19.25 $ 19.17 $ 19.38
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:
- ---------------------------------------------------------------------------------------------------------------------------------
Capital paid-in $ 9,999,496 $ 9,999,660 $ 9,999,673
Undistributed (Over-distribution of) net investment income (60,324) (18,991) (77,341)
Accumulated net realized gain (loss) from investments and derivative transactions (264,721) (192,874) (169,942)
Net unrealized appreciation (depreciation) of investments and derivative transactions (47,600) (200,447) (64,883)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets $ 9,626,851 $ 9,587,348 $ 9,687,507
- ---------------------------------------------------------------------------------------------------------------------------------
N/A - ShortDuration is not authorized to issue Class B shares.
See accompanying notes to financial statements.
- ----
31
Statement of Operations (Unaudited)
Six Months Ended March 31, 2006
Short Duration Core High Yield
- -----------------------------------------------------------------------------------------------------------
Investment Income $219,542 $ 255,523 $ 365,361
- -----------------------------------------------------------------------------------------------------------
Expenses
Management fees 26,195 31,063 35,418
12b-1 service fees - Class A 4 4 4
12b-1 distribution and service fees - Class B N/A 13 13
12b-1 distribution and service fees - Class C 13 13 13
Shareholders' servicing agent fees and expenses 35 59 72
Custodian's fees and expenses 20,225 31,391 14,539
Trustees' fees and expenses 146 91 166
Professional fees 10,093 10,031 9,978
Shareholders' reports - printing and mailing expenses 4,878 4,878 4,878
Federal and state registration fees 1,064 1,064 1,064
Other expenses 424 434 422
- -----------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 63,077 79,041 66,567
Custodian fee credit (1,199) (1,328) (1,735)
Expense reimbursement (32,124) (42,862) (23,528)
- -----------------------------------------------------------------------------------------------------------
Net expenses 29,754 34,851 41,304
- -----------------------------------------------------------------------------------------------------------
Net investment income 189,788 220,672 324,057
- -----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments (83,791) (86,356) (160,209)
Futures 4,318 6,983 (22,846)
Forwards (785) (2,194) --
Swaps (2,582) (2,582) 49,287
Foreign currencies (3,066) (1,667) --
Change in net unrealized appreciation (depreciation) of:
Investments 4,230 (150,152) 155,046
Futures 10,661 10,124 16,089
Forwards (1,481) (1,481) --
Swaps 8,593 8,593 31,504
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (63,903) (218,732) 68,871
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $125,885 $ 1,940 $ 392,928
- -----------------------------------------------------------------------------------------------------------
N/A - Short Duration is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
- ----
32
Statement of Changes in Net Assets (Unaudited)
Short Duration Core
------------------------------------- -------------------------------------
For the Period For the Period
December 20, 2004 December 20, 2004
(commencement of (commencement of
Six Months Ended operations) through Six Months Ended operations) through
3/31/06 9/30/05 3/31/06 9/30/05
- -----------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 189,788 $ 233,689 $ 220,672 $ 288,191
Net realized gain (loss) from:
Investments (83,791) (86,810) (86,356) (74,191)
Futures 4,318 (17,415) 6,983 (14,299)
Forwards (785) 19,542 (2,194) 19,629
Swaps (2,582) (1,284) (2,582) (1,099)
Foreign currencies (3,066) 507 (1,667) 584
Change in net unrealized appreciation
(depreciation) of:
Investments 4,230 (60,548) (150,152) (59,649)
Futures 10,661 (6,446) 10,124 (5,273)
Forwards (1,481) 1,012 (1,481) 1,012
Swaps 8,593 (3,621) 8,593 (3,621)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 125,885 78,626 1,940 151,284
- -----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment
income:
Class A (80) (55) (66) (68)
Class B N/A N/A (56) (54)
Class C (71) (41) (56) (54)
Class R (339,032) (238,381) (275,739) (289,783)
- -----------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (339,183) (238,477) (275,917) (289,959)
- -----------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Proceeds from sale of shares -- 10,000,000 -- 10,000,000
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions -- 10,000,000 -- 10,000,000
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (213,298) 9,840,149 (273,977) 9,861,325
Net assets at the beginning of period 9,840,149 -- 9,861,325 --
- -----------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $9,626,851 $ 9,840,149 $9,587,348 $ 9,861,325
- -----------------------------------------------------------------------------------------------------------------------
Undistributed (Over-distribution of) net
investment income at the end of
period $ (60,324) $ 89,071 $ (18,991) $ 36,254
- -----------------------------------------------------------------------------------------------------------------------
High Yield
-------------------------------------
For the Period
December 20, 2004
(commencement of
Six Months Ended operations) through
3/31/06 9/30/05
- -------------------------------------------------------------------------------
Operations
Net investment income $ 324,057 $ 451,401
Net realized gain (loss) from:
Investments (160,209) (36,891)
Futures (22,846) 27,267
Forwards -- --
Swaps 49,287 --
Foreign currencies -- --
Change in net unrealized appreciation
(depreciation) of:
Investments 155,046 (235,134)
Futures 16,089 (9,883)
Forwards -- --
Swaps 31,504 (22,506)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 392,928 174,254
- -------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment
income:
Class A (96) (114)
Class B (86) (100)
Class C (86) (100)
Class R (404,699) (474,394)
- -------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (404,967) (474,708)
- -------------------------------------------------------------------------------
Fund Share Transactions
Proceeds from sale of shares -- 10,000,000
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions -- 10,000,000
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets (12,039) 9,699,546
Net assets at the beginning of period 9,699,546 --
- -------------------------------------------------------------------------------
Net assets at the end of period $9,687,507 $ 9,699,546
- -------------------------------------------------------------------------------
Undistributed (Over-distribution of) net
investment income at the end of
period $ (77,341) $ 3,569
- -------------------------------------------------------------------------------
N/A - Short Duration is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
- ----
33
Notes to Financial Statements (Unaudited)
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 comprises the Nuveen Short Duration Bond Fund ("Short
Duration"), Nuveen Core Bond Fund ("Core") and Nuveen High Yield Bond Fund
("High Yield") (collectively, the "Funds"). The Trust was organized as a
Massachusetts business trust in 1998.
Short Duration ordinarily invests at least 80% of its assets in income
producing short-term securities with the objective of providing high current
income consistent with minimal fluctuations of principal.
Core ordinarily invests at least 80% of its assets in fixed income securities
with the objective of providing total return.
High Yield ordinarily invests at least 80% of its assets in domestic and
foreign corporate high yield debt securities, including zero coupon, payment
in-kind and convertible bonds with the objective of maximizing total return.
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.
Investment Valuation
The prices of fixed income securities and senior loans in each Fund's
investment portfolio are generally provided by an independent pricing service
approved by the Fund's Board of Trustees and based on the mean between the bid
and asked prices. Exchange-listed securities and derivative instruments, other
than futures, are generally valued at the last sales price on the exchange on
which such securities or instruments are primarily traded. Securities or
instruments traded on an exchange for which there are no transactions on a
given day or securities or instruments not listed on an exchange are valued at
the mean of the closing bid and asked 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 asked prices. Credit default swaps are valued using a
market quote provided by a major broker/dealer in such investments. Total
return swaps are valued by comparing the return of the underlying index at the
valuation date with the value at the original effective date of the contract.
When price quotes are not readily available, the pricing service or, in the
absence of a pricing service for a particular security or instrument, the Board
of Trustees of the Funds, or its designee, may establish fair market value
using a wide variety of market data including yields or prices of securities 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 by
the pricing service or the Board of Trustee's designee. Short-term investments
are valued at amortized cost, which approximates market value.
Investment Transactions
Investment transactions are recorded on a trade date basis. Trade date for
senior loans purchased in the "primary market" is considered the date on which
the loan allocations are determined. Trade date for senior loans purchased in
the "secondary market" is the date on which the transaction is entered into.
Realized gains and losses from transactions are determined on the specific
identification method. Investments purchased on a when-issued or 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 and delayed delivery purchase
commitments. At March 31, 2006, Core and High Yield had outstanding
when-issued/delayed delivery purchase commitments of $1,403,896 ($1,292,424 was
comprised of dollar rolls) and $85,000, respectively. There were no such
outstanding purchase commitments in Short Duration.
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Investment income also includes paydown gains and losses, if any.
Dividends and Distributions to Shareholders
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 accounting principles generally accepted
in the United States.
Dividends from net investment income are declared monthly. Net realized capital
gains from investment transactions, if any, are declared and distributed to
shareholders not less frequently than annually. Furthermore, capital gains are
distributed only to the extent they exceed available capital loss carryforwards.
Federal Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all 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.
Flexible Sales Charge Program
Each Fund offers Class A, C and R Shares. Core and High Yield also offer Class
B Shares. 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 18
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 agrees to pay a CDSC of up to 5%
depending upon the length
- ----
34
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. An
investor purchasing Class C Shares agrees to pay a CDSC of 1% if Class C Shares
are redeemed within one year of purchase. Class R Shares are not subject to any
sales charge or 12b-1 distribution or service fees. Class R Shares are
available only under limited circumstances.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently
only include 12b-1 distribution and service fees, are recorded to the specific
class.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Funds'
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.
Futures Contracts
The Funds may invest in futures contracts for the purposes of hedging against
changes in values of the Fund's securities or changes in the prevailing levels
of interest rates or currency exchange rates, as a substitute for a position in
the underlying asset, or to enhance the portfolio's return. 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." Subsequent payments ("variation
margin") are made or received by a Fund each day, depending on the daily
fluctuation of the value of the contract.
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. When the
contract is closed, a Fund records a realized gain or loss equal to the
difference between the value of the contract on the closing date and the value
of the contract when originally entered into.
Risks of investments in futures contracts include the possible adverse movement
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.
Swaps Transactions
The Funds are authorized to enter into swap transactions such as interest rate,
total return, index or currency swaps, consistent with their investment
objective and policies to obtain a desired return at a lower cost than if the
Funds had invested directly in the asset that yielded the desired return. Swap
transactions involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest or total return throughout
the lives of the agreements. The payment obligation is based on the notional
amount of the swap contract. Swap agreements are valued daily. Payments
received or made at the beginning of the measurement period are reflected on
the Statement of Assets and Liabilities. Unrealized gains are reported as an
asset and unrealized losses are reported as a liability on the Statement of
Assets and Liabilities. Income received or paid by the Fund on a swap agreement
is reported as a realized gain or loss on the Statement of Operations.
Additionally, realized gains or losses are recorded upon the termination of a
swap agreement and is equal to the difference between the Fund's basis in the
swap and the proceeds from (or cost of) the closing transaction. Notional
principal amounts are used to express the extent of involvement in these
transactions, but the amounts potentially subject to credit risk are much
smaller.
If there is a default by the counterparty to a swap contract, a Fund will be
limited to contractual remedies pursuant to the agreements related to the
transaction. There is no assurance that the swap contract counterparties will
be able to meet their obligations pursuant to the swap contracts or that, in
the event of default, a Fund will succeed in pursuing contractual remedies. A
Fund thus assumes the risk that it may be delayed in, or prevented from,
obtaining payments owed to it pursuant to the swap contracts. The
creditworthiness of the swap contract counterparties is closely monitored in
order to minimize this risk.
Dollar Rolls
The Funds are authorized to enter into "dollar rolls" in which a Fund purchases
or sells mortgage-backed securities for delivery in the future and
simultaneously contracts to sell or repurchase substantially similar (same
type, coupon, and maturity) securities on a different specified future date.
Dollar rolls are identified as TBAs in the Portfolio of Investments for each of
the applicable Funds. During the roll period, the Fund foregoes principal and
interest paid on the mortgage-backed securities. 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 included in Investment Income on the Statement of
Operations. Dollar rolls are valued daily.
- ----
35
Short Sales
The Funds are authorized to make short sales of debt securities. To secure its
obligation to deliver securities sold short, the Funds have instructed the
custodian to segregate assets in an equivalent amount of the securities sold
short. The Funds are obligated to pay to the parties to which the securities
were sold short, interest earned on the debt securities and records such
amounts as an expense in the Statement of Operations. Short sales are valued
daily and the corresponding unrealized gains or losses are included in "Change
in net unrealized appreciation (depreciation) of investments." Short Duration
and High Yield did not engage in selling securities short during the six months
ended March 31, 2006.
Foreign Currency Transactions
The Funds may engage in foreign currency exchange transactions in connection
with their portfolio investments and assets and liabilities denominated in
foreign currencies. Each Fund may engage in foreign currency forward, options
and futures contracts. To the extent that a Fund invests in such 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 in securities 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 dividend 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. Purchases and sales of investment
securities and 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 securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of a Fund and the amounts actually received.
Forward Foreign Currency Exchange Transactions
Generally, each Fund may enter into forward foreign currency exchange contracts
only 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 contracts are valued
at the forward rate and are valued daily. The change in market value is
recorded as an unrealized gain or loss by a Fund. When the contract is closed
or offset with the same counterparty, a Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed or offset.
Forward foreign currency contracts will generally not be entered into for terms
greater than three months. The use of forward foreign currency 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 contracts involves the risk
that anticipated currency movements will not be accurately predicted. A forward
foreign currency 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 in the Statements of Assets and Liabilities. In
addition, the Funds could be exposed to risks if counterparties to the
contracts are unable to meet the terms of their contracts. The counterparty
risk exposure is, therefore, closely monitored and contracts are only executed
with high credit quality financial institutions.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
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 accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the reporting
period. Actual results may differ from those estimates.
- ----
36
Notes to Financial Statements (Unaudited) (continued)
2. Fund Shares
Transactions in Fund shares were as follows:
Short Duration
------------------------------------
For the Period
December 20, 2004
(commencement of
Six Months Ended operations) through
3/31/06 9/30/05
-------------------------------------------------
Shares Amount Shares Amount
-------------------------------------------------
Shares sold:
Class A -- $-- 125 $ 2,500
Class C -- -- 125 2,500
Class R -- -- 499,750 9,995,000
-------------------------------------------------
Net increase -- -- 500,000 $10,000,000
-------------------------------------------------
Core
------------------------------------
For the Period
December 20, 2004
(commencement of
Six Months Ended operations) through
3/31/06 9/30/05
-------------------------------------------------
Shares Amount Shares Amount
-------------------------------------------------
Shares sold:
Class A -- $-- 125 $ 2,500
Class B -- -- 125 2,500
Class C -- -- 125 2,500
Class R -- -- 499,625 9,992,500
-------------------------------------------------
Net increase -- -- 500,000 $10,000,000
-------------------------------------------------
High Yield
------------------------------------
For the Period
December 20, 2004
(commencement of
Six Months Ended operations) through
3/31/06 9/30/05
-------------------------------------------------
Shares Amount Shares Amount
-------------------------------------------------
Shares sold:
Class A -- $-- 125 $ 2,500
Class B -- -- 125 2,500
Class C -- -- 125 2,500
Class R -- -- 499,625 9,992,500
-------------------------------------------------
Net increase -- -- 500,000 $10,000,000
-------------------------------------------------
3. Securities Transactions
Purchases and sales (including maturities and transactions in securities sold
short but excluding dollar roll transactions and short-term investments) for
the six months ended March 31, 2006, were as follows:
Short
Duration Core High Yield
-------------------------------------------------------
Purchases $12,893,677 $13,151,267 $7,412,067
Sales and maturities 13,004,541 13,069,166 6,942,304
-------------------------------------------------------
- ----
37
4. 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 amortization of premium and timing differences in recognizing
certain gains and losses on investment transactions.
At March 31, 2006, the cost of investments was as follows:
Short High
Duration Core Yield
- ------------------------------------------------------------------------------------------------------------
Cost of investments (excluding proceeds received on securities sold short) $9,644,588 $10,727,388 $9,175,518
- ------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation and gross unrealized depreciation of investments
at March 31, 2006, were as follows:
Short
Duration Core
- ---------------------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 3,291 $ 3,649
Depreciation (110,758) (247,537)
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (excluding proceeds received on securities
sold short) $(107,467) $(243,888)
- ---------------------------------------------------------------------------------------------------------------------------
High
Yield
- ---------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 82,692
Depreciation (218,008)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (excluding proceeds received on securities
sold short) $(135,316)
- ---------------------------------------------------------------------------------------------------------------
The tax components of undistributed net ordinary income and net realized gains
at September 30, 2005, the Funds' last tax year end, were as follows:
Short High
Duration Core Yield
------------------------------------------------------------------
Undistributed net ordinary income* $165,526 $97,119 $99,386
Undistributed net long-term capital gains -- -- --
------------------------------------------------------------------
The tax character of distributions paid during the period December 20, 2004
(commencement of operations) through September 30, 2005, the Funds' last tax
year end, was designated for purposes of the dividends paid deduction as
follows:
Short High
Duration Core Yield
-------------------------------------------------------------------------
Distributions from net ordinary income* $203,480 $249,963 $410,713
Distributions from net long-term capital gains -- -- --
-------------------------------------------------------------------------
*Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
The following funds elected to defer net realized losses from investments
incurred from December 20, 2004 (commencement of operations) through September
30, 2005 ("post-October losses") in accordance with federal income tax
regulations. The following Post-October losses were treated as having arisen on
the first day of the current fiscal year:
Short High
Duration Core Yield
---------------------------
$172,375 $104,769 $46,055
---------------------------
5. Management Fee and Other Transactions with Affiliates
Each Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by Nuveen
Asset Management (the "Adviser"), a wholly owned subsidiary of Nuveen
Investments, Inc. ("Nuveen"), and a specific fund-level component, based only
on the amount of assets within each individual fund. This pricing structure
enables Nuveen 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.
- ----
38
Notes to Financial Statements (Unaudited) (continued)
The annual fund-level fee, payable monthly, for each Fund is based upon the
average daily net assets of each Fund as follows:
Short Duration Core High Yield
Average Daily Net Assets Fund-Level Fee Rate Fund-Level Fee Rate Fund-Level Fee Rate
- ---------------------------------------------------------------------------------------------
For the first $125 million .3500% .4500% .5500%
For the next $125 million .3375 .4375 .5375
For the next $250 million .3250 .4250 .5250
For the next $500 million .3125 .4125 .5125
For the next $1 billion .3000 .4000 .5000
For net assets over $2 billion .2750 .3750 .4750
- ---------------------------------------------------------------------------------------------
(Effective May 1, 2006, the Adviser has agreed to lower the fund-level fee
rates for the Funds for each respective break-point by .1500%).
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as stated in the table below. As
of March 31, 2006, the complex-level fee rate was .1887%.
Complex-Level Assets/(1)/ Complex-Level Fee Rate
----------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion/(2)/ .1400
----------------------------------------------------------------
(1)The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds in
the U.S.
(2)With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level fee
rate for such complex-wide Managed Assets shall be .1400% until such time as
a different rate or rates is determined.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. 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.
The Adviser agreed to waive part of its management fees or reimburse certain
expenses of each Fund through July 31,2006, in order to limit total operating
expenses (excluding 12b-1 distribution and service fees and extraordinary
expenses) from exceeding .65%, .75% and .90% of the average daily net assets of
Short Duration, Core and High Yield, respectively. (Effective May 1, 2006, the
Adviser has agreed to reimburse all expenses other than management fees, 12b-1
distribution and service fees and extraordinary expenses for the Funds through
January 31, 2008). The Adviser may also voluntarily reimburse additional
expenses from time to time. Voluntary reimbursements may be terminated at any
time at the Adviser's discretion.
During the six months ended March 31, 2006, all 12b-1 fees charged to the Funds
were retained by Nuveen Investments, LLC, a wholly owned subsidiary of Nuveen.
At March 31, 2006, Nuveen owned 499,500 shares of Class R of Short Duration,
Core and High Yield. At March 31, 2006, the Adviser owned 125, 125 and 250
shares of Short Duration Class A, C and R, respectively, and 125 shares of each
of Core's and High Yield's Class A, B, C and R.
6. Subsequent Event - Distributions to Shareholders
The Funds declared dividend distributions from their net investment income
which were paid on May 1, 2006, to shareholders of record on April 7, 2006, as
follows:
Short Duration Core High Yield
----------------------------------------------------
Dividend per share:
Class A $.0710 $.0760 $.1240
Class B N/A .0635 .1115
Class C .0585 .0635 .1115
Class R .0750 .0800 .1280
----------------------------------------------------
N/A - ShortDuration is not authorized to issue Class B shares.
- ----
39
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period:
Class (Inception Date)
Investment Operations Less Distributions
--------------------------- ---------------------- ---------------------------
Before Credit/
Reimbursement
SHORT DURATION ------------------
Ratio
of Net
Invest-
Ratio of ment
Net Expenses Income
Beginning Net Realized/ Net Ending Ending to to
Net Invest- Unrealized Invest- Net Net Average Average
Asset ment Gain ment Capital Asset Total Assets Net Net
Value Income(a) (Loss) Total Income Gains Total Value Return(b) (000) Assets Assets
- ----------------------------------------------------------------------------------------------------------------------------
Class A (12/04)
2006(e) $19.69 $.36 $(.12) $ .24 $(.65) $-- $(.65) $19.28 1.23% $ 2 1.55%* 2.97%*
12/20/04 -
9/30/05 20.00 .43 (.53) (.10) (.21) -- (.21) 19.69 .66 2 1.52* 2.15*
Class C (12/04)
2006(e) 19.69 .30 (.14) .16 (.56) -- (.56) 19.29 .83 2 2.30* 2.22*
12/20/04 -
9/30/05 20.00 .31 (.48) (.17) (.14) -- (.14) 19.69 .09 2 2.27* 1.40*
Class R (12/04)
2006(e) 19.68 .38 (.13) .25 (.68) -- (.68) 19.25 1.28 9,622 1.30* 3.22*
12/20/04 -
9/30/05 20.00 .47 (.56) (.09) (.23) -- (.23) 19.68 .79 9,835 1.27* 2.40*
- ----------------------------------------------------------------------------------------------------------------------------
Class (Inception Date)
Ratios/Supplemental Data
----------------------------------------------------
After After Credit/
Reimbursement(c) Reimbursement(d)
SHORT DURATION ------------------ ------------------
Ratio Ratio
of Net of Net
Invest- Invest-
Ratio of ment Ratio of ment
Expenses Income Expenses Income
to to to to
Average Average Average Average Portfolio
Net Net Net Net Turnover
Assets Assets Assets Assets Rate
- -------------------------------------------------------------------
Class A (12/04)
2006(e) .89%* 3.63%* .86%* 3.66%* 134%
12/20/04 -
9/30/05 .91* 2.75* .89* 2.77* 140
Class C (12/04)
2006(e) 1.64* 2.88* 1.61* 2.91* 134
12/20/04 -
9/30/05 1.66* 2.00* 1.64* 2.02* 140
Class R (12/04)
2006(e) .64* 3.88* .61* 3.91* 134
12/20/04 -
9/30/05 .66* 3.00* .64* 3.02* 140
- -------------------------------------------------------------------
* Annualized.
(a)Per share Net Investment Income is calculated using the average daily shares
method.
(b)Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c)After expense reimbursement from the Adviser.
(d)After custodian fee credit and expense reimbursement.
(e)For the six months ended March 31, 2006.
See accompanying notes to financial statements.
- ----
40
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
Class (Inception Date)
Investment Operations Less Distributions
--------------------------- ----------------------
CORE
Net
Beginning Net Realized/ Net Ending
Net Invest- Unrealized Invest- Net
Asset ment Gain ment Capital Asset Total
Value Income(a) (Loss) Total Income Gains Total Value Return(b)
- ----------------------------------------------------------------------------------------------------------------------
Class A (12/04)
2006(f) $19.73 $.42 $(.43) $(.01) $(.52) $-- $(.52) $19.20 (.04)%
12/20/04 - 9/30/05 20.00 .54 (.55) (.01) (.26) -- (.26) 19.73 1.37
Class B (12/04)
2006(f) 19.73 .35 (.43) (.08) (.44) -- (.44) 19.21 (.43)
12/20/04 - 9/30/05 20.00 .42 (.49) (.07) (.20) -- (.20) 19.73 .81
Class C (12/04)
2006(f) 19.73 .35 (.43) (.08) (.44) -- (.44) 19.21 (.43)
12/20/04 - 9/30/05 20.00 .42 (.49) (.07) (.20) -- (.20) 19.73 .81
Class R (12/04)
2006(f) 19.72 .44 (.44) (.00) (.55) -- (.55) 19.17 .00
12/20/04 - 9/30/05 20.00 .58 (.58) (.00) (.28) -- (.28) 19.72 1.51
- ----------------------------------------------------------------------------------------------------------------------
Class (Inception Date)
Ratios/Supplemental Data
-------------------------------------------------------------------------------
Before Credits/ After After Credits/
Reimbursement Reimbursement(c) Reimbursement(d)
CORE ------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate(e)
- --------------------------------------------------------------------------------------------------------------------
Class A (12/04)
2006(f) $ 2 1.88%* 3.38%* .99%* 4.27%* .97%* 4.29%* 125%
12/20/04 - 9/30/05 2 1.76* 2.69* 1.02* 3.43* 1.00* 3.46* 155
Class B (12/04)
2006(f) 2 2.63* 2.63* 1.74* 3.52* 1.72* 3.54* 125
12/20/04 - 9/30/05 2 2.51* 1.94* 1.77* 2.69* 1.75* 2.71* 155
Class C (12/04)
2006(f) 2 2.63* 2.63* 1.74* 3.52* 1.72* 3.54* 125
12/20/04 - 9/30/05 2 2.51* 1.94* 1.77* 2.69* 1.75* 2.71* 155
Class R (12/04)
2006(f) 9,580 1.63* 3.63* .74* 4.52* .72* 4.54* 125
12/20/04 - 9/30/05 9,854 1.51* 2.94* .77* 3.68* .75* 3.71* 155
- --------------------------------------------------------------------------------------------------------------------
* Annualized.
(a)Per share Net Investment Income is calculated using the average daily shares
method.
(b)Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c)After expense reimbursement from the Adviser.
(d)After custodian fee credit and expense reimbursement.
(e)Excluding Dollar Roll transactions.
(f)For the six months ended March 31, 2006.
See accompanying notes to financial statements.
- ----
41
Selected data for a share outstanding throughout each period:
Class (Inception Date)
Investment Operations Less Distributions
--------------------------- ----------------------
HIGH YIELD
Net
Beginning Net Realized/ Net Ending
Net Invest- Unrealized Invest- Net
Asset ment Gain ment Capital Asset Total
Value Income(a) (Loss) Total Income Gains Total Value Return(b)
- ---------------------------------------------------------------------------------------------------------------------
Class A (12/04)
2006(e) $19.39 $.62 $ .15 $ .77 $(.78) $-- $(.78) $19.38 4.03%
12/20/04 - 9/30/05 20.00 .86 (1.04) (.18) (.43) -- (.43) 19.39 1.56
Class B (12/04)
2006(e) 19.39 .54 .15 .69 (.70) -- (.70) 19.38 3.61
12/20/04 - 9/30/05 20.00 .75 (.99) (.24) (.37) -- (.37) 19.39 .99
Class C (12/04)
2006(e) 19.39 .54 .15 .69 (.70) -- (.70) 19.38 3.61
12/20/04 - 9/30/05 20.00 .75 (.99) (.24) (.37) -- (.37) 19.39 .99
Class R (12/04)
2006(e) 19.40 .65 .14 .79 (.81) -- (.81) 19.38 4.18
12/20/04 - 9/30/05 20.00 .90 (1.05) (.15) (.45) -- (.45) 19.40 1.79
- ---------------------------------------------------------------------------------------------------------------------
Class (Inception Date)
Ratios/Supplemental Data
-------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement(c) Reimbursement(d)
HIGH YIELD ------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate
- --------------------------------------------------------------------------------------------------------------------
Class A (12/04)
2006(e) $ 2 1.64%* 5.99%* 1.15%* 6.48%* 1.11%* 6.52%* 76%
12/20/04 - 9/30/05 2 1.68* 5.10* 1.17* 5.61* 1.14* 5.63* 69
Class B (12/04)
2006(e) 2 2.39* 5.24* 1.90* 5.73* 1.86* 5.77* 76
12/20/04 - 9/30/05 2 2.43* 4.35* 1.92* 4.86* 1.89* 4.88* 69
Class C (12/04)
2006(e) 2 2.39* 5.24* 1.90* 5.73* 1.86* 5.77* 76
12/20/04 - 9/30/05 2 2.43* 4.35* 1.92* 4.86* 1.89* 4.88* 69
Class R (12/04)
2006(e) 9,680 1.39* 6.24* .90* 6.73* .86* 6.77* 76
12/20/04 - 9/30/05 9,692 1.43* 5.35* .92* 5.85* .89* 5.88* 69
- --------------------------------------------------------------------------------------------------------------------
* Annualized.
(a)Per share Net Investment Income is calculated using the average daily shares
method.
(b)Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c)After expense reimbursement from the Adviser.
(d)After custodian fee credit and expense reimbursement.
(e)For the six months ended March 31, 2006.
See accompanying notes to financial statements.
- ----
42
Notes
- --------------------------------------------------------------------------------
43
Notes
- --------------------------------------------------------------------------------
44
- --------------------------------------------------------------------------------
Fund Information
================================================================================
Fund Manager Legal Counsel Transfer Agent and
Nuveen Asset Management Chapman and Cutler LLP Shareholder Services
333 West Wacker Drive Chicago, IL Boston Financial
Chicago, IL 60606 Data Services, Inc.
Independent Registered Nuveen Investor Services
Public Accounting Firm P.O. Box 8530
PricewaterhouseCoopers LLP Boston, MA 02266-8530
Chicago, IL (800) 257-8787
Custodian
State Street Bank & Trust
Company
Boston, MA
================================================================================
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 Effective Maturity: The average of all the maturities of the bonds in a
Fund's portfolio, computed by weighting each maturity date (the date the
security comes due) by the market value of the security. This figure does not
account for the likelihood of prepayments or the exercise of call provisions.
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.
================================================================================
Quarterly Portfolio of Investments and Proxy Voting information: Each Fund's
(i) quarterly portfolio of investments, (ii) information regarding how the
Funds voted proxies relating to portfolio securities held during the 12-month
period ended June 30, 2005, and (iii) a description of the policies and
procedures that the Funds used to determine how to vote proxies relating to
portfolio securities are available 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
1-202-942-8090 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 450 Fifth Street NW, Washington, D.C.
20549.
================================================================================
NASD Regulation, Inc. provides a Public Disclosure Program which supplies
certain information regarding the disciplinary history of NASD members and
their associated persons in response to either telephone inquiries at (800)
289-9999 or written inquiries at www.nasdr.com. NASD Regulation, Inc. also
provides an investor brochure that includes information describing the Public
Disclosure Program.
- ----
45
Learn more
about Nuveen Funds at
www.nuveen.com/mf
Nuveen Investments:
SERVING Investors
For GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. Over this time,
Nuveen Investments has adhered to the belief that the best approach to
investing is to apply conservative risk-management principles to help
minimize volatility.
Building on this tradition, we today offer a range of high quality equity
and fixed-income solutions that can be integral parts of a well-diversified
core portfolio. Our clients have come to appreciate this diversity, as well
as our continued adherence to proven, long-term investing principles.
We offer many different investing solutions for our clients' different
needs.
Managing approximately $145 billion in assets, Nuveen Investments offers
access to a number of different asset classes and investing solutions
through a variety of products. Nuveen Investments markets its capabilities
under six distinct brands: NWQ, specializing in value-style equities;
Nuveen, managing fixed-income investments; Santa Barbara, committed to
growth equities; Tradewinds NWQ, specializing in global value equities;
Rittenhouse, focused on "blue-chip" growth equities; and Symphony, with
expertise in alternative investments as well as equity and income
portfolios.
Find out how we can help you reach your financial goals.
To learn more about the products and services Nuveen Investments offers and
for a prospectus, where applicable, talk to your financial advisor, or call
us at (800) 257-8787. Please read the information carefully before you
invest.
.. Share prices
.. Fund details
.. Daily financial news
.. Investor education
[LOGO] Nuveen Investments
MSA-INV3-0306D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable to this registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
See Portfolio of Investments in Item 1
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable to this registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to this registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable to this registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing date of
this report that includes the disclosure required by this paragraph, based on
their evaluation of the controls and procedures required by Rule 30a-3(b) under
the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))
that occurred during the second fiscal quarter of the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable to
this filing
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: EX-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable
to this registrant.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an Exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registration specifically incorporates it by
reference. EX-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Investment Trust III
--------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
-------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date June 8, 2006
----------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
-------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date June 8, 2006
----------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
-------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date June 8, 2006
----------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.